Dominion Resources - A Stock That Has Outperformed Its Dividend Gains

| About: Dominion Resources, (D)

Dominion Resources (NYSE:D) is one of the nation's largest producers and transporters of energy, with a portfolio of approximately 28,200 megawatts of generation, 11,000 miles of natural gas transmission, gathering and storage pipeline and 6,300 miles of electric transmission lines.

Dominion operates the nation's largest natural gas storage system with 947 billion cubic feet of storage capacity and serves retail energy customers in 15 states.

As you can see, Dominion is an extremely large utility company with a history of stock appreciation and very large gains in their dividend payout. The quarterly dividend has increased from 39.5 cents in November 2008 to 49.3 cents this November, and a recently announced dividend of 52.75 cents for 2012, for an annualized dividend of $2.11 a share, up from $1.97 in 2011.

Most people would rejoice seeing a company that is aggressively raising their dividend for their share owners. However, I'm skeptical of the future growth of Dominion for the following reasons.

Dominion stock didn't just hit a 52 week high in December, it hit an ALL TIME high. This is from a stock that went from 42 dollars a share to start 2011, to 53 at the end of 2011. Dominion missed earnings two out of four quarters in 2011, and operating earnings went down from $3.34 a share in 2010 to $3.05 in 2011. Projected earnings for 2012 are $3.10-$3.35 a share. Dominion's PE Ratio is just over 19, and its dividend payout ratio will be around 70%, when in 2010 it was only 39%.

To wrap it up, Dominion won't have a problem paying their dividend, but I don't see any upside with this stock, if anything, I see a downside until it gets to a price that supports a 5% yield, and a lower PE like some of its better priced competitors, PPL, EXC, and FE.

Disclosure: I am long PPL, EXC.

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