Should You Invest in Dominion Energy?

PHOTO CREDIT: Dominion Energy

OVERVIEW

Dominion Energy Incorporation ($D) is a company based in the United States. The company produces and sistributes electricity and natural gas in the United States. The company operates thousands of miles of electrical lines and natural gas lines for 7 million customers in 16 states. The company was founded in 1983.

Why You Should?

  1. Dominion Energy is a great reopening play in an investor’s portfolio. The pandemic shut down schools, restaurants, and other large venues, something that reduced the demand for electricity. However, once this pandemic is over and states reopen, the company will see strong growth in electricity and natural gas volumes.
  2. In my opinion, the demand for electricity will continue to increase as it is a popular and renewable form of energy. For example, the rise of electric cars will increase the demand for electricity, something that will benefit Dominion. This makes Dominion a great long-term investment as it will benefit from the United States shifting to renewable forms of energy.
  3. Dominion Energy is investing in the future of the electricity and energy industry. For example, they have invested millions of dollars into solar, wind, and water to produce energy. This has helped the company increase its profitability for the long term and has positioned it well for the future of the energy industry.
  4. The company is a safe investment option in an investor’s portfolio. People and businesses will continue to purchase electricity even through tough economic times in order to maintain a high quality of life. This will help the company maintain stable sales during a recession, something that will also benefit investors in the company.

Why You Should Not?

  1. The company faces tough competition in the energy industry. Though the company signs long-term contracts with the cities that it serves, these contracts can be handed over to other companies like Consolidated Eddison, AES, Next Era, and many others. This competition might hurt the company and its investors.
  2. The COVID-19 pandemic has caused the demand for electricity destined for commercial entities to fall. The pandemic caused sporting venues, restaurants, schools, and other non-essential businesses. This caused the demand for electricity to drop. The pandemic will continue to hurt the company and its investors until all of these businesses are fully reopened once again.
  3. The utility energy business is extremely regulated, something that will limit growth for the company. Any price increases or new investments need to go through and be approved by government entities, something that might cause Dominion’s stock price to grow slower than the market. This is the one downside of investing in utility energy companies.

MY OPINION

I think that Dominion Energy is a decent long-term investment due to its position as a good reopening play, a strong long-term outlook, its position as a safe investment option, as well as its future investments in its core business. However, tough competition, negative impacts from the pandemic, as well as heavy regulations might hurt the company and its investments.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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