On Sunday, Duke Energy (DUK) declared a quarterly dividend of $0.945 per share. The dividend indicates an increase of ~2% compared to its last quarterly dividend. The company has increased its dividends for 13 consecutive years. The ex-dividend date for Duke Energy’s dividend is August 15. The dividend will be paid on September 16.
The company’s quarterly dividend increase is below its historical average. The dividend increase also falls well below broader utilities’ average dividend growth. In the last five years, Duke Energy increased its dividend per share 3.3% compounded annually, while broader utilities raised their dividends ~4% during the same period.
The company provided an adjusted earnings guidance range of $4.80–$5.20 per share for 2019. Given the recent increase, Duke Energy will likely pay a dividend per share of $3.745 for fiscal 2019, which indicates a payout ratio of 75%—in line with its peers.
Duke Energy’s premium yield
Currently, Duke Energy offers a dividend yield of 4.1%, which is higher than the peer average yield of 3.1%. The dividend yield has been higher than the peer average in the last five years. The company has paid a cash dividend for 93 consecutive years. Duke Energy’s dividend profile looks stable due to its stable earnings. The company’s earnings are driven by its large regulated operations.
Southern Company (SO) offers a yield of 4.4%. The company managed to raise its dividends 3.4% compounded annually in the last five years. NextEra Energy (NEE) is trading at a dividend yield of 2.4%—one of the lowest among utilities (XLU). NextEra Energy leads the pack with its handsome dividend growth. The company raised its dividends more than 10%.
Analysts’ views and target price
The stock has a mean target price of $92.6, which suggests a potential upside of 3.3% from its current price of $89.7 over the next 12 months.
Analysts seem cautious on Duke Energy stock. Among the 19 analysts surveyed by Reuters that track Duke Energy, 13 recommended a “hold,” one recommended a “strong buy,” three recommended a “buy,” and two recommended a “sell.”
So far, Duke Energy stock has risen 4% this year. The stock has underperformed broader utilities. Currently, Duke Energy is trading at 18x its forward earnings. The stock look inflated for utility stocks due to its slow earnings growth. Duke Energy’s historical average valuation is ~19x–20x. NextEra Energy and Southern Company are trading at 22x and 18x their forward earnings, respectively.