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Readers of this space know that one of the preferred sectors is the electric power generation sector. And the sector is favored for a reason that may not be obvious to all. Electricity via wind, solar, and nuclear generation is likely to play a larger role in energy as climate change reduction, then elimination, becomes a societal goal. Electricity also remains a potential propulsion source for cars, particularly once oil resumes its inevitable climb. And with the above in mind, electric power generator Dominion Resources (NYSE: D) is worth a review.
In general, analysts expect Dominion to register 2-4% revenue growth, primarily on higher utility revenue in FY 2009, but also aided by the expected completion of the Cove Point liquid natural gas facility.
Analysts are also impressed by Dominion's transformation out of exploration and production, so that it can focus on its core business -- electric power and natural gas transmission and distribution. Also, a high-single-digit dividend increase would not be a surprise in 2010, and that fact, combined with a stock chart that appears to have bottomed at $27-30, makes D an inviting Buy at these levels, $31-35. The First Call FY 2009/FY 2010 EPS estimates for D are $3.20 to $3.29.
Stock Analysis: Dominion Resources is a moderate-risk stock. Consider buying a 25% position in D now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your D position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $22.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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