Many investors look to build a stream of passive income. A good place to start is the utility sector because it offers a balance of stability and yield. But within utilities, which stock should you buy? In this post, you’ll learn everything there is to know about the Duke Energy dividend. We’ll look at the stock’s history, factors that drive payouts, and what you might expect moving forward.
You’ll learn all there is to know about Duke Energy’s dividend. It will cover its history and its pros and cons. We will then compare the dividend yield with a high-yielding real estate fund and conclude with some news releases and expert insights from prominent financial blogs.
Table of Contents:
- About Duke Energy
- Duke Energy Dividend History
- Is Duke Energy a Good Dividend Stock?
- What Experts Say About Duke Energy and Dividend Growth Strategies
- High-Growth Dividend Plays Versus Duke Energy Dividend
About Duke Energy
Duke Energy is a major player in the utility world, operating primarily in the southeastern and midwestern US. It provides electricity and natural gas to millions of customers. The company is publicly traded on the NYSE under the ticker DUK.
Being a utility company, investors look to it as a source of reliable passive income from dividend stocks.
Duke Energy Dividend History
The first thing income investors are interested in is the history of a dividend payout. Has it been consistently paid? Has it grown over time?
You want to know if the company you are investing in is serious about paying and increasing its dividend. So, let’s have a look.
Duke Energy boasts an incredible track record for dividend payouts. Duke Energy has paid out a cash dividend for 98 straight years on its common stock. For comparison, to be classified as a Dividend King the company needs to have increased its dividend for 50 straight years.
We will see if it is a Dividend King later in this article, but let’s just say, Duke Energy Dividend investors are pretty used to getting paid.
When does Duke Energy pay dividends?
Knowing the dividend payout schedule is pretty helpful. It will tell you how many payments per year the company pays and give you a better sense of the timing for your dividend cash flow.
Duke Energy pays out its dividends every quarter on the 16th of March, June, September, and December, according to the Duke Energy investor relations website. The individual investors on record on the Friday closest to the 15th of February, May, August, and November are entitled to receive those dividends.
So if a company pays a $1 dividend per year, a quarterly dividend payer would pay $.25 every quarter to shareholders of record.
Is Duke Energy a Good Dividend Stock?
Duke Energy’s history certainly seems to support a long-term thesis for a dividend-growth strategy. But like every other publicly-traded company, it faces its share of headwinds.
These could jeopardize its dividend payouts down the line. It’s wise to understand both the good and the bad when looking to pick up shares in this electric utility.
Pros of Investing in Duke Energy for Dividends
The pros of buying Duke Energy for dividends are simple. It has an amazing history of both paying dividends and raising them over time. This demonstrates a shareholder-friendly approach toward returning cash to shareholders.
Plus, utility companies such as Duke Energy operate as regulated monopolies in their service areas. This guarantees stable, recurring cash flows that underpin a sustainable payout to its investors.
This makes investing in utility stocks less risky and attractive for investors looking for low-volatility holdings in their portfolios. The market acknowledges this as well, especially during down markets where these “safe haven” utility names like Duke Energy generally hold their value. In a bad market, while share prices may go down a little, dividends don’t generally face any risk of cuts.
Cons of Investing in Duke Energy for Dividends
While Duke Energy’s impressive dividend growth makes a solid case for investors, we need to balance this with some risks associated with this stock as well.
Firstly, there is the fact that this company’s stock doesn’t historically experience rapid price appreciation. Utilities, as defensive holdings, simply aren’t exciting, growth-oriented investments. So don’t expect them to multiply in value and deliver enormous capital appreciation over a short period.
This should be factored into an overall portfolio return strategy. This is especially true if your risk tolerance permits riskier but high-growth investments in your portfolio. Secondly, one must acknowledge that Duke Energy uses a lot of debt to finance its business. A number of financial analysts are not too pleased with this. You’ll find many of these criticisms of Duke Energy, for example, in posts such as this one titled “Duke Energy (NYSE:DUK) Has No Shortage of Debt” published on Seeking Alpha, the investing insights platform, in December of 2023.
Also, as a business that requires substantial infrastructure development for electricity transmission, natural gas pipelines, power plants, and more, debt is a given for Duke Energy and others in the utility sector. Rising interest rates could put some pressure on the dividend payout over the years if Duke Energy fails to pass its costs onto customers through rate increases. This means there’s always going to be the risk of rate increases getting rejected or a dividend reduction.
Balancing Risk and Return for Duke Energy Investors
For an investor looking for higher returns through stock split history price appreciation, a utility such as Duke Energy might not be a wise allocation. Instead, they may turn to growth stocks with lower dividends but with much faster earnings and share price growth, enabling higher capital gains.
Such high-growth companies typically offer low or zero dividend yields for a while and prioritize growing the business before rewarding shareholders. However, Duke Energy would appeal to investors looking for a good combination of dividend income, low risk, and slow-growth potential over a long period.
Is Duke Energy Dividend a Better Value Than Alternative High-Yielding Assets?
One good way to measure the overall value of investing in a regulated utility company like Duke Energy for dividends would be to compare it with a similar high-yielding alternative, preferably outside of the stock market. Many investment analysts might choose to compare this dividend play to Real Estate Investment Trusts (REITs). This would certainly make sense but, let’s go with an asset class that many experts like to compare to REITS – Private Real Estate Credit funds. Private credit generally has a low correlation to equity markets.
Duke Energy, a blue-chip company, will often show similar behavior and correlation to broader equity indexes like the S&P 500 and the Dow Jones Industrial Average. An interesting choice would be to use the high-yielding Ascent Income Fund by Equity Multiple for this comparison. It invests in senior real estate debt and has had a historic annual dividend payout of 12.1%, beating Duke Energy Dividend yield by a good margin.
Here is a table for better comparison:
| Company | Ticker | Historical Yield | Type |
|---|---|---|---|
| Duke Energy | DUK | 4.3% | Public Utility (NYSE) |
| EquityMultiple Ascent Fund | – | 12.1% | Private Real Estate Debt Fund |
Looking purely at dividend yields, a private real estate credit fund would certainly look better than Duke Energy stock. However, we also need to weigh several risks before concluding anything.
Firstly, the fact that the 12.1% yield for the real estate fund is historic does not guarantee similar returns in the future. You should view historic payouts as a starting point and an indicator, but not as a firm prediction for what to expect in future payouts.
Furthermore, Private Funds, in contrast to the easy buying and selling of public stocks through online brokers like Nasdaq stocks, typically lock your investment in for many years. It’s wise to weigh this “liquidity risk” while looking to compare two asset classes for a long-term income strategy.
Finally, with any sort of debt investment (including with this Real Estate fund) investors must also consider credit risk. What is the possibility of the debt not being repaid and even potential default by the underlying property owners? Such issues simply do not arise with stable utility stocks.
To sum it up, while the Duke Energy dividend yield appears smaller compared to Private Real Estate debt funds, one needs to balance this against several additional factors. These factors include long-term capital appreciation through stock chart price movement (available with a stock) and reduced risk compared to any sort of debt instrument.
In conclusion, while there are various alternatives for passive income through dividend yield, utility names such as Duke Energy still hold strong with their low-risk attributes.
What Experts Say About Duke Energy and Dividend Growth Strategies
Investment advice, although best gotten from a financial advisor, is plentiful online on a number of credible sites. Some of these sites include Barchart.com, Simply Wall St., and Seeking Alpha. To better guide you on the choice between dividend strategies such as buying utility stocks or focusing on growth names (generally non-dividend payers), we have curated some insightful expert insights about dividend growth.
High-Growth Dividend Plays Versus Duke Energy Dividend
In an August 2024 post, Barchart.com wrote a piece about ” 3 Dividend Kings with Massive Dividend Growth Rates” that showcased a different take on dividend income through a combination of dividend yield as well as long-term capital gains. In it, they presented companies like Altria Group, Vanguard Dividend Appreciation ETF, and Realty Income Corp. They highlighted these companies’ ability to consistently raise payouts while experiencing impressive capital gains through share price appreciation over the long term.
These investments differ drastically in nature from Duke Energy Dividend which we have already established, does not typically experience massive share price jumps in a short period. To illustrate this comparison, here is a quick table:
| Stock Name | Dividend Growth (Last 5 Years) | Capital Gains (Last 5 Years) |
|---|---|---|
| Altria Group | 6% | 25% |
| Vanguard Dividend Appreciation ETF | 8% | 75% |
| Realty Income Corp | 3% | 45% |
| Duke Energy | 2.8% | 20% |
As shown in this table, Duke Energy’s growth (in terms of dividends as well as share price appreciation) is the smallest amongst high-yielding names such as Altria (a cigarette maker), Realty Income (a REIT), and Vanguard’s Dividend Appreciation ETF (invests in companies known for raising dividends consistently). For an income-focused investor willing to take on a slightly higher risk in pursuit of capital gains and high dividend growth, one of these alternatives might be worth looking into.
But, such an allocation is not without risks, of course. For example, the sin stock, Altria Group is in the cigarette industry with declining cigarette sales and mounting regulatory pressure. Its performance moving forward might be far less impressive than the historic trends reflected in this table.
Safe High Yielders Such as Duke Energy During a Market Crash
Investors seeking safe high-yield investments like Duke Energy are well-served to turn to other financial bloggers and industry experts during market downturns. As expected, you’ll find plenty of financial commentary encouraging long-term income investors to stay the course and “ride it out.” Barchart.com offered the piece, “2 Dividend Stocks to Buy in August if the Market Crash Scares You”, which showcases their stance of going long (buying more stock) on good companies at reduced prices during a market sell-off.
They even made suggestions to pick up blue-chip companies during a market crash for a low entry price to maximize returns down the line when the markets recover. In an October 2023 post by Simply Wall St, “Duke Energy (NYSE:DUK) Is Paying Out a Larger Dividend Than Last Year” the company reported a dividend increase of over 2%. The authors noted that while there is no “silver bullet” for beating the markets consistently, picking up great dividend payers at reduced valuations offers a sound long-term approach.
While that strategy certainly works with most businesses with growing cash flows, one must take a note of the industry, competitive advantage (or a “moat”), balance sheet, dividend payout ratio, etc. Just blindly going long a low-priced company (even during a market crash) with a high yield won’t always deliver the results one might expect. It’s vital to perform additional fundamental analysis on any stock, just like Duke Energy, to gauge its overall ability to support consistent payouts to investors moving forward. In conclusion, there are various opinions and strategies about Duke Energy Dividend and the use of a dividend strategy overall – making it important for any investor to make a judgment based on their own research.
FAQs about Duke Energy Dividend
Is Duke Power a good dividend stock?
Duke Energy is a good dividend stock because it is a regulated utility with stable recurring revenues and pays a 4%+ annual dividend yield that has a solid track record of growth for decades. But as discussed in this post, investors looking for high dividend growth rates and/or high capital gains (in addition to decent dividends) should consider growthier dividend-paying stocks, although such an approach has additional risks. For investors seeking stability, passive income, and low-risk returns, DUK should fit in well as part of a diversified portfolio of stocks.
What month does Duke pay dividends?
Subject to declaration by the Board of Directors, Duke Energy pays its dividends on the 16th of March, June, September, and December to its common stockholders of record on the Friday closest to the 15th of the prior month.
Is Duke Energy stock going to split?
While there has been much discussion about various high-priced companies like Tesla and Apple deciding to split their stocks, there have been no plans declared by Duke Energy’s board to initiate any stock split history anytime soon. Whether a stock split history should be seen as good news for investors or a bad one is a different debate entirely.
But one thing to note would be that despite several historic stock splits (usually viewed positively for investors who hope to own the now lower-priced shares), Duke Energy has consistently paid and even raised dividends even when the price had risen. Investors should be mindful of this point.
Is Duke Energy stock a good buy now?
While stock chart market prices change everyday, according to market data from Barchart Solutions as of this writing Duke Energy stock is priced at approximately $86 per share and pays out an annual dividend of $4.18 for an annual yield of about 4.9%.
There’s a number of bullish commentaries about Duke Energy and utilities in general written recently in prominent investing sites such as Barchart.com (they wrote “2 Magnificent S&P 500 Dividend Stocks to Buy Now and Hold Forever“), Seeking Alpha, and Yahoo Finance (an August 2024 post titled “Buy the 3 Highest-Yielding Dividend Stocks in the S&P 500?“). Investors, although encouraged by the generally bullish sentiment and positive investor outlook toward this stock, need to weigh various factors. These factors include its use of debt, its historical and forward dividend growth rate, its ability to pay out during tough markets, the need for continuous capital investment for building infrastructure and, last but not least, their individual long-term income needs.
Conclusion
Duke Energy dividend remains a strong candidate for building a portfolio with long-term income as a priority. Although other names offer greater capital gains potential and higher dividend growth rates, utilities offer much-needed stability, and DUK stock stands out as a premier dividend player with its lengthy payout track record. Understanding its strengths and weaknesses will be key in creating a diversified dividend-growth strategy, tailored to an investor’s individual risk tolerance, income requirements, and long-term financial goals. Remember, investing is best done based on one’s individual research, with a measured, thoughtful approach. Consulting a professional financial planner can provide a path that best reflects those priorities.
