Dear Mr. Berko:

Dear F.L.:

I don’t believe inflation is going to be a significant problem in the coming decade. In fact, in the past several months I’ve come to believe that deflation may now be a more significant problem. But the reason I’ve not recommended Treasury Inflation-Protected Securities, or TIPS, is that I don’t trust Congress’ ever-changing definition of inflation.

The most recent glaring example of congressional ineptitude is the exclusion of food and energy prices from the Consumer Price Index (CPI) in the past couple of years. Congress calls the new results “core inflation,” giving the CPI a healthy-apple image in an attempt to soothe public angst. But food and energy are the meat of this apple, and it’s prophetic that Congress tosses the worthless “core” to the voter.

Any fool knows that in the past four years, inflation has been a lot higher than the 2.5 percent that Congress would have us believe. The real number, including food and energy, is closer to 12 percent.

TIPS prices do not reflect this truth, so I have not recommended them. However, that’s now moot. If unemployment remains high, as I believe it will, and if unemployment continues higher, as I believe it will, then logic dictates that prices must decline to meet lower demand from an increasing number of consumers who have less spendable income.

But I can unequivocally recommend Dominion Resources Inc. (D-$46.81). Dominion sells electrical power to 2.4 million customers in Virginia and parts of North Carolina and sells natural gas to 1.5 million customers in Ohio and West Virginia and to 117 merchant power customers across 14 states.

Dominion’s assets include 28,000 megawatts of generation capacity; 6,100 miles of electric transmission lines; 57,000 miles of distribution lines; an 11,000-mile natural gas transmission, gathering and storage pipeline; and 22,000 miles of gas distribution lines. Dominion also owns 948 billion cubic feet of storage capacity for natural gas.

The company’s $1.97 dividend yields a solid 4.2 percent and since 2006 has grown 7 percent a year. Many believe the dividend will grow between 5 percent and 7 percent annually in the coming five years. Several market services believe Dominion’s dividend could top $2.49 a share as revenues grow from $14.7 billion to $18 billion by 2016.

Its business derives from a strong, low-unemployment service area and an economy that serves some of the fastest-growing regions in the eastern United States.

The company’s low payout ratio of 35 percent augurs well for continued dividend growth.

Dominion fits well in most income/growth accounts and has little downside exposure. If you reinvest the dividends, it should provide an average annual return in the coming decade between 7 percent and 10 percent.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or email him at malber@adelphia.net. ©2011 Creators.com