What Investors Should Know about Duke Energy’s Dividends
Duke Energy: Dividends
Duke Energy’s (DUK) dividend growth hasn’t been the best in the US utility industry, but its premium yield of 4.5% is among the highest. With the Piedmont Natural Gas acquisition, Duke’s earnings are likely to accelerate, which may boost its dividends too.
Duke’s dividends have grown fairly well over the past few years at a rate of 2.5% compounded annually. The company is expected to pay dividends of $0.86 per share for 1Q17 on March 16, 2017.
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Dividend yields of peers
Southern Company (SO) and FirstEnergy (FE) yield nearly 4.6%. Renewables giant NextEra Energy (NEE) yields nearly 3%. The Utilities Select Sector SPDR (XLU) and SPY (SPX-INDEX) currently yield 3.5% and 2%, respectively. Thus, Duke’s yield seems very well placed as compared to peers and broader markets (SPX-INDEX). Duke Energy stock has also been relatively stable in exchange markets, and this may shape an attractive risk-and-reward proposition for conservative investors.
As we can see in the above graph, Duke’s dividends are expected to grow by ~4% in the next few years, which is in line with the industry average. On the other hand, this growth rate is less than half of NextEra Energy’s (NEE) and Dominion Resource’s (D) expected dividend growth rate of ~10%.
Duke currently seems comfortable achieving 4%–6% targeted earnings growth over the next several years. Its healthy product portfolio of electric, gas, renewables, and midstream puts it in a seemingly strong position for balanced growth going forward. Its stable earnings growth will likely help it maintain healthy dividend growth as well.