Duke energy corp_ a reliable high-yield dividend stock (duk) _ investorplace

Duke Energy Corp ( DUK) is a favorite high-yield dividend stock for income investors, and it’s no wonder why. K gas constant The company has paid uninterrupted quarterly dividends for 90 years and is set to increase its dividend for the ninth consecutive year in 2016.

Regulated utility companies such as Duke can provide safe retirement income with less risk than other types of businesses because of their predictable earnings, government-supported competitive advantages, and relatively low stock price volatility.

For these reasons and more, we own several utility stocks in our Conservative Retirees and Top 20 Dividend Stocks portfolios. Gas monkey live However, just because a stock appears to have little fundamental risk does not mean it is a safe investment. 93 gas near me The price paid for a stock is still very important, and that is especially true for low-growth utility stocks.

While utility companies can be relatively attractive income investments compared to bonds due to their potential for capital appreciation and moderate income growth, it’s still important to diversify a portfolio’s income streams in other sectors. Electricity vs gasoline Unexpected shocks can still happen across entire sectors, and no one living off dividends in retirement desires to deal with unpleasant, avoidable surprises when it comes to their nest egg.

Let’s take a closer look at Duke Energy’s business to see if it’s a stock we should consider for our utilities exposure. 3 main gas laws Duke Energy Business Overview

Duke Energy’s history dates back to the early 1900s, and the company is largest electric utility in the country today with over $23 billion in annual revenue and operations reaching across the Southeast and Midwest regions. Electricity how it works Duke Energy is a regulated utility company that serves approximately 7.4 million electric customers and 1.5 million gas customers, including customers from its planned $4.9 billion acquisition of Piedmont Natural Gas (more on this later).

Regulated utilities account for about 90% of Duke Energy’s business mix, but the company also has a commercial portfolio of renewables and gas infrastructure (5%) and an international energy business in Central and South America (5%), which it recently put up for sale.

The company’s regulated utilities primarily rely on coal (29%), nuclear (27%), and natural gas (23%) for its generation of electricity. K electric company Hydro and solar generate another 1% of the company’s total energy, and Duke Energy also purchases about 20% of its power.

Regulated utility companies are essentially monopolies in the regions they operate in. Bad gas 6 weeks pregnant With the exception of Ohio, all of Duke’s electric utilities operate as sole suppliers within their service territories.

Building and operating the power plants, transmission lines, and distribution networks to supply customers with power costs billions of dollars, and it would generally be unprofitable and inefficient to have more than one supplier for a region. C gastronomie traiteur avis State utility commissions also have varying degrees of power over the construction of generating facilities, which further restricts competition.

The downside to the “monopoly” enjoyed by regulated utilities is that their services are priced by state commissions. Electricity water analogy animation This is done to keep prices fair for consumers and allow utility companies to earn a reasonable, but not excessive, return on their investments to encourage them to provide safe and reliable service.

A utility company’s attractiveness is largely driven by the states it operates in. Gas cap light Some have more favorable demographics (e.g. Gas key staking tool population growth) and regulatory bodies. 76 gas station jobs Duke Energy’s mix is generally favorable. Electricity song omd Over the past three years, base rate cases approved to Duke Energy have granted the company a return on equity ranging from 9.8% to 10.5% across the Carolinas, Ohio, and Florida.

In addition to the industry’s promotion of stability, Duke’s business has undergone a rather significant transformation over the last five years to improve the reliability of its earnings and cash flows.

Duke Energy’s biggest move was its acquisition of privately held Progress Energy in mid-2012 for over $13 billion, significantly enhancing the company’s scale and market share in regions such as the Carolinas. Gas leak los angeles Duke Energy has realized over $500 million in cost synergies from the deal and become a more efficient energy provider.

The company next entered the regulated pipeline business in 2014 to help its efforts to replace coal power plants with cleaner and cheaper natural gas generation facilities. Gas prices in texas 2015 In October 2015, Duke Energy announced a deal to acquire Piedmont Natural Gas ( PNY) for $4.9 billion to boost its push into gas.

Piedmont is a regulated gas distribution company that delivers natural gas to customers in the Carolinas and Tennessee. Gas natural fenosa The company owns valuable gas infrastructure that currently supports Duke’s gas-fired generation in the Carolinas and will be further expanded to help with Duke’s ongoing conversion from coal to gas.

Regulated gas companies also offer strong and predictable returns on capital (Piedmont’s return on equity is about 10%) and should continue to benefit as a result of the natural gas surplus in the U.S.

Compared to electricity sales, which seem likely to slow as energy usage becomes increasingly efficient, gas has a stronger growth profile (Piedmont has investment pipeline growth of 9%). M gasol This is because new pipelines coming on-line will allow gas to replace dirtier power sources such as coal in regions where gas was previously inaccessible.

Piedmont will about triple Duke’s number of natural gas customers to approximately 1.5 million and help establish a platform for future growth in gas infrastructure projects. Gas hydrates are used After the deal closes, Duke Energy expects roughly 90% of its assets to earn regulated returns, which should provide very reliable earnings.

Duke Energy has also gotten rid of non-strategic assets to lower its risk profile and improve the quality of its earnings. Gas prices going up to 5 dollars Management sold the company’s merchant Midwest commercial generation business to Dynergy for $2.9 billion in early 2015 and placed its struggling Latin American generation business up for sale in February 2016. Electricity lesson plans year 6 Each of these businesses had less predictable earnings and greater macro risk.

Duke Energy believes its current business mix is now 100% focused on its core operations, whereas 25% of the company’s 2011 net income was derived from non-core businesses. Electricity edison Management now expects to spend $8 billion on new generation investments, $10 billion on gas & electric infrastructure, and $2 billion on commercial & regulated renewables to drive 4-6% annualized earnings growth over the next five years.

Overall, we believe Duke Energy has a strong moat. Thitima electricity sound effect The company has excellent scale as the largest electric utility in the country and operates primarily in regions with generally favorable demographic trends and regulatory frameworks.

Management has simplified Duke’s mix to focus on core regulated businesses that provide reliable earnings and new growth opportunities in natural gas and renewable generation resources. Electricity jokes riddles While the utility sector is gradually evolving, we believe Duke Energy is here to stay for a long time to come. Gas vs electric stove cost Duke Energy’s Key Risks

Uncontrollable macro factors such as mild temperatures and industrial activity can impact Duke Energy’s near-term financial results. Eon gas card top up However, we believe these are transitory issues that have little bearing on the company’s long-term earnings potential.

The bigger risks worth monitoring are changes in state regulations, population growth trends in key states, increased environmental regulations, and execution of the company’s business strategy (e.g. Hp gas online booking hyderabad large projects and acquisitions).

The rates Duke Energy can charge its customers are decided at the state level. Was electricity invented during the industrial revolution Similar to what we observed when we analyzed Southern Company, another regulated utility, most of the regions Duke Energy operates in have generally favorable regulatory environments and are characterized by positive population and economic growth.

However, the company is banking on these conditions remaining stable as it continues investing for growth and depending on states to approve rate increases to earn a fair return on its capital-intensive investments.

The Environmental Protection Agency (EPA) also creates risk for utility companies in the form of enhanced safety and emissions standards. Shale gas in spanish Duke is still dealing with its notorious coal ash spill that took place in North Carolina in 2014, and the company is gradually shifting its mix of power away from coal in favor of cleaner sources such as natural gas.

Finally, over the very long term, electric utility companies will need to deal with the reality that demand is gradually decaying thanks to increasing energy efficiency and distributed generation (e.g. Gas tax in texas rooftop solar).

Duke has earmarked about $2 billion for growth investments on commercial and regulated renewables over the next five years, but it’s still a relatively small proportion of the overall business.

The company’s acquisition of Piedmont should also help the company with growth initiatives outside of regulated electric utility services. J gastroenterol Duke Energy Dividend Analysis

We analyze 25+ years of dividend data and 10+ years of fundamental data to understand the safety and growth prospects of a dividend. Z gas guatemala Duke Energy’s long-term dividend and fundamental data charts can all be seen by clicking here.

Our Safety Score answers the question, “Is the current dividend payment safe?” We look at factors such as current and historical EPS and FCF payout ratios, debt levels, free cash flow generation, industry cyclicality, ROIC trends, and more. Gas pain Scores of 50 are average, 75 or higher is very good, and 25 or lower is considered weak.