Dominion Energy - Short the Wind Speed Bump; A Tactical Swing Trade

Hook & thesis

Dominion Energy is building one of the largest U.S. offshore wind farms - a 5.2 GW project off Virginia Beach - while running a capital-intensive regulated utility business that still generates solid operating profits. That combination looks attractive on paper. In practice, though, heavy near-term investing outflows, elevated liabilities and modest cash balances create a vulnerability: if the offshore project hits a headline - a construction delay, a permitting snag, a higher-than-expected cost update or a tougher-than-expected rate-case response - the market can reprice the stock quickly. My trade idea is a tactical short/swing: sell into the recent strength and manage risk tightly.

The thesis is not that Dominion is broken. The company produces strong operating cash (net cash flow from operating activities was $1.945B in the quarter ended 09/30/2025) and reported net income of $1.028B for Q3 2025 (diluted EPS of $1.16). But capex and investing are large and lumpy: net cash flow from investing activities was -$3.116B in that same quarter, and the company is still funding the offshore buildout. With only $932M of cash on the balance sheet at 09/30/2025 and noncurrent liabilities of $70.14B, headlines tied to project execution or financing have real teeth.

What Dominion does and why the market should care

Dominion Energy is an integrated utility with over 30 GW of generation capacity and more than 90,000 miles of electric T&D lines. The company is moving into large-scale offshore wind: it is constructing a rate-regulated 5.2 GW wind farm off the Virginia Beach coast. The growth story is clear - renewables buildout, long-term contracted-like economics via rate regulation - but the near-term mechanics are funding and execution.

Why this matters to equity holders now: utilities generally trade on predictability and yield. Dominion still pays a well-covered quarterly dividend of $0.6675 (declared 10/29/2025; ex-dividend 12/05/2025; pay date 12/20/2025), which annualizes to $2.67 and implies a current yield in the mid-4% range given a share price around $58.60. That yield is meaningful and helps sustain the equity in a benign environment. But the market is also sensitive to one-off hits when a utility is simultaneously large-scale building and has to fund it through debt/equity and rate cases. The stock's short-term reaction to such news can be outsized.

Data-driven support

• Profitability: Q3 2025 revenues were $4.527B, operating income $1.339B and net income $1.028B (diluted EPS $1.16). Those are solid numbers for a regulated utility and show the business is generating operating profit.
• Cash flow & investing: Net cash flow from operating activities was $1.945B in Q3 2025, while net cash flow from investing activities was -$3.116B. The company is spending heavily to fund growth - notably the offshore build.
• Balance sheet snapshot (09/30/2025): Assets $111.597B, Liabilities $79.871B, Equity $31.726B. Cash on hand: $932M. Noncurrent liabilities: $70.14B. The leverage is large in absolute terms, and available cash is constrained versus ongoing investing.
• Financing behavior: In Q3 2025 the company reported net cash flow from financing activities of +$1.824B, consistent with active financing to support investing. Interest & debt expense in the quarter was $527M, a recurring burden.
• Dividend: Quarterly cash dividend $0.6675 (declared 10/29/2025), implying an annualized payout of $2.67. At a share price of roughly $58.60 that is an indicated yield of about 4.6%.

Valuation framing

A clean market cap is not provided in the filings here, so take the following as a practical, dataset-rooted valuation check rather than a formal, live-market multiple. Using the most recent quarterly diluted EPS of $1.16 (Q3 2025) and annualizing it (4x Q3 as a rough shorthand) gives an approximate 2025 run-rate EPS of $4.64. At a trading price near $58.60 that implies a back-of-envelope P/E around 12.6x. That is a reasonable multiple for a regulated utility but is not high enough to insulate the stock from an execution headline on a large project where funding expectations shift quickly.

Separately, the company is a meaningful dividend payer (annualized $2.67), which supports downside defense: the current dividend looks covered by operating cash in the quarter. Still, valuation complacency is common when yield masks financing risk; the market has penalized utilities before for project overruns and delayed rate recovery.

Trade idea - actionable entry, stop and targets

Trade direction: Short (tactical swing)
Time horizon: 2-8 weeks
Risk level: High

Suggested position sizing: limit to a small, tactical allocation (2-3% of portfolio) given the company’s strong regulated cash flows and meaningful dividend. Use a stop at $63 to cap losses; the rationale is that a sustained move above the recent multi-month highs (~$62.77) would invalidate the short-term execution-fear thesis.

Catalysts to watch (2-5)

• Offshore project updates: any announcement of cost overrun, schedule slippage or supplier disputes on the 5.2 GW Virginia project would be the fastest path to downside pressure.
• Rate-case decisions in Virginia or nearby jurisdictions that limit recovery of project costs or change the approved rate base assumptions.
• Quarterly results / guidance: a weaker directional comment on capex funding or increased financing plans would force the market to re-evaluate leverage and dilution risk.
• Credit rating actions or rising interest expense: an unexpected downgrade or visible rise in interest expense would increase financing costs for the build and could be a near-term negative.
• Macro risk-off moves: as a high-yield utility, Dominion typically underperforms in sharp market selloffs if investors rotate out of dividend plays.

Risks and counterarguments (at least 4)

• Regulated recovery is likely: the project is rate-regulated, which means Dominion can often pass through a large share of costs to customers over time. That reduces long-term equity risk versus merchant builds. If regulators provide clear cost-recovery mechanisms, the short will be challenged.
• Solid operating profitability: the company reported operating income of $1.339B and net income of $1.028B in Q3 2025; operating cash flow was $1.945B. Those core numbers support the dividend and provide a cushion versus temporary shocks.
• Dividend and yield defend equity: the company’s quarterly dividend of $0.6675 (annualized $2.67) gives a yield of roughly 4.6% at current prices, which attracts income-focused investors and can limit downside absent a big headline.
• Financing flexibility: the company demonstrated active financing in Q3 2025 with net cash flow from financing activities of $1.824B. Management has historically accessed debt and capital markets to fund projects; a controlled financing plan would blunt the thesis.
• Counterargument - execution risk priced in: some of the market’s caution may already be reflected in the share price. If the company provides a credible financing path or a timetable that removes uncertainty, the stock could rally rapidly against a short position.

What would change my mind

I will cover or flip the trade to neutral/long if Dominion publishes clear, granular progress milestones on the 5.2 GW project with firm fixed-price commitments, or if regulators explicitly approve accelerated cost recovery that materially reduces equity funding needs. A sustained quarter with materially stronger free cash flow (operating cash >> investing cash such that net investing is covered without outsized financing) would also force re-evaluation.

Conversely, a credible update that shows mounting contractor disputes, a large capital increase beyond prior guidance, or a credit rating action would strengthen the short case and push me toward the secondary target.

Bottom line: Dominion is a fundamentally solid utility with attractive yield and a major growth project. But in the short run, the 5.2 GW offshore wind build creates a pronounced execution and financing sensitivity. For tactical traders willing to accept higher risk, a disciplined short with an entry near current levels, a stop above the recent highs, and targets in the low-to-mid 50s offers an asymmetric, news-driven opportunity. Keep position sizes small and monitor project and regulatory headlines closely.

Disclosure: This is a tactical trade idea and not personalized investment advice. Position sizing and risk tolerances vary; perform your own due diligence.

Key documents referenced in the analysis:

• Q3 2025 financials (filing accepted 10/31/2025) for income statement, balance sheet and cash flow line items.
• Dividend declarations (most recently 10/29/2025; ex-dividend 12/05/2025; pay date 12/20/2025).