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Dominion Energy Inc. (D - Free Report) announced that its Board of Directors has approved a 10% hike in annual dividend to $3.67 per share. The revised quarterly dividend of 91.75 cents will be paid to its shareholders in March 2019.
A Long Track Record of Dividend Hike
During the first nine months of 2018, the company paid dividend worth $1,635 million compared with $1,435 million in the year-ago period.
This hike marks its 16th consecutive year of dividend increase. In addition, this is the 364th consecutive dividend that Dominion or its predecessor company has paid to its shareholders.
The current dividend yield will be 4.77% compared with the Zacks S&P 500 Composite’s 2.04%.
What’s Driving the Dividend?
Dominion’s planned investment in different segments and positive returns from the completed capital projects are expected to drive earnings at a 6-8% compound average growth rate from 2017 through 2020. Since the regulated assets contribute a major portion of the company’s earnings, it provides future earnings visibility.
In December 2018, Dominion’s 1,588 megawatt natural gas-fueled Greensville County Power Station started commercial operation in Virginia, which will also contribute to bottom-line growth.
The proposed merger between Dominion and SCANA Corporation is likely to be another positive for the company. The merger is expected to be completed soon, as approval from the South Carolina Commission has already been received.
The company’s operations provide a stable source of cash flows, which can be used to fund ongoing projects and increase the dividend per share.
Dividend Hike - Common for Utilities
Utilities are one of the safest investment bets, due to its domestic focus and mostly regulated assets. In addition, the demand for utilities remains immune to the vagaries of the economy, which assure steady performance from the mature utility companies and consistent dividend payment.
We notice that other utilities have also raised their dividend rates during the second half of 2018. Duke Energy Corporation (DUK - Free Report) and American Electric Power Company (AEP - Free Report) have raised the quarterly rate by 4.2% and 8.1%, respectively, to reward its shareholders.
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