When

the stock price of leading performers declines, they actually become cheaper.  Nice.  Dominion did that today, by more than 10%.  When the share price of bad companies drop it’s called a value trap.  Today, Monday, Dominion launched two press releases.  They changed things.  What did we learn when “Dominion Zags  Down 10% & Green. Play the Bounce?”

 

The Richmond-based utility is selling off it’s gas transmission and storage business to Buffet’s Berkshire(BRK.A.)  Additionally, we learned that D is canceling it’s Atlantic coast pipeline project.  Court decisions concerning the pipeline have been mixed. Possible regulatory decisions could have driven project costs up from original projections of $4.5B-$5b, to $8b.

 

What are the ramifications?  D’s projected EPS range will drop by approximately $1 a share.  In turn, Dominion’s dividend will drop from a current $0.94 to $0.63 a share.  That’s a 32.9% dividend cut.  That’s what’s behind the 9} percent drop in Dominion’s share price.  A Briefing.com article states that Dominion seeks to “reposition itself as a state-regulated utility focused on clean energy.”  

 

 

-Dominion Energay Inc-

Buying

strong performers at bargain prices pays.  Such prices are often the result of market over-reactions.  We believe Dominion shares will rebound with strength, perhaps soon.  Although the dividend cut is substantial, it’s quite possible the share price has been overly punished, thus providing an attractive entry point here, around $75.

 

Dominion is said to be repositioning to a clean energy future.  Thus bodes will for an equity market increasingly focused on “ESG” investing, or “Environmental, Social, and Governance.”

 

In our just launched piece “POwER PLAY.  Utilities.  Protection?” we called out only two names; Dominion and Nextara.  Each provides something to shareholders.  Yet Dominion is the only one to perform inline with the benchmark.  Now it’s selling at 10.55% lower price.  Could prove a winner, if not perhaps this week as a trade, with a dividend fall-back.  As always, good luck and good investing.