The last time I wrote about Dominion Resources, Inc. (NYSE:D) I stated that I was not going to be buying anymore shares at the time. Since that time the stock has shot up 6.36% versus the 7.38% gain on the S&P 500 (NYSEARCA:SPY). Dominion is a producer and transporter of energy, mainly providing electricity, natural gas and related services to customers in the eastern region of the United States. On November 5, 2013, the company reported third quarter earnings of $1.00 per share which beat the consensus of analyst estimates by $0.10. The stock is up 31.48% excluding dividends in the past year (up 35.53% including dividends), and is beating the S&P 500, which has gained 27.92% in the same time frame. I currently hold Dominion in my growth portfolio and with all this in mind I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis to see if it's worth buying some more stock in the company right now.
The company currently trades at a trailing 12-month P/E ratio of 117.68, which is expensively priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 18.53 is currently fairly priced for the future in terms of the right here, right now. The 1-year PEG ratio (17.94), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is expensively priced based on a 1-year EPS growth rate of 6.56%. In the utilities sector of my growth portfolio I like looking at 1-year earnings growth greater than 5% and 5-year earnings growth of greater than 5% as well.
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 3.41% with a payout ratio of 402% of trailing 12-month earnings while sporting return on assets, equity and investment values of 0.5%, 2.2% and 3.2%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I believe the 3.41% yield of this company is good enough for me to take shelter in for the time being. The company has been increasing its dividends for the past ten years at a 5-year dividend growth rate of 7.6%.
Looking first at the relative strength index chart [RSI] at the top, I see the stock coming down from overbought territory with a value of 53.91 with downward trajectory, which is a bearish pattern. To confirm that, I will look at the moving average convergence-divergence [MACD] chart next and see that the black line is below the red line with the divergence bars increasing in height to the downside, indicating another bearish pattern. As for the stock price itself ($65.90), I'm looking at $67.05 to act as resistance and $65.40 to act as support for a risk/reward ratio, which plays out to be -0.75% to 1.75%.
- On 05Nov13 the company reported third quarter earnings of $1.00 versus expectations of $0.90.
- The company declared a quarterly dividend of $0.5625 per share with an ex-date of 04Dec13 and pay date of 20Dec13.
Dominion is fairly valued based on future earnings and expensive on growth, but what utility isn't? The technical situation of how the stock is currently trading is telling me we might be seeing some more downward pressure for now. The good dividend yield and earnings growth potential, are what I like about the company, but personally I'm not going to be buying right now. Right now I'm up on my position (+5.34%) and I will continue to hold onto the shares I have, reinvesting the dividends.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!