Yahoo Finance Don't Buy Dominion Energy, Inc. (NYSE:D) For Its Next Dividend Without Doing These Checks
Dominion Energy, Inc. (NYSE:D) stock is about to trade ex-dividend in 4 days time. You will need to purchase shares before the 27th of February to receive the dividend, which will be paid on the 20th of March.
Dominion Energy's next dividend payment will be US$0.94 per share. Last year, in total, the company distributed US$3.76 to shareholders. Based on the last year's worth of payments, Dominion Energy has a trailing yield of 4.2% on the current stock price of $89.38. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Dominion Energy can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Dominion Energy
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. An unusually high payout ratio of 205% of its profit suggests something is happening other than the usual distribution of profits to shareholders.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's not ideal to see Dominion Energy's earnings per share have been shrinking at 4.5% a year over the previous five years.
We'd also point out that Dominion Energy issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Dominion Energy has delivered 7.9% dividend growth per year on average over the past ten years. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Dominion Energy is already paying out 205% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.
To Sum It Up
Should investors buy Dominion Energy for the upcoming dividend? Not only are earnings per share shrinking, but Dominion Energy is paying out a disconcertingly high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
Wondering what the future holds for Dominion Energy? See what the 11 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
