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Norman Tweed
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Retiree interested in stocks and financial instruments, especially dividend producing stocks. In the 20th century, I was an electrical engineer with Dominion Resources. I use a dividend growth investment style. Quick rules of thumb for complex questions, like fair value p/e using the Gordon... More
  • Dominion Resources: Will Natural Gas E&P Make This Stock A Winner For Retirees? 4 comments
    Mar 30, 2014 3:41 AM | about stocks: D, SPY

    I signed on with Virginia Electric & Power Company back in 1967, fresh out of Engineering School. It was a regulated utility which provided electric power and distributed natural gas. This company became Dominion Resources (NYSE:D) and grew. During my career (closing in 2000 with retirement) I saw the natural gas portion of the company morph into one of the largest oil and natural gas exploration and production companies in the country with an export terminal at Cove Point. They also operate one of the nation's largest natural gas storage systems. An excellent overview of the company is presented by Investing Insights: Dominion well positioned to outperform. After this cold winter, it appears that energy has become a prominent global commodity and there is a large differential in pricing between the United States and Europe. In fact, there is geopolitical action in Ukraine over the price of gas and source, especially Russia's pipeline through that country.

    During my career, I raised a family and saved for retirement through the Dominion Resources thrift plan, which started as company stock purchases and company match and morphed into a 401k plan by the time I retired. It was important for me to invest as much as possible each month into the company savings plan and company pension plan. The 401k allowed us to have other investments including an S&P 500 Index mutual fund in addition to Dominion stock. However, with the .com bust beginning as I retired, the S&P 500 (NYSEARCA:SPY) suffered a major pullback. Dominion had a much less pronounced drop, being a utility.

    (click to enlarge)

    I sold a few shares of Dominion during those rough days of early retirement (2000-2003) since both of my children had just married and needed all the help I could give them due to the economic downturn. As you can see from the chart above, the Great recession of 2008 also sank the S&P 500, but once again Dominion held up rather well. I bet my retirement on D stock and Pension and they came through for me twice! Now there is a speculative air about the stock based on global conditions, including climate change. I have always looked at Dominion as a dividend growth stock and will present my analysis here:

    (click to enlarge)

    As you can see Dominion has increased in price from $30 to the current level of $71.09. The forward P/E ratio is 18.98, while the price/book ratio is 3.54. The current yield is 3.38% and it is a Dividend Contender with 11 years of increasing dividends.

    StockDate of reinvestDiv Rate# SharesDividendDrip price# Shares purTotal ValueCurrent Yield
    Totals  408.42$3,733.99 78.42  
             
     02/26/14$0.60404.94$242.96$69.763.48$28,491.603.44%
     12/04/13$0.56401.42$226.00$64.133.52$25,968.823.51%
     09/04/13$0.56397.53$223.81$57.623.88$23,129.603.91%
     05/05/13$0.56393.47$221.52$54.564.06$21,689.344.13%
     02/26/13$0.56389.50$219.29$55.283.97$21,751.124.07%
     11/28/12$0.53385.48$203.15$50.434.03$19,642.734.18%
     08/29/12$0.53381.67$201.52$52.973.80$20,418.693.99%
     05/30/12$0.53377.83$199.49$51.863.85$19,793.514.07%
    D02/29/12$0.53373.91$197.43$50.473.91$19,068.854.18%
     11/30/11$0.49370.38$182.60$51.623.54$19,301.423.82%
     08/24/11$0.49366.73$180.80$49.583.65$18,363.263.98%
     05/25/11$0.49362.94$178.93$47.183.79$17,302.314.18%
     03/02/11$0.49358.99$176.98$44.793.95$16,255.964.40%
     11/24/10$0.46355.12$162.64$42.033.87$15,088.184.36%
     08/25/10$0.46351.39$160.94$43.153.73$15,323.264.25%
     05/26/10$0.46347.26$159.05$38.564.12$13,549.474.75%
     02/24/10$0.46343.18$157.18$38.534.08$13,380.004.75%
     11/25/09$0.44339.14$148.54$36.784.04$12,622.254.76%
     08/26/09$0.44334.77$146.63$33.494.38$11,357.935.23%
     05/27/09$0.44330.00$144.54$30.334.77$10,153.445.78%

    As can be seen from the spreadsheet, an investment of $10,000 on 5/27/2009 with dividend reinvestment would have grown to $28,491 today. This is 23% annual growth.

    (click to enlarge)

    Is it overvalued? I continue to reinvest in it and note that the forward P/E is 18.98. With the run up of 9.89% so far this year, I believe there is speculation about the proposed MLP spin off and export of natural gas to Europe affecting the price. I have always dripped this stock through good times and bad and only sold shares when my family needed the money.

    Conclusion: Dominion Resources is a strong contender in the oil and gas business with regulated electric and gas utilities on the side. This has been an extremely cold winter and natural gas in storage has come down considerably from normal levels. There is global pressure for increased use of natural gas to limit climate change as well as provide heat and energy for industry. This stock is a continuing buy for retirees, like myself.

    Disclosure: I am long D, SPY.

    Themes: Retirement, oil gas, utilities Stocks: D, SPY
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Comments (4)
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  • OntheRock
    , contributor
    Comments (187) | Send Message
     
    I have been a fan of D for many years. as it was my introduction to owning individual equities. When we lived in Virginia many years ago, we participated in the savings plan that enabled us to buy shares directly by adding a little to our monthly electric bill. That amount grew and we sold the shares to help fund our retirement home in 2000. I wish I could have been able to keep those shares, though! I bought again in 2009 - it was the first holding in what has become my DGI portfolio, and it is one of my best performers. I still reinvest the dividends. If D is successful with its LNG export business, it will be icing on the cake!
    30 Mar, 08:06 PM Reply Like
  • Norman Tweed
    , contributor
    Comments (7358) | Send Message
     
    Author’s reply » Thanks OntheRock for your comments. I think D has become more shareholder friendly over the years. You have made an excellent choice of stocks!
    31 Mar, 03:30 AM Reply Like
  • Seekingdividends
    , contributor
    Comments (8) | Send Message
     
    excellent company. Just seems kind of pricey. Thanks for all or your excellent articles.
    30 Mar, 08:57 PM Reply Like
  • Norman Tweed
    , contributor
    Comments (7358) | Send Message
     
    Author’s reply » Thanks Seekingdividends for your comments. D reminds me of PG when I bought the initial tranche in 1980. It never comes down in price!
    31 Mar, 03:31 AM Reply Like
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