John StephensonDominion Resources IncDTOP PICKJul 19, 2004
4% dividend. Likes its diversity of utility, pipeline and liquefied natural gas terminals. Also has 6.2 TCF of gas and oil equivalent. Cheaper than some of its peers.
(A Top Pick Feb 21/07. Up 2% including dividends.)Thought there would be more of a catalyst by selling their oil/gas properties, which they did, but management paid themselves $16 million in bonuses. Now might be an interesting time to look at this.
A US utility which also has E & P properties that they are looking to sell and expecting $16 billion for it. Intend to buy back stock and pay down debt. Negotiating an advanced agreement with Virginia regulators to get additional upside in cap return.
Q:"What companies could profit from liquid natural gas?" A:"You want to focus on some of the utility names. It's only 3% of the market and there are large groups opposing shipments."
Some of the diversified utilities are well-positioned. Their rate structure is based on a cost plus so oil prices do not affect them. As the economy grows, more power will be required.
As a utility, it has reasonable downside protection. Has a gas arm with substantial gas fields, which gives it a diversified earnings base. Also has one of four LNG terminals in the US, which gives it somewhat of a monopoly.