Duke Energy Corporation (DUK) raised the quarterly cash dividend on its common stock by 5 cents to 25.5 cents per share. This action increases the annualized dividend from 98 cents to $1.02. The dividend is payable on September 17, 2012 to shareholders of record at the close of business on August 17, 2012. This is the 86th consecutive year that Duke Energy has paid a quarterly cash dividend on its common stock.
Earlier, in January 2011, Duke Energy announced that it would buy Progress Energy Inc. (:PGN). Raleigh, North Carolina-based Progress Energy is a pure-play electricity utility with a solid rate base growth opportunity in the long term. The company engages in regulated electricity operations in the southeastern U.S. and also runs non-regulated businesses.
The $16.5 billion transaction is expected to be completed by July 2012. Once the transaction gets through, it would create the largest U.S. utility and increase its ability to build new power plants to meet future greenhouse-gas emissions limits. Currently, Chicago-based Exelon Corporation (EXC) is the largest U.S. utility.
Duke Energy also announced a 1-for-3 reverse stock split, following the anticipated closing of its merger with Progress Energy, on or about July 1. Duke Energy also said that the dividend will be automatically adjusted to $0.765, if the merger is closed on or prior to the dividend record date.
Duke Energy, a Zacks #2 Rank ('Buy') stock, is one of the largest electric power holding companies in the United States. Duke Energy’s stable U.S. electricity and gas operations (spread over the five states of North Carolina, South Carolina, Indiana, Ohio and Kentucky) generate a relatively stable and growing earnings stream. Looking ahead, Duke Energy’s merger with Progress Energy, Inc. is expected to be a strategic fit and accretive to earnings. The combined entity would provide regulated electricity services to more than 7.1 million customers in 6 states (North Carolina, South Carolina, Florida, Indiana, Ohio, and Kentucky). The merger is expected to keep the company’s long-term goal of 4% 6% earnings growth in good stead.
Looking ahead, our bullish outlook for the company is supported by higher rates, its strong balance sheet, ongoing capital expansion projects and an above-average dividend yield for the industry.
We have a long-term Neutral recommendation on the Duke Energy stock.
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