The board of directors of the electric utility
Dominion Resource Inc.
) has approved of an increase in the annual dividend rate by 15
cents or 6.7%. The revised quarterly dividend of 60 cents will be
paid to the shareholders in Mar 2014.
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After the hike, the annual dividend will come to $2.40, with a
dividend yield of 3.75%, higher than the industry average of
2.10%. The company aims to disburse up to 60% to 70% of its
normalized earnings as dividends.
The systematic investments made by the company to develop its
infrastructure have started to yield positive returns. Dominion
expects 80% to 90% of its future earnings to come from its
regulated businesses, which assures a steady source of income for
The decision to form an MLP, export natural gas from the Cove
Point LNG facility and the Blue Racer Midstream joint venture put
the company in a solid position. We believe these initiatives
will further boost Dominion's earnings. Given the strong
fundamentals, it is not overtly ambitious for shareholders to
anticipate another dividend hike in 2014.
Dominion Resource continues to generate strong cash flow. In the
first nine months of 2013, cash flow from operating activities
was $2.95 billion, with $0.97 billion used for dividend payouts.
We believe the cash flow generation capability will enable the
company to meet its increased dividend payment obligation.
True to the defensive nature of all utilities, a few others have
also recently hiked their annual dividend payouts.
) hiked its annual dividend by 6.5 cents or 7.8% while
American Electric Power
) raised its annual dividend by 4 cents or 2%.
Dominion Resources has a Zacks Rank #3 (Hold). A better ranked
stock in the utility sector is
Westar Energy, Inc.
) carrying a Zacks Rank #1 (Strong Buy).