The Duke of Dividends!

For those of you looking to add an energy utility company to your portfolio, Duke Energy has declared a quarterly cash dividend on its common stock of $0.22 per share, an increase of $0.01 over the previous level. The dividend is payable on Sept. 17, 2007, to shareholders of record on the close of business Aug. 17,2007.

With a juicy yield of about 4.60% and a consistent record of paying a dividend, Duke Energy is worth some additional diligence.

“According to our Charter, one of Duke Energy’s benchmarks for success is to provide a superior return to investors,” said James E. Rogers, chairman, president and CEO. “We are committed to having a 70- to 75-percent payout ratio, and we expect to grow our dividends with earnings over time. The board’s action increases our dividend by nearly 5 percent and affirms we are fulfilling that commitment.”

This is the 81st consecutive year that Duke Energy has paid quarterly cash dividends on its common stock. However, we must look a little closer at this figure as we like to see a track record of growing dividends and Duke Energy appears to have recentley cut in its dividend.  That wouldn’t completely exclude it from the buy list, but it definitely doesn’t help.

Digging Deeper

The apparent cut in dividend doesn’t necessarily hold true as Duke spun off Spectra Energy…which also paid a respectable distribution this quarter. 

Also, you can see Duke Energy has a higher dividend payout ratio (70-75%) than I typically like to see. Duke’s payout ratio is also greater than its peers such as Constellation Energy who typically hold their dividend payout ratio in the 20-30% range.

Also note that revenue has decreased over the past three years, while the cost of revenue has increased over the past year.

Company Information

Duke Energy Corp., one of the largest electric power companies in the United States, supplies and delivers energy to approximately 3.9 million U.S. customers. The company has nearly 37,000 megawatts of electric generating capacity in the Midwest and the Carolinas, and natural gas distribution services in Ohio and Kentucky.

Disclosure: I do not own shares of Duke Energy.

2 comments

  1. I like your comments on Duke Energy, but I have to disagree with one of your comments about a dividend cut. You said, “However, we must look a little closer at this figure as we like to see a track record of growing dividends and Duke Energy has had a recent cut in its dividend.” In the past 2 years, the only dividend cut was when Duke spun off it’s gas assets into Spectra Energy. So when this happened they gave each shareholder Spectra Stock and between both stocks, the dividend equaled what had been the Duke dividend before the spin-off. I used to own Duke, but sold it off in a portfolio reorganization. Do your due diligence and look at the entire picture of what happened to cause the dividend decrease.

  2. While technically the DUK dividend is lower than it was in previous years, it was not actually a cut, but was the impact of spinning-off Spectra Energy. If DUK shareholders held on to the shares of SE, then their combined dividend is equal to what they had previously been receiving.

    This is the same for MO and their spin-off of KFT as well.

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