Summary

  • Shares of Dominion Energy are down 17% YTD.
  • Sensing opportunity, George Soros picked up 225,000 shares of the electricity utility in Q1.
  • Dominion’s problems will pass and investors that follow Soros’ lead will be glad they did.

In June 8th’s “2 Billionaires Have this 4.1% REIT In Their Portfolios” we learned that two of the world’s richest men, George Soros and Bill Gates, both owned shares of Crown Castle International (CCI).

Today, we analyze an even higher-yielding investment made by Mr. Soros that investors should strongly consider: Dominion Energy (D).

Electricity utilities have long been favorites of dividend investors. The reasons for this are simple. In exchange for putting up the capital to provide power to thousands of households, regulators guarantee them a reasonable rate of return – predictable profits that can be paid out in the form dividends.

The situation has worked well – imagine a world where you walk into your home after a long day. The only thing on your mind is a hot meal and a cold drink. You reach to switch on the light switch, flip your index finger, and then nothing. A trivial event you rarely think twice about has now turned your whole evening upside down.

This course of events sounds familiar to us all – we shouldn’t feel bad about thinking little of what electricity utilities provide. That’s just the point: when things are going well, you don’t think about it.

Which is why, as reasons we shall soon learn, investors should give strong consideration to following multi-billionaire investor George Soros into shares of Dominion Energy.

Finding near-certain dividend stocks is a rare thing in an investor’s life. And though they occasionally run into short-term travails, the public/private electric utility system in this country is alive and well and will likely continue to reward investors (and utility customers) for decades to come.

The hand that giveth taketh away…

In March 2018, the Federal Energy Regulatory Commission (FERC) handed down a ruling regarding the tax treatment of pipeline construction costs. Essentially, some pipeline operators lost a tax break. Unfortunately, Dominion Energy Midstream Partners (DM) (majority owned by Dominion Energy) was a beneficiary of this rule, and its units dropped like a stone from ~$26 to today’s ~$13 quotation.

D data by YCharts

D PE Ratio (NYSE:TTM) data by YCharts


 

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