The Company in a Nutshell
- Duke is one of the largest U.S. utilities with operations in the Midwest, Florida, and the Carolinas.
- Duke offers an attractive yield for income seekers, while not making unsustainable promises.
- Duke has successfully increased its payouts for 17 consecutive years.
Date Reviewed | 9/6/2024 |
Company Name | Duke Energy Corp |
Symbol | DUK |
Sector | Utilities |
Industry | Utilities - Regulated Electric |
Beta | 0.456 |
PRO Rating | 4 |
Dividend Safety | 3 |
Business Model
Duke Energy Corporation is an energy holding company. The Company operates through two segments: Electric Utilities and Infrastructure (EU&I) and Gas Utilities and Infrastructure (GU&I). The EU&I segment conducts operations primarily through the regulated public utilities of Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Indiana, and Duke Energy Ohio. EU&I provides retail electric service through the generation, transmission, distribution, and sale of electricity to customers within the Southeast and Midwest regions of the United States. The GU&I segment conducts natural gas operations primarily through the regulated public utilities of Piedmont, Duke Energy Ohio, and Duke Energy Kentucky. GU&I serves residential, commercial, industrial, and power generation natural gas customers, including customers served by municipalities who are wholesale customers. It also purchases a diverse portfolio of transportation and storage services from interstate pipelines.
Current price | 116.34 |
ROE | 8.85 % |
ROIC | 4.05 % |
Shareholder Yield | 0.85 % |
5-Yr Total Return | 48.20 % |
1-Yr Total Return | 27.20 % |
Next Earnings Date | 10-31-24 |
Latest Quarter Information
What the CEO said:
“We’ve had an excellent first half of the year, delivering on grid and generation investments and collaborating with stakeholders to advance the energy transition across our jurisdictions,” said Lynn Good, Duke Energy chair and chief executive officer
What we say:
09-04-2024, Duke Energy reported a solid quarter with revenue up 9% and EPS up 30%! The revenue increase was primarily driven by higher sales volumes, rate increases, and improved weather conditions in its key service areas. The Electric Utilities & Infrastructure segment saw significant growth, contributing an additional $0.34 per share, while the Gas Utilities & Infrastructure segment faced a slight decline due to higher interest expenses and depreciation. The EPS growth was supported by strong operational performance across its electric utilities, driven by customer growth of 2.4% in the Carolinas and Florida, and a 1.9% increase in weather-normalized volumes
Investment Thesis
An investment in a utility stock is usually made on the typical assumption of buying a sustainable source of income. You get a stable business, relatively high yield, and clockwork increases. This is exactly the case with DUK. The company has a strong business model and a focus on stable revenue sources. In February of 2024, DUK increased its five-year capital expenditure plan by $8B from previous guidance to $73B, saying rising power consumption in U.S. Southeast and Midwest states requires more investments in clean energy. Duke works with regulators to increase their rates gradually. Since the company has several projects (read large CAPEX), DUK should be able to continue these rate-increase strategies for several more years. Duke Energy is advancing its strategy to transition to a cleaner energy future. The company announced new initiatives aimed at expanding its renewable energy portfolio, including additional solar and wind projects, and investments in battery storage technology. Moreover, Duke Energy reached agreements with major tech companies like Amazon, Google, and Microsoft for clean energy supply, reinforcing its commitment to sustainability and long-term growth. We have a favorable view of DUK’s utility business in the Southeast region, with strong customer growth and regulatory support for renewable energy investments. DUK is a perfect match for any retirement or conservative portfolio looking for a stable dividend grower. 2024 adjusted EPS is expected to be $5.85-$6.10.
Dividend Triangle
5-Yr Rev. Growth | 3.45 % |
5-Yr EPS Growth | -1.20 % |
5-Yr Div Growth | 2.25 % |
Potential Risks
Duke boasts an impressive $73B budget for Capital Expenditures through 2028. It focuses on grid modernization, transitioning to a cleaner generation profile, natural gas infrastructure investments, and environmental remediation. While this is all good, some serious money must be either borrowed or new shares issued to finance those expenditures. DUK is counting on increasing their regulated rates and enjoying more profitability. A good example of this is the failure of the Atlantic Coast Pipeline (ACP). This was an $8B joint project with Dominion that was terminated. This will also reduce Duke’s earnings growth for the next few years. With current inflationary pressures, we are concerned about rate case outcomes if the economy continues to slow down. Not to mention that interest rates are starting to weigh more heavily on Duke’s budget.
Debt/Equity | 1.60 |
Financial Debt to EBITDA (TTM) | 5.90 |
Current Ratio (Quarterly) | 0.75 |
Credit Score | 67 |
Dividend Growth Perspective
Duke is an example of stability with consecutive dividend increases since 2007. When you look at both the payout and the cash payout ratios, you can understand why the company can’t afford to increase its dividend in a more substantial manner. However, the company is well-positioned to continue paying its dividend and offer a modest increase each year. In 2023, the company increased its dividend by 2%, from $1.005 to $1.025/share. The utility offered a similar increase in 2024, brining the dividend to $1.045/share.
Dividend ($) | 4.18 |
Dividend Yield Fwd | 3.65 % |
Dividend Frequency | Quarterly |
Average 5-Yr Yield | 4.05 % |
Payout Ratio (%) | 74.90 |
Cash Payout Ratio (%) | -315.55 |
DGR 1-Yr | 2.00 |
DGR 3-Yr | 2.05 |
DGR 5-Yr | 2.25 |
DGR Streak | 19 |
Chowder Score | 5.85 |
Next DVD PMT | 09-16-24 |
Valuation
Recent Annual Dividend Payment | $ 4.18 |
Expected Dividend Growth Rate Years 1-10 | 3.00% |
Expected Terminal Dividend Growth Rate | 4.00% |
Discount Rate | 9.00% |
Discount Rate (Horizontal) | |||
Margin of Safety | 8.00% | 9.00% | 10.00% |
20% Premium | $ 120.19 | $ 96.45 | $ 80.61 |
10% Premium | $ 110.17 | $ 88.42 | $ 73.90 |
Intrinsic Value | $ 100.16 | $ 80.38 | $ 67.18 |
10% Discount | $ 90.14 | $ 72.34 | $ 60.46 |
20% Discount | $ 80.13 | $ 64.30 | $ 53.74 |
Video Tutorial: How to Read the Stock Cards DDM Valuation
Market Cap | 90 B |
PE Ratio | 19.95 |
Fwd PE | 18.65 |
Price to Book Ratio | 1.80 |
DDM Valuation | 80.38 |
Average 5-Yr PE | 24.61 |
Value Score | 63 |
- All financial metrics are updated weekly.
- The DSR PRO rating and Dividend Safety Score are updated quarterly.
- The analysis (investment thesis, risk potential, dividend growth perspective and DDM calculation) is reviewed every 6 months.
- The PDF format includes only comments (no metrics) and is reviewed every 6 months.