Will Duke Energy Maintain Its Premium Yield?



Duke Energy: Dividends

Charlotte, North Carolina–based Duke Energy (DUK) has one of the best dividend profiles among the companies comprising the S&P 500 Utilities Index (XLU). As we earlier discussed, the utility has paid a dividend for the last 91 consecutive years.

Duke Energy, with a yield of 4.1%, is one of the top-yielding utility stocks in the sector. In comparison, the Utilities Select Sector SPDR ETF (XLU) is offering a yield of 3.5%. It should be noted that, barring a few instances, Duke Energy’s dividend yield has not fallen below 4% in the last five years. In comparison, Southern Company (SO) yields 4.8% while NextEra Energy (NEE) yields 2.6%.

DUK yld

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Dividend growth

In the last five years, Duke Energy has increased its per-share dividends by 2.5%, compounded annually. In the same period, broader utilities increased their per-share dividend by an average 4.2%, compounded annually. Georgia-based Southern Company raised its dividends by 3.6%, compounded annually, in the last five years.

If you are looking for attractive dividend growth for the future, NextEra Energy is among the few utility stocks that offer an expected double-digit dividend growth profile going forward. In the last five years, NEE increased its dividend 9.6%, compounded annually.

Payout ratio

Duke Energy has one of the largest payout ratios among its peers. Its payout ratio was ~91% in 2016, higher than the industry average. Duke Energy’s five-year average payout ratio is also near 90%.

NextEra Energy (NEE), the largest utility by market capitalization, has a payout ratio near 55%. The biggest utility distributing a much lower portion of its profits, as dividends might concern some investors. However, it is deploying profits for future growth, which is considered a positive characteristic of the stock. The stock has outperformed consistently over the years.


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