Let’s see how Duke Energy (DUK) has performed in the market in the last few years compared to its peers. It has already shown a decent run so far this year. Duke Energy’s returns, including dividends, in the trailing 12 months came in at 18%, marginally underperforming broader utilities (XLU). Duke Energy’s robust rally along with its stable dividends contributed to these healthy returns.
In the last five years, Duke Energy’s total returns came in at 10%, compounded annually. The Utilities Select Sector SPDR ETF (XLU) returned 13% compounded annually over the same period.
The broader utilities underperformed the SPDR S&P 500 (SPX-INDEX) (SPY) by a large margin in the last five years. In this period, SPY’s total returns were 14% compounded annually.
The chart above shows the normalized stock price performance of Duke Energy and the utilities at large, along with the broader markets.
NextEra Energy (NEE), the largest component of the S&P 500 Utilities Index, has outpaced both the broader utilities and the markets by a huge margin in the last five years. In this period, it returned 20%, including dividends, compounded annually. It also outperformed its peers in the last three-year and one-year timeframe.
Investors have chosen to remain invested in relatively safer utility stocks in the last few years considering the uncertainties in the broader markets. This has led to utilities—generally considered as a slow-moving sector, surpassing the broader markets, resulting in utilities’ premium valuations.
Let’s compare Duke Energy’s current valuations with its peers in the next part.