Dominion Energy (D): A Hidden Gem in the Utilities Rally

The utilities sector has quietly become a refuge for investors fleeing the volatility of AI-driven tech markets. Amid job market resilience and rising recession fears, Dominion Energy (D) stands out as a compelling contrarian play. Despite a modest 1% year-to-date (YTD) gain, the company’s fundamentals—bolstered by a hedge fund frenzy, a game-changing Amazon partnership, and a fortress balance sheet—suggest this is a stock primed for a breakout. Barclays’ $58 price target looms large, but the true opportunity lies in the underappreciated catalysts fueling Dominion’s ascent.

Recession Resilience: Utilities Are the New Gold

Utilities are the ultimate defensive asset. With regulated businesses providing steady cash flows, Dominion’s earnings are insulated from economic cycles. Its core operations—electricity and natural gas distribution in Virginia and South Carolina—are underpinned by rate-regulated contracts, shielding it from price wars or demand swings.

Yet Dominion’s YTD performance has been unremarkable, masking its true strength. While the stock trades at $53.81 (as of May 13), its dividend yield of 5.2%—among the highest in its sector—offers a safe harbor for income seekers. This yield is no accident: Dominion has boosted dividends at a 12% annualized rate over five years, a feat few utilities can match.

Hedge Funds Are Accumulating—a Silent Bullish Signal

Dominion’s stock may be overlooked by retail traders fixated on AI hype, but institutional investors are piling in. According to recent filings, 39 hedge funds now hold significant stakes, including luminaries like Viking Global and Coatue Management. This accumulation suggests a deep conviction in Dominion’s undervalued growth story.

Consider the math: Dominion trades at 10.8x forward earnings, a discount to its five-year average of 12.3x. With earnings growth of 7%+ projected through 2025, this valuation gap is unsustainable.

The Amazon SMR Partnership: A Game-Changer

Dominion’s most underappreciated catalyst is its partnership with Amazon to deploy Small Modular Reactors (SMRs) in Virginia. This $500 million joint venture with X-energy—a leader in advanced nuclear tech—targets 300 MW of carbon-free power by the late 2020s. The project addresses two critical trends:

1. Soaring Demand: Virginia’s energy needs are projected to double within 15 years, driven by data centers and AI infrastructure. SMRs offer a scalable, emissions-free solution.
2. Regulatory Tailwinds: The Inflation Reduction Act and Virginia’s “All-American, All-of-the-Above” energy plan provide subsidies and fast-tracked permitting.

This is not a pipe dream. The SMR project could generate $2 billion in revenue by 2030, while reducing Dominion’s carbon footprint—a must for ESG-conscious investors.

Why Now Is the Time to Buy

Jim Cramer’s surprise endorsement of Dominion on Mad Money last month underscores a broader shift: utilities are finally getting their due. With Barclays forecasting a $58 price target—14% above current levels—the upside is clear.

But the real catalyst is Dominion’s dividend yield versus risk-free rates. At a time when 10-year Treasuries yield 4.2%, Dominion’s 5.2% dividend offers a compelling premium. Meanwhile, its 2025 earnings guidance of $3.28–$3.52 per share remains comfortably achievable, even in a slowdown.

Final Verdict: A Buy at $53.81

Dominion Energy is a rare blend of stability and growth. Its regulated moat, dividend heft, and SMR breakthrough position it to thrive as tech volatility fades and investors refocus on fundamentals. At current levels, this is a stock where valuation, cash flow, and strategic vision align perfectly.

The SMR project alone justifies a re-rating, while hedge funds’ quiet accumulation signals a coming wave of institutional buying. For investors seeking recession-proof returns with upside, Dominion Energy is not just a gem—it’s a cornerstone for 2025 and beyond.

Action Item: Buy Dominion Energy (D) at $53.81. Target: $58 (Barclays). Risk: $49.50 (2025 low).

This analysis is based on public data as of May 13, 2025. Always conduct further research before making investment decisions.