Duke Energy Corporation (DUK) continues with its steady effort towards maximization of shareholders’ wealth through payment of dividends and increases the same at regular intervals. The board of directors has raised its quarterly cash dividend rate by around 2% sequentially to 79.5 cents per share. The revised dividend will be paid on Sep 16, 2014 to shareholders of record as of Aug 15.
On an annualized basis, Duke Energy’s dividend rate will come to $3.18 per share. The company’s current annual dividend yield will be 4.3%, significantly higher than the sector average.
Duke Energy has a stable dividend payment history distributing quarterly cash dividend for 88 consecutive years. The company hiked its quarterly dividend rate every year since Jan 2007 after the spin-off of Spectra Energy.
The last quarterly dividend hike was made in May 2013. The quarterly dividend has increased around 2% to 78 cents per share from the previous payout.
For 2014, Duke Energy plans to achieve the long-term dividend payout ratio in the range of 65% - 70% of its adjusted diluted earnings per share.
Duke Energy maintained a stable financial position backed by strong cash generation capacity. As of Mar 31, 2014, the company had cash and cash equivalents of around $1.5 billion. In the first three months of 2014, Duke Energy’s operating cash flow was roughly $1.37 billion. A favorable financial position supports the company’s practice of paying steady dividends.
Duke Energy also utilizes substantial amount of funds for its growth projects. The company invested around $1.27 billion in first-quarter 2014 and plans to spend $16 - $20 billion between 2014 and 2018. A major portion of funds is expected to be allocated for new generation and infrastructure development projects. The scheduled completion of these projects will enable Duke Energy to meet increasing customer demand, thereby improving future cash inflows.
Duke Energy currently has a Zacks Rank #3 (Hold). However, some better-ranked stocks in the same industry include Dynegy Inc. (DYN), NRG Energy, Inc. (NRG) and Wisconsin Energy Corporation (WEC). All the stocks carry a Zacks Rank #1 (Strong Buy).