Duke Energy (DUK) Announces 4.2% Quarterly Dividend Hike

Duke Energy Corporation DUK recently announced that the board of directors approved a quarterly cash dividend of 93 cents per share on its common stock. This would mark a quarterly increase of 3.75 cents or 4.2%.

Per the company, the dividend will be payable on Sep 17, 2018 to stockholders on record as of Aug 17. The estimated annual yield on the dividend is 4.3%.

Regular Distribution Hikes

Duke Energy has been raising its cash dividend per share every year and this is the 92nd consecutive year, in which the company has continued with the same trend. In July 2017, Duke Energy announced a quarterly cash dividend increase of 4.1% on its common stock.

Duke Energy has a stable dividend payment history. As of Mar 31, 2018, the company had cash and cash equivalent worth $421 million compared with  $358 million as of Dec 31, 2017. The company has maintained its record of increasing its quarterly dividend rate every year since January 2007 on the basis of its growing financial strength.

In the first quarter of 2018, Duke Energy paid dividend worth $599 million to its shareholders, almost in line with the payment in the year-ago quarter. It continues to target annual growth in dividend, while being consistent with its long-term 4%–6% earnings growth rate. Through 2022, the company is focused to maintain its long-term dividend payout ratio in the range of 70%–75% of its adjusted earnings per share.

Factors Supporting Regular Dividend Hike

Duke Energy has been making capital investments in its infrastructure and expansion projects across its service territories. Per its long-term plans, the company aims to spend $30 billion for electric utilities and infrastructure, and also reduce its capital expenditures by approximately $1 billion for the 2018–2022 period. These investments are expected to drive the company’s earnings base growth in the combined electric and gas businesses by approximately 6% over the next five years.

The company’s additional generation projects, such as dual-fuel capabilities, and combined heat and power facilities to increase the flexibility of its system, are likely to boost its performance in the time ahead.

Notably, we believe that such planned investments along with significant growth initiatives will enable the company duly achieve its long-term investment targets and in turn improve its shareholder value through such regular dividend hikes.

Price Movement

Duke Energy has lost 1.9% in the last 12 months against the industry’s growth of 1%. The underperformance may have been caused by the potential volatility in market prices of fuel, electricity and other renewable energy commodities that the company faces.

Zacks Rank & Key Picks

Duke Energy currently has a Zacks Rank #3 (Hold). A few top-ranked stocks in the same industry include NRG Energy, Inc. NRG, Ameren Corporation AEE and Avangrid, Inc. AGR. While NRG Energy sports a Zacks Rank #1 (Strong Buy), Ameren Corporation and Avangrid carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NRG Energy pulled off an average positive earnings surprise of 507.93% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings moved up 24 cents over the past 90 days.

Ameren Corporation reported average positive earnings surprise of 7.69% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings moved up 4 cents over the past 90 days.

Avangrid reported average positive earnings surprise of 7.79% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings moved up by a cent over the past 90 days.

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