Alright, let's get one thing straight right off the bat: dividend stocks ain't exactly the sexiest topic. But hey, some folks get a kick out of them, so here we are, diving headfirst into Dominion Energy's dividend situation. And honestly, what I'm seeing isn't exactly filling me with confidence.
The Payout Ratio Problem
So, Dominion Energy is gonna shell out $0.6675 per share on December 20th. Big deal. The yield's around 4.5%, which they're calling "fairly typical." Okay, fine. But here's where my eyebrows start arching higher than Spock's. They're paying out a "fairly large proportion of earnings," and get this—they're not even generating positive free cash flow.
Hello? Red flag, anyone?
It's like they're robbing Peter to pay Paul, except Peter is their future investment and Paul is... well, Paul is some retiree living off dividends. No offense to retirees, but that ain't a sustainable business model. Are they really expecting us to believe this can last? What happens when earnings take a hit? Dividend cut, that's what. And then Paul's screwed.
Speaking of which, I gotta vent about something completely unrelated. My neighbor's got this leaf blower that sounds like a jet engine, and he uses it at 7 AM every freakin' Sunday. I swear, one of these days... Anyway, back to Dominion.
Volatility and Growth
The article admits there's been "instability" with Dominion's dividend. "At least one cut in the last 10 years," they say. Well, la-dee-da. One cut is one too many if you're relying on that income. They've grown the dividend a measly 1.1% annually since 2015. That barely keeps up with inflation, let alone provides any real growth.
And get this: EPS is supposedly growing at 12% per year. Sounds great, right? Except they immediately follow that up by saying the payout ratio is already high, so "we don't think the dividend has many prospects for growth." So, which is it? Are they growing or not? This is like the corporate version of "yes, no, maybe, I don't know—can you repeat the question?"
The article even has the audacity to say, "While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily." Talk about hedging your bets. They're basically saying, "It's bad now, but maybe it'll be good later. Don't quote us on that, though."
The Unreliable Verdict
The final verdict? The author thinks the dividend "could prove to be unreliable." No freakin' kidding. They even admit that Dominion Energy isn't a "great stock to add to your portfolio if income is your focus." offcourse, if your looking for income you should probably avoid it.
But wait, there's more! They throw in some BS about how market movements "attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable." Yeah, no duh. Tell me something I don't know. The thing is, this dividend is currently unpredictable. It's like trying to predict the weather based on a coin flip.
Then again, maybe I'm the crazy one here. Maybe everyone else is cool with getting jerked around by a company that can't even manage its cash flow properly.
A House of Cards Built on Dividends
So, what's the real story? Dominion's dividend looks like a house of cards waiting to collapse. Don't bet the farm on this one, folks. There are far better ways to generate income without risking your financial future.
