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Dominion a Strong Energy Segment Play

An energy powerhouse with upside price potential


dominion resourcesI think the recent upbeat Beige Book report and China cutting rates will do much to stem any further price erosion in energy prices. The rate cut by the Chinese central bank signals a new effort to begin stimulating that economy in the second half of the year. Producers of commodities should benefit from the perception of an uptick in the economy and thus the demand for strong oil imports.

I’m partial to Dominion Resources (NYSE:D) now. The company operates in three segments: DVP, Dominion Generation and Dominion Energy. The DVP segment includes regulated electric transmission and distribution operations that serve residential, commercial, industrial and governmental customers in Virginia and North Carolina.

The Dominion Generation segment engages in electricity generation through coal, nuclear, gas, oil, hydro and renewable sources, and the Dominion Energy segment is involved in regulated natural gas distribution operations in Ohio and West Virginia, regulated gas transmission pipeline and storage operations, natural gas gathering and by-products extraction activities, and regulated LNG import and storage operations.

And it’s quite the powerhouse within the industry: The company just announced the construction of a new $1.2 billion natural gas electrical plant to be located in Northern Virginia and to serve that growing economy, one of the strongest in the nation. Earnings for all utilities were soft in the first quarter due to warm weather, but they should rebound as the hot summer months fuel higher cooling levels in homes and businesses. In addition, the conversion from coal to natural gas as a main feedstock also will boost profits in years ahead.

From a technical standpoint, shares of D have been consolidating for eight months following a strong move up in the first half of 2011. Now, they’re showing clear signs of wanting to break out to the upside. Another endorsement is that of nine separate insider purchases this year against zero insider sales. Total insider ownership is 1.68 million shares, so officers of the company have a strong stake in the company’s future. Dominion Resources is a fine holding for our Conservative High-Yield Portfolio. 

  Vital Statistics For Dominion  
Current Price   $52.76
52-Week Range   $44.50-$53.68
Target Price   $60
Dividend Yield   4.1%
Dividend Payout (Annual)   $2.04
Dividend Frequency   Quarterly
Ex-Dividend Date   Est. 8/30/12
Dividend Payment Date   Est. 9/20/12
Dividend Tax Treatment   Ordinary Income


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