Duke Energy Dividend Stock Analysis

Duke Dividend For High Yield, But Slow Dividend Growth

Let’s dive into a Duke Energy dividend stock analysis today.

Because Duke Energy has been powering homes and businesses with electricity and natural gas for more than 150 years.  Most importantly, the Duke Energy dividend is substantial. It is one of those slow and steady stocks that I like to own.

So let’s take a closer look at this essential services company. And address some important questions. Such as…

Is Duke Energy a good investment? Certainly, I will have some thoughts on that topic. Also, we will look at Duke’s dividend growth, dividend safety, and much more.

Duke Energy dividend stock analysis

Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

Duke Energy Stock Dividend Analysis: Key Takeaways

1. Duke is a stable, steady, and consistent dividend growth stock. Operating in the U.S. regulated utility sector.

2. It has nearly a 4% dividend yield. And 2-4% projected dividend growth potential. Based on my review. Management believes adjusted earnings will grow 5-7% annually over the next few years.

3. As of the time of this update, the stock looks fully valued.

4. Assuming the company is successful at executing its business plans. An investor can reasonably expect 8-10% total returns over the long run.

5. I have a mid-size position in Duke stock. As part of my portfolio of dividend growth stocks. And currently, rate it a “hold” for my personal investment decision-making.

Your situation may be different. So, read on for a full evaluation.

Are you like me and always on the hunt for new dividend stocks to invest in? If yes. Then, I have a couple of “go-to” sources I would like to suggest.

First, there is the Simply Investing report. It focuses on both U.S.-based and Candian-based companies that pay regular dividends.

I also like the Motley Fool Stock Advisor. For its insightful stock reviews and recommendations.

Okay. With those highlights and thoughts taken care of. Let’s get into the details. Starting with some background on the company.

Duke Energy Company Background

Duke is one of the largest electric power holding companies in the United States. They operate as a regulated utility.

Regulated utility companies, like Duke, are some of the most stable stocks you can buy.

Duke’s business is focused on:

  • Generating electricity
  • Distributing natural gas
  • Producing energy from renewable sources

Source: Duke Energy – About Us

More about these businesses…

Electricity: Their electric generating capacity is centered in the Carolinas, the Midwest, and Florida.

Natural gas distribution: They serve more than a million customers in Kentucky, Tennessee, and the Carolinas.

Commercial business: They own and operate a range of power generation assets in North America. With an emphasis on renewable energy.

Duke’s Strategic Vision & Growth Plan:

Duke is seeking to improve their customer’s experience by:

  • Modernizing their energy grid
  • Generating cleaner energy
  • Expanding their natural gas infrastructure

The company’s long-term growth will come from making smart investments. And their 5-year plan calls for more than $50 billion of capital improvement projects.

Also, that plan calls for 5-7% annual earnings growth.

Source: Duke Energy Investor Update

Duke Energy Stock Symbol

Duke stock trades on the New York Stock Exchange. It trades under the ticker symbol DUK (NYSE: DUK).

When I buy (and hopefully never sell) my dividend stocks. I use the Webull app. It’s fast and powerful. And has great research tools.

And best of all, trades are commission-free. You can learn more about Webull here.

That completes the business overview portion of today’s Duke stock analysis. So, moving right along with our feature company.

Next up, let’s get to know the dividends paid by Duke Energy.

Duke Dividend Rate Per Share

Duke stock pays an annual forward dividend of $3.94 per share.

The annual forward dividend is the last cash dividend payment approved by the company. Multiplied by the number of times a company pays dividends each year.

Duke Energy Dividend Yield

This results in nearly a 4% Duke Energy dividend yield. Based on the company’s recent stock price.

Dividend yields can change quickly. Since they are inversely related to the stock price.

So, be sure to check for Duke’s current dividend yield. Before investing money.

How Often Does Duke Energy Pay Dividends?

Duke’s dividends are paid 4 times per year. Each quarterly dividend payment is one-fourth of the annual rate.

When Does Duke Pay Dividends?

The timing of quarterly dividend payments for Duke is March, June, September, and December. During these months the dividend payments are made on or around the 16th day.

When Is The Ex-Dividend Date For Duke Stock?

For an investor to receive Duke’s next dividend payment. One must complete their purchase of Duke stock before the ex-dividend date.

Duke’s ex-dividend date is approximately 1 month before each of the quarterly dividends is paid.

The timing of dividend payments varies slightly each quarter. So, it’s a good idea to check the company’s investor relations site. For the latest dividend announcement.

Duke Energy Dividend History

Duke has been paying dividends annually since 1927.

And, they have a nice consecutive annual dividend increase streak going. Specifically, they have increased the dividend every year since 2005.

Duke Energy Dividend Growth Rate

Dividend growth has settled into the 2-4% range. As shown in the table below.

Table 1: Duke Compound Annual Dividend Growth Rate

1 Year3 Years5 Years7 Years
Based on the company’s most recent fiscal year-end.

With the last couple of dividend increases near the low end of that range.

We will circle back to the dividend in a moment. But now, let’s check out business fundamentals and financial position first. To help with that further assessment of the dividend.

Duke Historical Revenue Trend

As a slow and steady regulated utility. Duke Energy is not a high-growth stock.

Revenue fluctuations are mainly due to acquisition and divestiture activity. While the underlying demand for the company’s energy products and services grows slowly.

Chart 1: Duke 7-Year Revenue Trend

Duke dividend stock analysis

First of all, energy demand grows in very low single-digit percentages on an annual basis. Furthermore, a stable revenue base is one thing that makes regulated utilities some of the most consistent stocks you can find.

Duke Energy Dividend Payout Ratio

Duke’s earnings grow over time.  However, they can be volatile.

This is due to mergers and acquisitions-related costs. Regulatory rate settlements. And, the write-down of past investments when required.

Chart 2: Duke Energy 7-Year Trend of Earnings And Dividends Paid

Duke dividend payout ratio

The company prefers to discuss “adjusted earnings per share” with investors. Management makes adjustments to factor out the volatile one-time items from earnings reported under the accounting rules.

Regardless, in the long run, Duke’s earnings grow from acquisitions.  And they grow by investing in capital improvement projects.

The cost of capital projects plus a profit margin is then passed on to their customers.  This is the essence of a regulated utility business model.

The dividend payout ratio based on earnings is somewhat high. It has run about 75% of adjusted earnings over the past several years.

Although Duke’s dividend payout ratio is high. This is common for utility stocks.

Next, let’s discuss this company’s stock dividend and cash flow.

Duke Energy Dividend Payments & Free Cash Flow

Evaluating dividend payments versus cash flows is oftentimes not relevant for regulated utilities.

Because these businesses have large capital investment requirements. The investments often consume more cash than the company generates.

But due to the predictability of their stable and regulated businesses. They can finance those expenditures with long-term debt. The resulting debt payments are supported by the revenues and profits the capital expenditures generate.

So, earnings are usually the best measure of a utility’s dividend-paying capacity. Not cash flow. And in Duke’s case, adjusted earnings are best.

As I stated, Duke has been operating with a dividend payout of about 75%. Based on adjusted earnings and dividends per share.

Next, let’s check the company’s credit rating. And financial position. Then I can circle back to some additional points about Duke’s dividend.

Duke Energy Credit Rating

Knowing a company’s credit rating is important. It provides a signal about the company’s financial position. 

A corporation’s credit rating is similar to how your credit score works. 

Higher credit ratings mean lower risk to those who lend the company money.  Also, higher ratings mean lenders will likely get their loans paid back.

Duke Energy Dividend

Duke has a Baa1 and BBB investment grade-moderate credit risk rating from S&P and Moody’s, respectively.

This is an adequate rating.  It is, however, at the lower end of the investment-grade spectrum. As shown in the chart above.

On a side note, be sure to keep an eye on your personal credit score. I check mine for free using Credit Karma. You can learn more about Credit Karma here.

Furthermore, investing in dividend stocks is just one aspect of solid money management. It’s also a good idea to treat your entire financial picture as a business.

To do so, I manage all of my investments and spending in one place. By using web-based Personal Capital. You can learn more about Personal Capital here. It’s easy to sign up. And free to use.

Duke Energy Debt To Equity Ratio

At the end of last year, Duke’s debt to equity ratio was 1.2 to 1. This is not out of line with other regulated utilities. And represents a fairly conservative capital structure.

Duke Energy Dividend Safety

I will make a judgment on dividend safety based on several factors presented thus far:

  • Business model and growth plan
  • Dividend payout ratio
  • Credit rating
  • Debt to equity

Based on these metrics, the Duke Energy dividend has some risk to it, in my opinion.

Also, the investment newsletter Utility Forecaster gives Duke a low dividend safety rating. It scores Duke a 1 out of a possible 8 using its proprietary rating system.

I’m not convinced that Duke’s dividend will be reduced in the future. I don’t know that for a fact. But, risky dividends are a downside to dividend stocks.

However, the Duke Energy dividend certainly does not get the highest marks for safety. The one mitigating factor Duke has? The predictability of its business given its status as a regulated utility.

Related: How to pick dividend stocks

Duke Energy Dividend Growth Forecast

I like it when a company is transparent in communicating objectives for the dividend. It helps me plan for my future income. Duke management is helpful in this area. But, not completely transparent.

Duke Energy’s plans for dividend growth are stated as “long-term dividend growth commitment”. With underlying 5-7% projected earnings growth through 2025.

Thus, Duke desires to share its profit growth in the form of dividends with investors. I like that.

But, I’m going to use a dividend forecast that is less than projected earnings growth. For my planning purposes. Specifically, I will use 2-4%.

Until I see actual proof that the company will raise the dividend more rapidly. I won’t go any higher.

Because historical dividend growth does not suggest it prudent to do so. Since recent dividend increases were below the longer-term trend.

Let’s wrap up today’s dividend stock analysis. With a look at the stock’s valuation next.

Duke Energy Stock Valuation

Let’s judge value in several ways:

  • Duke dividend discount model
  • Morningstar fair value estimate
  • Utility Forecaster buy limit price

Duke Energy Dividend Discount Model

The single-stage dividend discount model considers several factors I have discussed thus far.

  • Current dividend payment
  • Projected dividend growth rate

My desired annual return on investment of 9%.

Using these assumptions, the dividend discount model considers Duke Energy’s stock overvalued.

Utility Forecaster Buy Limit Price For Duke

The Utility Forecaster investment newsletter suggests a maximum buy target of $106 per share.

Morningstar Fair Value

The investment analysis firm Morningstar believes Duke Energy’s stock is fairly valued at $98 per share.

Duke Energy Stock Valuation Conclusions

The valuation measures give us a range of values. Based on them, I conclude Duke stock is fully valued at a minimum. Perhaps slightly overvalued as of the time of this update.

Duke Energy Dividend Stock Analysis – Wrap Up

Duke is a regulated utility.  Because of the consistent demand for electricity and natural gas, Duke is considered a stable and consistent stock to own.

Is Duke Energy A Good Investment?

The Duke Energy dividend yield is at an attractive level.  However, the dividend appears somewhat risky. And has been growing at a slow rate. There may be better investments to consider for one’s investment dollars.

For me, Duke holds a mid-sized position in my dividend growth stock portfolio. And I plan to hold.

But, do not intend to add to the position at this time. Furthermore, I will consider selling if I see any signs that the dividend may be at risk of reduction.

Further Reading About Stable Utility Stocks And Their Dividends

I hope you enjoyed this article.  If so, here are a couple of others that you may find interesting:

My Favorite Dividend Investing Resources

The dividend investing and personal finance resources I mentioned in this article are summarized here for your convenience.

I use all of them. To make the most of my money and investments.

Trade stocks for free using the Webull app
Get dividend stock recommendations from Simply Investing
Use Morningstar for insightful investment analysis
Or, try the Motley Fool Stock Advisor
Check your credit for free using Credit Karma
Manage your total financial picture for free using Personal Capital

Disclosure & Disclaimer: I am not a licensed investment adviser, financial adviser, or tax professional. And I am not providing you with individual investment advice, financial guidance, or tax counsel. Furthermore, this website’s only purpose is information & entertainment. And we are not liable for any losses suffered by any party because of information published on this blog.

I own Duke Energy stock and collect the Duke Energy dividend.

8 thoughts on “Duke Energy Dividend Stock Analysis”

  1. Hi Tom,

    I think I own Duke as part of some ETFs. Based on this analysis, however, I would not buy it if I were to buy individual energy stocks. I will keep buying into utilities as a whole, since I like the sector’s stability and relatively high dividends.


  2. 4% yield is pretty high for a US stock (in my observation, Canadian stocks tend to have higher yields than US stocks). As I was reading your analysis, I cringed more and more with the safety of this dividend!

  3. Great article. Makes me change my outlook on Duke. As far as “dividend safety score” – let’s say out of 100, what do you give it? 65?

  4. Thanks and much appreciated for the investment information about Duke. I am new in this platform and appreciate the eye witness to encourage to make rational decision.
    Thanks once again for everyone contribution.
    Best regards

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