Let's cut to the chase: owning Dominion Energy stock has paid off. It's now mostly tracking its buyer, NextEra Energy. Take the money and run.
We recommended shares of the just over $62 billion regulated utility that serves Virginia and the Carolinas at the end of November. Since then, they have gained almost 16%. That beats the S&P 500's just over 11% rise and 3% gain by the State Street Utilities Sector Select SPDR ETF. Our thesis was mostly about data centers, as Virginia is home to many of them. With companies needing to power their artificial intelligence, Dominion's valuation had more room to reflect the tailwind.
That thesis has worked out, though admittedly not exactly for the reasons we had anticipated. NextEra Energy, a $186 billion market capitalization company focused mostly on the eastern U.S., on May 18 announced it's acquiring Dominion, partly in an effort to bolster its data center business. Clearly, NextEra saw value in Dominion's data center business, just as we had.
NextEra agreed to issue Dominion shareholders 0.8138 NextEra shares for every Dominion share at the time of closing, which is expected likely in the second half of 2027. That means whatever NextEra's stock price is at that point, Dominion's should be very close to 81.138% of it. There's also a cash payment at closing that equates to just over 40 cents per share. But given that the deal is mostly NextEra's stock, as NextEra's stock goes, so goes Dominion's.
That's why it's prudent to sell. Sure, Dominion stock could keep rising if NextEra rises -- either because of a broader utility rally or because of company-specific reasons -- but ultimately, a bet on Dominion is now a bet on NextEra. We recommended NextEra almost three years ago, but it isn't a pick right now. So why not take the profits and go elsewhere with the money?
Selling gives an investor an opportunity to look at other attractive areas of the market. We've recently recommended several names in the technology and consumer sectors.
The one other factor Dominion shareholders should know is that there's a saving grace if the merger doesn't happen. If regulators block the deal, NextEra would have to pay Dominion a $4.83 billion termination fee. If NextEra backs out, it would have to pay Dominion $6.52 billion.
That would significantly reduce management's need to issue more stock to raise the funds it needs for investments, given that it reiterated on its first quarter earnings presentation that it's on pace to issue just $1.7 billion roughly in equity for 2026. The point is that, with no deal, Dominion's earnings per share growth would look a tick higher, given a lower share count than with more financing. But that, on its own, isn't a reason to stay in the stock, especially since the deal probably will go through. It has already gained, and it's now simply a bet on NextEra.
Take the money -- and buy other stocks.
Jacob Sonenshine is a stock picks writer at Barron's Investor Circle and regular contributor to The Trader Column. His general focus is technology, consumer, industrial, and healthcare.
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July 15, 2026 23:40 ET (03:40 GMT)
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