(D) Dominion Increases Dividend – Payout Intact

To maintain its payout ratio, Dominion Resources Inc. (D) has increased its quarterly dividend by 7.1%, bringing the annualized dividend to $2.11 per share from the previous payout of $1.97 per share.

Following the hike, the company will now pay a quarterly dividend of 52.75 cents per share compared with its previous payout of 49.25 cents per share. The said dividend will be paid on March 20, 2012, to shareholders of record as of the close of business on March 2, 2012.

This is the company’s 336th consecutive dividend to be paid to unit holders. In December 2010, the company had raised the annualized dividend by 7.7% to $1.97 versus its previous dividend of $1.83.

In December last year, the company while reaffirming its 2010 dividend policy had announced that it expects a dividend payout ratio in the range of approximately 60.0%–65.0% of expected earnings. Particularly, in 2012, it expects it to be at the top end of the payout range. In the long term, the company expects its earnings to grow at a consistent range of 5.0%–6.0%.

American Electric Power Company (AEP), a Dominion Resources peer, had also increased its quarterly dividend, in October 2011, by 2.2% to 47 cents a share from the previous payout of 46 cents per share.

Dominion believes that its operations provide a stable source of cash flow to contribute to planned levels of capital expenditures and maintain or grow the dividend on common shares. The steadily rising dividend is only possible because its earnings are heavily tied to electric utility operations whose returns are guaranteed.

The company is one of the market leaders in the energy-intensive Midwest, mid-Atlantic, and Northeast regions of the U.S. However, we are concerned about any adverse regulatory decision and fluctuating power prices. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

The company expects to release its earnings on January 27, 2012. The Zacks Consensus Estimates for fourth quarter 2011 and fiscal year 2011 are currently at 65 cents per share and $3.12 per share, respectively.

Richmond, Virginia-based Dominion Resources together with its subsidiaries engages in producing and transporting energy in the United States. It is a major energy company engaged in regulated and non-regulated electricity distribution, generation, and transmission businesses. Dominion is one of the nation’s largest energy producers. In addition, it sells electricity at wholesale prices to rural electric cooperatives, municipalities, and in wholesale electricity markets.

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DOMINION RES VA (D): Free Stock Analysis Report

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