Dominion’s board approved the company’s first dividend increase in 10 years on Friday, declaring 2-cent boost in the fourth-quarter dividend to 66.5 cents per share in response to a positive financial outlook. It will increase Dominion’s annual dividend to $2.60/share, and the company is planning similar dividend hikes over the next couple years.
“Our integrated energy assets are delivering strong and sustainable performance. Key financial and credit measures are healthy and improving,” said CEO Thomas Capps. “All signs point to a continued positive outlook for achieving our targeted 5-7% annual projected increase in operating earnings growth. After a decade of stable dividends, the board now believes that overall conditions are right for a dividend increase.”
For dividends payable in 2005, the quarterly rate is expected to rise again, from 66.5 cents to 67 cents/share, for an annual rate of $2.68. Under current financial projections, the company believes that additional 8-cent/share annual increases in the dividend rate are appropriate.
Merrill Lynch analysts recently concluded that Dominion’s integrated business model is working well. The impact of higher fuel costs on power generation and its utility business has been offset by higher E&P margins.
Last month during a meeting with analysts, Dominion reiterated its earnings guidance for this year at $4.75-4.90 and for 2005 at $5.10-5.30, with 5-7% growth thereafter. The Merrill analysts said they believe their earnings estimates for the company — which are at the low end of guidance for both years — “may prove somewhat conservative.” Following the analyst meeting, Merrill reiterated its buy and $70 price objective. “The stock is also one of the few names that can be purchased at a discount to peers where there is a meaningful prospect of upside earnings surprises over the next couple of years” (see Daily GPI, Sept. 16).
Dominion shares were on the rise on Friday, reaching $65.36 as of 1:20 p.m. EDT, up about 28 cents from Thursday’s close and near the top end of a 52-week range of $59.27 to $66.35.
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