Analyzing Duke Energy’s Dividend Profile
Duke Energy raised its quarterly dividend
The largest rate-regulated utility in the country, Duke Energy (DUK), declared a quarterly dividend of $0.89 per share on July 10, 2017. The ex-dividend date for this dividend is August 16 while it will be paid on September 18, 2017. This dividend is 4% higher than its dividend in the previous quarter.
Duke Energy stock is currently trading at a dividend yield of 4.1%, while the Utilities Select Sector SPDR (XLU) offers a yield of 3.5%.
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Duke Energy’s current dividend yield surpasses those of its peers. Xcel Energy (XEL), one of the largest regulated utilities, is currently offering a dividend yield of 3%. Industry leader and renewables giant NextEra Energy (NEE) yields around 2.7%. Duke Energy’s peer and leading regulated utility Southern Company (SO) is trading at a yield of 4.7%.
Duke Energy’s dividend profile is one of the best in the industry mainly because of its earnings stability. It generates more than 85% to 90% of its earnings from regulated operations, which facilitates stable and predictable earnings, ultimately supporting stable dividends.
Duke Energy’s current dividend yield is indeed attractive relative to peers. The yield is also 180 to 200 basis points higher than that of broader markets and ten-year Treasury yields. However, it should be noted that Duke Energy’s dividend growth has been below the industry average in the last five years.
In this period, Duke Energy managed to increase its per share dividends by 2.5%, compounded annually. In the same period, utilities at large increased their dividend by an average 4.2% compounded annually. Southern Company raised its per share dividends by 3.6% compounded annually in the last five years.
You can read more about which utility has a superior dividend profile in Southern Company and Duke Energy: A Dividend Yield Showdown?