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Duke Energy (DUK) Rewards Shareholders With 2% Dividend Hike

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Duke Energy Corp(DUK - Free Report) recently announced that the board of directors has approved a quarterly cash dividend on its common stock of $1.005 per share, thus rewarding its shareholders with a 2% hike. The revised quarterly dividend is payable on Sep 16, 2022 to shareholders of record at the close of the business on Aug 12, 2022. This signifies the company’s capability to generate excess cash to reward shareholders with impressive dividend hikes.

The company’s new annualized dividend rate is now $4.02 per share, resulting in a dividend yield of 3.8% as of Jul 14, 2022. This is better than the industry average of 3.4% and S&P 500 Composite Market Dividend Yield of 1.6%.

Can Duke Energy Sustain Dividend Hikes?

The ability to reward shareholders with better dividends is backed by strong cash flow and revenue generation capacity. Duke Energy witnessed a 16% year-over-year improvement in first-quarter 2022 revenues. Meanwhile, DUK’s cash and cash equivalents came in at $853 million at the end of Mar 31, 2022, reflecting an impressive improvement from $343 million as of Dec 31, 2021.

Additionally, a company’s investments in expansion projects and business development activities play a critical role in strengthening the earnings of the company. To this end,Duke Energy anticipates spending capital worth more than $130 billion over the next decade. Such an encouraging investment plan must significantly boost the earnings of the company. Duke Energy expects its long-term adjusted earnings per share growth rate in the range of 5%-7% through 2025.

Such underlying strong fundamentals of the company are likely to bolster its cash flow generation prospects and may enable the company to continue with its commitment to offering additional perks to its shareholders in the long haul. It is worth mentioning that Duke Energy has been consistently rewarding shareholders with dividends since the last 95 years and targets a dividend payout ratio between 65% and 75% going forward.

Peer Moves

Companies usually adopt shareholder-friendly initiatives in the form of hiked dividends to show their financial strength and effectively deploy capital in shareholder return. In this context, DUK apart, utilities that have attained the increased dividend hike strategy to exhibit financial flexibility are NextEra Energy (NEE - Free Report) ,Consolidated Edison(ED - Free Report) andCMS Energy(CMS - Free Report) .

In February 2022, NextEra Energydeclared a regular quarterly common stock dividend of $0.425, which is an approximate 10% increase compared with the prior-year quarterly dividend.

NextEra Energy boasts a long-term earnings growth rate of 9.3%. NEE shares have returned 4.3% in the past year.

In January 2022, Consolidated Edison declared a quarterly dividend of 79 cents a share on its common stock, reflecting an annualized increase of 6 cents over the previous annualized dividend of $3.10 a share.

The long-term earnings growth rate of Consolidated Edison is pegged at 2%. ED shares have rallied 24.9% in the past year.

In January 2022, CMS Energy’s board of directors approved a quarterly dividend hike on the company's common stock to 46 cents per share, up from 43.50 cents per share.

CMS Energy boasts a long-term earnings growth rate of 8.1%. CMS shares have returned 7% in the past year.

Price Movement

In the past year, Duke Energy’s shares have risen 2.1% compared with the industry’s growth of 3%.

Zacks Investment Research
Image Source: Zacks Investment Research

Zacks Rank

Duke Energy currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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