Growth Spotlight: Dominion Resources

| About: Dominion Resources, (D)

Dominion Resources (NYSE:D) has been a big winner since I added it to the Portfolio in April 1989, the very first issue of my advisory service, Utility Forecaster. And the best is yet to come, thanks to its unique position in North America's shale gas bonanza.

Dominion's 7,800-mile gas pipeline and storage network connects six states in the heart of the Marcellus and Utica shale formations, now home to the continent's cheapest gas. It also owns 5,400 miles of gathering pipeline, the largest natural gas liquids extraction-fractionation operation in the Eastern US and Dominion Cove Point LNG, which is close to making good on its export potential.

Profits from this growing group of assets are assured by long-term contracts that don't depend on gas and oil prices. Meanwhile, Dominion is adding gas-fired power plants to its Virginia electric utility rate base, including a 1,300-megawatt combined-cycle facility announced in late February.

The plant will help Dominion meet robust local demand growth. It also reduces potential environmental liabilities, as cleaner gas will replace coal as feedstock.

And thanks to proximity to Marcellus and ownership of gas infrastructure, Dominion should be able to control its future fuel costs, even when gas prices inevitably recover.

Dominion's five-year annualized dividend growth rate is a robust 7.6 percent. Meeting management's 5 percent to 6 percent growth target over the next five years looks assured thanks to numerous opportunities to invest and strong regulatory support.

Even the merchant power unit, a drag on recent years' results, appears to have stabilized.

Dividend growth of 5 percent to 6 percent plus a 4 percent to 4.5 percent current yield add up to 10 percent annual returns in this high-percentage business.

Disclosure: I am long D.

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