Dominion Energy's (NYSE:D) Dividend Will Be $0.6675

The board of Dominion Energy, Inc. (NYSE:D) has announced that it will pay a dividend on the 20th of June, with investors receiving $0.6675 per share. This makes the dividend yield 5.0%, which will augment investor returns quite nicely.

View our latest analysis for Dominion Energy

Dominion Energy's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, Dominion Energy was paying out 115% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Over the next year, EPS is forecast to expand by 58.7%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 74% which brings it into quite a comfortable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was $2.25, compared to the most recent full-year payment of $2.67. This means that it has been growing its distributions at 1.7% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Dominion Energy has only grown its earnings per share at 4.7% per annum over the past five years. The earnings growth is anaemic, and the company is paying out 115% of its profit. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Dominion Energy you should be aware of, and 2 of them are potentially serious. Is Dominion Energy not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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