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Can This Utility Grow Its Dividend?

By Joel South – Updated Apr 7, 2017 at 12:42PM

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Widows and orphans are no longer the primary purchasers of utility securities. In fact, investors in utility companies had to increase their risk appetite, as some firms moved away from regulation and dabbled into the unregulated retailing segments.

Dominion Resources has made a strategic move away from deregulation, and expects to have only 10% of operations in this segment. This should be a relief for investors who depend on the company’s 4% dividend. In addition to focusing on regulated power generation and supply, Dominion has been shedding non-core businesses, allowing the firm to fund its operations internally, and aligning capital expenditures with growth. This new structure has supplied Dominion with steady operating earnings per share growth, which supported management's idea to increase the company’s dividend payout ratio by 5%. 

Utility companies offer a safer way to play the energy sector, by substituting capital gains growth for sturdy dividends. However, there are other safe plays in energy, and our analysts have found a company that's a leading provider of equipment and components used in drilling and production operations, and poised to profit from it in a big way. To get the name and detailed analysis of this company that will prosper for years to come, check out our special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report -- it's totally free.

Joel South has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Dominion Resources and Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Dominion Resources, Inc. Stock Quote
Dominion Resources, Inc.
$69.11 (-2.74%) $-1.95
NextEra Energy, Inc. Stock Quote
NextEra Energy, Inc.
$78.41 (-1.95%) $-1.56
Duke Energy Corporation Stock Quote
Duke Energy Corporation
$93.02 (-2.19%) $-2.08
Exelon Corporation Stock Quote
Exelon Corporation
$37.46 (-0.77%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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