uploads///DUK stk

Duke Energy’s Dividend Outlook and Growth Prospects

By

Oct. 9 2019, Updated 9:54 p.m. ET

Dividend outlook

Duke Energy’s (DUK) earnings in the longer term seem well placed, which might facilitate the targeted 4%–6% dividend growth. As we discussed previously, Duke Energy’s huge exposure to regulated operations provides earnings stability and predictability.

Article continues below advertisement

Market performance

Duke Energy stock has been weak in the last few months. Broader utilities started their downward streak in mid-December 2017 due to tax reforms and the Fed’s interest rate hike. Since then, Duke Energy stock has corrected 15% and marginally underperformed its peers (XLU).

Importantly, Duke Energy has significantly underperformed its peers in terms of total returns in the long term. In the last five years, Duke Energy returned 6% compounded annually. Broader utilities’ total returns were ~10% compounded annually during the same period. The total return is a more apt metric to measure utilities’ performance. The total return considers stock appreciation and dividends paid in a particular period.

The Fed is targeting three quarter-point rate hikes this year. Rising interest rates, tax cuts, and increasing Treasury yields have dented utility stocks in the last few months. Going forward, we could see intermittent weakness in defensives if these factors continue to dominate.

Utilities (IDU) are trading at their yearly lows. Read S&P 500 Utilities at a 52-Week Low Offer a Big Gain Potential and Does Dominion Energy’s Deal with SCANA Look Uncertain? to learn more.

Advertisement

More From Market Realist

  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.