Duke Energy: A Power Play for Income Investors

02/08/2018 5:00 am EST

Focus: UTILITIES

Mario Medina

Contributing Editor, DirectInvesting

Founded in 1916 and headquartered in Charlotte, North Carolina, Duke Energy (DUK) has grown from a local electric utility into an international energy provider, explains income expert Mario Medina in Vita Nelson's DirectInvesting.

Duke operates in the vibrant Southeastern United States, where population growth continues to exceed national averages and it has shown willingness to not only grow through major acquisitions, but to also restructure its collection of business units to achieve maximum efficiency.

The company's other major venues — Ohio and Latin America — offer excellent potential for continued expansion. Its long history of consistent earnings growth and dividend payments makes it a solid company.

It is considered a diversified business with a durable competitive advantage over its rivals and enjoys a solid management and corporate culture. Consensus estimates call for the company to earn about $4.56 per share this year, and to go to about $4.80 per share in 2018.

It has paid dividends to investors since 1926 and has increased its payments for 13 consecutive years. During the past five years, it has increased its dividends at an average annual rate of 22.9%, with its quarterly payment of $0.89 per share currently providing a yield of 4.49%. 

Technically, DUK also looks attractive, trading 15.4% below its all-time high, while it is forming a long base (a price consolidation pattern) between $72 and $92 approximately, in which $72 is acting as a technical support level.

Duke’s Beta (a measure of the volatility, or systematic risk in comparison to the market as a whole as evidenced by the S&P 500 Index) is 0.03 so the stock is 99.97% less volatile than the market.

Duke’s dividend reinvestment plan charges no fees for cash investing, dividend reinvestment, automatic investment or termination of the plan. With the stock being fundamental and technically attractive, this may be an excellent entry point for investors with a longer-term investment horizon.

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