Last update on 2024-06-27

Dominion Energy (D) - Dividend Analysis (Final Score: 3/8)

Detailed analysis of Dominion Energy (D) dividend policy with an 8-criteria scoring system. Final score: 3/8. Coverage for income-focused investors.

Short Analysis - Dividend Score: 3

We're running Dominion Energy (D) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Dominion Energy's (D) dividend analysis based on an 8-criteria scoring system reveals mixed results. The company boasts a high dividend yield of 5.6851%, much higher than the industry average, due mainly to a falling stock price. However, their average annual dividend growth rate hasn't consistently surpassed 5% over the last 20 years, and their payout ratio is higher than the ideal 65%, averaging around 72.98%. The company's dividends are often not well-covered by earnings or free cash flow, exhibiting considerable volatility. While Dominion has paid dividends for over 25 years and demonstrated a general upward trend, some volatility like the dip in 2020 is concerning. Additionally, their stock repurchase activities aren't consistent, indicating a sporadic strategy.

Insights for Value Investors Seeking Stable Income

Given the fluctuating performance and mixed stability indicators of Dominion Energy’s dividend policy, there are both appealing and cautionary signs. The high dividend yield is attractive for income-focused investors; however, the consistency issues with coverage by earnings and cash flow, along with a payout ratio above sustainable levels, might pose risks. The company's track record of paying dividends for over 25 years is a positive, yet the occasional volatility suggests potential uncertainties. Conservative investors may want to exercise caution or investigate further, considering the financial details and overall strategy before making investment decisions in Dominion Energy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its share price.

Dominion Energy's current dividend yield of 5.6851% is significantly higher than the industry average of 3.12%. Historically, Dominion's dividend yield has seen fluctuations, but the trend in the last couple of years shows an upward movement, reaching its peak in 2023. The closing stock price has declined to 47 in 2023 from a high of 82.82 in 2019. This declining stock price can partially explain the increased yield. Remarkably, the dividend per share has seen less variability compared to the stock price, indicating consistent dividend payments. Therefore, the high dividend yield is partly a result of the lower stock price. Overall, a higher dividend yield can be attractive for income-focused investors, but the decreasing stock price warrants caution. This trend is favorable if Dominion can maintain its dividend payouts, yet concerning if the underlying stock value continues to decline.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate is higher than 5% in the last 20 years?

Analyzing Dominion Energy's (D) Dividend Ratio data over a 20-year period, the dividend growth rate has exhibited varying trends. The data shows significant volatility in the growth rates, with some years experiencing negative growth rates, particularly in 2007 (-8.4783) and from 2020 to 2021 (-26.9565). However, there were some notable positive growth years such as 2008 (25.099) and 2019 (9.9401). The average dividend ratio over this period is 4.0137%. Given the inconsistencies and the average value falling below 5%, it can be inferred that the Dividend Growth Rate of Dominion Energy has not consistently maintained a growth rate higher than 5% over the past 20 years. This trend is not favorable, as a stable and higher-than-5% growth rate is desirable for investors seeking dependable dividend income. This suggests potential volatility in shareholder returns regarding dividends.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio is a financial metric that shows the proportion of earnings a company pays to its shareholders in the form of dividends. A lower payout ratio indicates that the company is retaining more earnings for growth and stability.

The average payout ratio for Dominion Energy (D) over the last 20 years stands at approximately 72.98%. This ratio exceeds the ideal threshold of 65%, indicating that the company has been paying out a significant portion of its earnings as dividends. High payout ratios, particularly the extreme values such as 401.18% in 2012 and -693.47% in 2020, suggest periods of financial stress or exceptional events affecting earnings. Generally, maintaining a payout ratio higher than 65% is considered less sustainable for long-term growth and financial stability, signaling potential risks in continuing such dividend payments.

Dividends Well Covered by Earnings?

Determining if dividends are well covered by earnings means examining the company's ability to generate enough profit to sustain its dividend payments. It's essential because it shows financial health and sustainability.

Analyzing Dominion Energy (D) from 2003 to 2023 reveals fluctuations in the coverage of dividends by earnings. Ideally, this ratio should be above 1, indicating earnings are sufficient to cover dividends. For many years, the coverage ratio is below 1, such as in 2007 (0.32), 2008 (0.5), and 2019 (0.59), indicating dividends are not fully covered by earnings. However, peaks are observed in years like 2012 (4.01), 2003 (2.58), and 2019 (2.12), showcasing excellent coverage sporadically. The trend is volatile, displaying inconsistency which may concern investors. Continuing this volatility without consistent improvement can suggest potential issues in maintaining future dividend payments.

Dividends Well Covered by Cash Flow?

Dividend coverage by cash flow refers to the extent to which a company's free cash flow can cover its dividend payments. Free cash flow is the cash generated by the company after accounting for capital expenditures and is crucial for sustaining dividend payments.

Dominion Energy's free cash flow has been mostly negative, with only a few positive years. The dividend coverage ratios fluctuate widely, showing values greater than 1 in 2004 and 2017, which indicates good coverage in those years. However, for most of the period, the ratios are negative or below one, suggesting that free cash flow is insufficient to cover dividends. This is generally a bad trend as it indicates potential sustainability issues with the dividend payout. If the company cannot generate enough cash to cover dividends, it may have to rely on debt or equity financing, which is not sustainable long term.

Stable Dividends Since the Company Began Paying Dividends?

Bolt measures the consistency and reliability of dividends paid out by the company. It's crucial because it demonstrates the company's ability to generate consistent cash flows and its commitment to returning capital to shareholders. Consistent dividends are indicative of stable and predictable financial performance.

Analyzing Dominion Energy's dividend payout over the past 20 years shows a generally upward trend with periodic increments in dividends almost every year. Notably, there's a pronounced drop in 2020 – where the dividend per share fell from $3.672 to $2.52, a decrease of approximately 31.4%. Similarly, in 2023, the value slightly decreased from $2.6715 to $2.672. Sample measures such as a significant 20% drop were met in 2007 where the dividend reduced from 1.58 to 1.26. Over the long run, though the general upward trajectory portrays a positive inclination, the trend of inconsistency can pose a concern for consistent income-seeking investors. However, the overall dividends have risen from $1.29 in 2003 to $2.672 in 2023, marking an overall healthy gain, although the recent volatility might worry some investors.

Dividends Paid for Over 25 Years?

Dividends paid for over 25 years is an indication of a company's ability to consistently generate strong cash flows and its commitment to returning capital to shareholders. It reflects the company's financial stability and reliability over time.

Dominion Energy (D) has paid dividends consistently for over 25 years, starting from 1998. While there has been a slight dip from 2007 to 2008 and again a noticeable dip from 2019 to 2020, the overall trend has been one of growth in dividend payments per share. The dividend per share from 1998 to the present has grown from $1.29 to roughly $2.67 in 2023. This escalation indicates a solid commitment to returning shareholder value and suggests financial robustness. Numerically, the overall increase represents roughly a 107% growth over the period, which is commendable and reflects positively on the company's long-term financial health and policy towards dividends. Although the dip in 2020 can be perceived as a flag, the relatively quick recovery signals resilience. Thus, Dominion Energy's ability to maintain and grow its dividend over such an extended period is a strong positive indicator.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Dominion Energy (D) and why it is important to consider

Over the past 20 years, Dominion Energy repurchased shares consistently in the years 2007, 2008, 2010, 2011, 2012, and 2020. This amounts to repurchases in 6 out of 20 years, which gives an average repurchase frequency of about 1.5707 times annually. The repurchase activities seem sporadic at best, as evidenced by a significant jump in the number of shares from 681 million in 2018 to 838 million in 2019, without a follow-up reduction. With recent share numbers like 823.9 million in 2022 and 836.4 million in 2023, it is clear that large-scale repurchases are not a regular part of Dominion Energy's buyback strategy. This shows a somewhat inconsistent track record, which may not provide much confidence to investors expecting regular buybacks. The irregularity indicates that buybacks are likely used strategically during certain market conditions rather than as a consistent way to return value to shareholders.