Is Dominion Energy the Smartest Investment You Can Make Today?

Dominion Energy (NYSE: D) has a number of very attractive features to offer dividend investors. But there's one fact about the company that will likely cause investors some concern. Here's why it could be the smartest investment you can make today if you can look past management's broken promise.

What did Dominion Energy do that was so bad?

Dominion Energy was projecting continued dividend growth leading up to its sale of pipeline assets to Berkshire Hathaway. The cash flow lost from this decision was material, so the company had no choice but to reset the dividend lower. It then promised investors that dividends would start growing again.

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Dominion Energy made a single dividend increase and then announced it was going to perform a business review. That review lasted roughly a year and resulted in more assets being sold; this time it was natural gas utilities to Enbridge. Dominion did not cut its dividend this time around, instead telling investors that it would need to strengthen its balance sheet and reduce the payout ratio before it would start increasing the dividend.

The company is still working on that effort, noting that its 2025 dividend guidance was for an annual dividend of $2.67 per share. That's the same amount that was paid in 2024. In other words, Dominion Energy's revamp is still a work in progress even though the business is performing reasonably well overall.

If you are a dividend investor and can't look beyond the dividend cut and broken dividend growth promise you shouldn't buy Dominion Energy.

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There are things to like about Dominion Energy

The average utility is offering a dividend yield of around 2.9%; Dominion Energy's yield is 5%. That's a huge difference that will materially enhance the income a dividend investor generates in a year. And while the dividend isn't growing, the long-term goal is for Dominion to get back on the dividend growth path.

Supporting that will be the electric utility's projection of 5% to 7% earnings growth over the foreseeable future. That guidance is backed by a $50 billion capital investment plan, a 16% increase over the capital plan from a year ago. And while the company is still working to strengthen its balance sheet, it remains well capitalized so it should have the wherewithal to support its growth plans.

Two big call-outs from the capital investment plan are renewable power and assets to support data centers and artificial intelligence (AI). On the clean energy side, Dominion is building a large offshore wind project in the waters off of Virginia. The company estimates that project is about halfway done and on time. With regard to AI and data centers, demand from data centers in Dominion's Virginia market increased 88% between July and December of 2024. Both of these support the long-term thesis of an eventual return to dividend growth.

Long-term dividend investors could be smart to buy Dominion now

There's no question that Dominion Energy has let investors down in the past as it worked to overhaul its portfolio and reduce risk. At this time, it is a simple regulated electric utility. There's no more that can be overhauled, so executing on the growth plan is the only goal open to management. So far, that is going well. Given the elevated yield, you are getting paid generously to wait for the return of dividend growth. When that happens, which seems highly likely, Wall Street will probably afford this giant U.S. utility a higher valuation. Buying now will get you in the door before that point.

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Reuben Gregg Brewer has positions in Dominion Energy and Enbridge. The Motley Fool has positions in and recommends Berkshire Hathaway and Enbridge. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.