Is Duke Energy’s Dividend Yield Attractive?



Duke’s dividend yield

As of September 20, Duke Energy (DUK) was trading at a dividend yield of 4.6%. At that level, it’s one percentage point above utilities’ average yield. DUK has paid a dividend every quarter for the last 92 years.

DUK’s dividend grew at a CAGR (compound annual growth rate) of 2.9% in the last five years. Analysts expect DUK earnings to grow 4%–6% annually. Its dividend might also rise near that level annually.

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Peer comparisons

Southern Company (SO) is trading at a dividend yield of 5.5%, which is 90 basis points higher than DUK’s yield. However, Exelon (EXC), American Electric Power Company (AEP), and NextEra Energy (NEE) are trading at dividend yields of 3.2%, 3.5%, and 2.6%, respectively, which are each more than one percentage point less than DUK’s dividend yield.

Rising Treasury yield might concern utility stocks

On September 19, the US ten-year Treasury constant maturity rate was 3.08%, the highest since May 17, 2018. On August 23, the ten-year Treasury constant maturity rate was 2.8%, its lowest level since May 29, 2018. Between August 23 and September 20, the yield rose ~26 basis points. In that period, the Utilities Select Sector SPDR ETF (XLU) fell 0.4%. Rising Treasury yields might be a concern for rate-sensitive stocks such as utilities.


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