Duke Energy Corporation DUK recently announced that the board of directors has approved a quarterly cash dividend of 94.5 cents per share on its common stock. This will mark a quarterly increase of 1.75 cents or 1.85%. The dividend will be payable on Sep 16, 2019 to stockholders on record as of Aug 16.
Reasons for theHike
Duke Energy has been raising cash dividend for 93 consecutive years. The current dividend yield is pegged at 4.15%, which is higher than the industry’s 2.88% and Zacks S&P 500 composites’ 1.88%. The company generated cash flow from operations of $7.19 billion in 2018 compared with $6.62 billion in 2017. Based on its financial strength, the company expects to maintain its long-term dividend payout ratio in the range of 65-75% of its adjusted earnings per share through 2023.
Moreover, Duke Energy has been making capital investments in its infrastructure and expansion projects across service territories. Currently, the company intends to invest around $37 billion in overall growth projects for the 2019-2023 time frame. This is likely to drive earnings in the combined electric and gas businesses by approximately 6% over the next five years. With further investments, the company expects to achieve earnings growth rate of 4-6% through 2023.
Importance of Dividend Hike in Utility Space
The Utilities sector provides basic electric, water and gas services. The sector is independent of fluctuations in the economy. Stable earnings and cash flow enable utilities to reward shareholders with regular dividends and share buybacks. This enables utility players to generate steady revenues and cash flows, which positions them in investors’ good books.
Other than Duke Energy, there are other utilities that have raised their dividend rates during the first half of 2019. In January, ONEOK, Inc.’s OKE board of directors announced a quarterly dividend hike to 86 cents per share, up 12% year over year. This will lead to an annualized dividend of $3.44. In June, National Fuel Gas Company NFG announced that the board of directors has approved a 2.4% increase in the quarterly dividend rate. The revised quarterly dividend will be 43.5 cents.
Zacks Rank & Key Pick
Duke Energy currently has a Zacks Rank #4 (Sell).A better ranked stock in the same industry is DTE Energy Company DTE, carrying a Zacks Rank of 2 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DTE Energy pulled off an average positive earnings surprise of 12.24% in the last four quarters. The company’s long-term earnings growth is pegged at 6%.
In the past month, shares of Duke Energy have gained 4.4% compared with the industry’s rise of 3.2%.
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DTE Energy Company (DTE) : Free Stock Analysis Report
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