EUR 850.00 For Business Accounts Only

Morningstar | Dominion's Growth Investments Accelerate

Dominion Energy changed its name from Dominion Resources in 2017. More importantly for investors, however, the company has also made a strategic pivot. Since 2010, it has focused on the development of new wide-moat projects with conservative strategies, exited the exploration and production business, sold or retired no-moat merchant energy plants, and made significant investments in moaty utility infrastructure.The $4 billion Cove Point Liquefied Natural Gas export facility loaded its first tanker in 2018. We now expect 48%-owned Atlantic Coast Pipeline to cost roughly $8 billion and not be in complete commercial operation until 2022. Both wide-moat infrastructure projects illustrate Dominion's conservative strategy pivot.Dominion has accelerated its capital expenditures and now expects growth investments to be roughly $26 billion, about two-thirds of the investment directed to its regulated utility in Virginia. Including maintenance capital expenditures, we expect total capital expenditures and equity investments in ACP to reach $35.5 billion from 2019-2023. This should drive EPS growth over 5% annually. Wide-moat businesses generate about 45% of Dominion's operating earnings versus roughly half before the acquisition of Scana and acceleration of regulated utility investments. The balance of earnings will come from regulated gas and electric utilities with some of the most constructive regulation and attractive growth potential in the country.Although annual dividend increases have averaged 9% the past five years, we believe the currently attractive yield and elevated payout ratio will likely result in the board reducing dividend growth to 2.5% per year from 2020-2023. If so, 2023 would represent 20 straight years of increases. Although we are now less bullish on dividend increases, we still think the dividend yield and earnings growth could deliver high-single-digit returns through the next decade.