Duke Energy (NYSE:DUK) - Share price, News & Analysis

Q: What is the Fair Price of DUK when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

DUK ($112.58) is trading above our estimate of [[fair value]] ($90.23)

DUK fundamental analysis
Snowflake Score
Valuation	2/6
Future Growth	1/6
Past Performance	5/6
Financial Health	0/6
Dividends	4/6

DUK Stock Overview

Duke Energy Corporation, together with its subsidiaries, operates as an energy company in the United States.

Rewards

Earnings are forecast to grow 7.51% per year

Earnings grew by 31.7% over the past year

Risk Analysis

Interest payments are not well covered by earnings

Dividend of 3.57% is not well covered by earnings

Significant insider selling over the past 3 months

Duke Energy Competitors

Southern

NYSE:SO

US$84.7b

American Electric Power Company

NasdaqGS:AEP

US$53.6b

Exelon

NasdaqGS:EXC

US$46.0b

Xcel Energy

NasdaqGS:XEL

US$42.1b

Price History & Performance

Summary of all time highs, changes and price drops for Duke Energy
Historical stock prices
Current Share Price	US$112.58
52 Week High	US$116.33
52 Week Low	US$95.48
Beta	0.34
1 Month Change	6.67%
3 Month Change	2.50%
1 Year Change	5.33%
3 Year Change	23.28%
5 Year Change	29.74%
Change since IPO	168.05%

Recent News & Updates

Aug 08

Duke Energy Is My Favorite Defensive Dividend Stock

Duke Energy is one of America's largest utility companies with a 3.7% yield and a low-volatility profile. In this article, I explain why this allows the company to outperform the market and why DUK is my favorite defensive investment. Moreover, we will discuss its valuation, capital expenditures, and the expected sale of its commercial renewables. Introduction It's time to talk about Duke Energy (DUK). Duke Energy is one of America's biggest electric utility companies with a market cap of $84.0 billion. It's also one of the first five stocks I bought for my dividend growth portfolio a couple of years ago as I knew I needed and wanted defensive exposure. While DUK can be considered to be one of the most boring stocks on the market as it doesn't sell fancy products or develops breathtaking technologies, I think calling DUK "boring" is a compliment. The company is a reliable source of high income for investors thanks to regular and satisfying dividend hikes, and above all, the company does not underperform the market, which a lot of market participants seem to forget occasionally. While I have bought a lot of dividend growth stocks with a focus on growth this year, I am eagerly adding to my Duke Energy position for all the reasons I just mentioned and the fact that it has a lot of nuclear exposure. Moreover, the company is selling its solar and wind assets, which I believe is a smart move. So, with all of this in mind, let me explain why DUK is my favorite defensive investment. By the way, below is an overview of my portfolio. In case it's hard to read (click to enlarge), I put the full list in my Seeking Alpha bio. Author When Boring Is Good First, let me give you some background info that explains why high yield and low volatility make sense. In June, S&P Dow Jones Indices published an article highlighting the outperformance of the S&P 500 Low Volatility High Dividend Index. While that's obviously a way to promote their index, there is no denying that the research is worth something. The low volatility high-yield portfolio consists of the 25 lowest volatility stocks of the 75 highest-yielding S&P 500 stocks. When looking at a comparison of the past 10 years (in the table below) we see a lot of numbers. So, let's make sense of it all. Going back to January 31, 1990, the S&P 500 has been beaten by all high-yield investments, regardless of volatility. However, only one portfolio beat the S&P 500 on a risk-adjusted basis. And that's the low volatility, high-yield portfolio. This portfolio had annualized volatility of 17.3%, which helps as downside protection is key. Low-volatility stocks tend to outperform during bear markets. Even if these stocks don't always keep up during bull markets, downside protection is enough to maintain high long-term total returns. S&P Dow Jones Indices From my own experience and research, I obviously agree with the things above. After all, it's based on facts. However, it is extremely easy to buy high-yielding stocks that do not outperform as there are more high-yielding stocks on the market than low-volatility stocks with quality dividends that withstand the test of time. In other words, use this information carefully when assessing the high-yield stocks you consider buying. The good news is that Duke Energy is a perfect example of a high yield and low volatility. Going back to 2004, the company has returned 11.4% per year including dividends. This beats the Utilities Select Sector SPDR ETF (XLU) by roughly 120 basis points, which really adds up over time. It also beats the S&P 500, which returned 9.3% during this period. Moreover, the standard deviation of Duke was 14.8% during this period, which is in line with the S&P 500. That's impressive as we're comparing a single stock to a well-diversified basket of 500 stocks. Hence, Duke scores high on a volatility-adjusted basis as well (Sharpe/Sortino ratio). And, it has a very low market correlation, which helps when structuring a portfolio. It's also the reason why I will own utilities. Not because I'm fascinated by the way they generate electricity, but because it makes so much sense to own safe dividend stocks on top of more exciting dividend growth investments. Portfolio Visualizer Note that outperformance varies. Overall, we're talking about the very long-term as we can include periods of high and low inflation, recessions, economic expansions, wars, Democrat and Republican Presidents, and whatnot. Over the past 3 and 5-year intervals, Duke has not outperformed the market, but it has come very close with an almost similar standard deviation, which is impressive as the past 3-5 years were more favorable for tech stocks, which are a big part of the S&P 500. Portfolio Visualizer With that said, Duke brings a ton of value to the table, which supports the company's impressive returns. The Duke Dividend Duke is currently paying a $1.005 dividend per share per quarter. That's $4.02 per share per year. Based on its $109 share price, we're dealing with a yield of 3.7%. This yield is one of its lowest as the yield usually hovers somewhere above 4.0%. Moreover, the yield is roughly 70 basis points (the graph below says 60, but that number is 10 basis points too low), above the Vanguard High Dividend ETF's (VYM) yield. DUK Dividend Yield data by YCharts When incorporating Seeking Alpha's dividend scorecard, we see that the company scores very decently versus its utility peers with no grade below B. Seeking Alpha The "problem" is that the dividend growth score of B+ is mainly based on factors like EBITDA growth, which are also part of the calculations in this category. When it comes to actual dividend growth, the company scores a D+. This also explains why the company's yield is now one of the lowest of the past 10 years as capital gains have outperformed dividend growth. Over the past 10 years, dividend growth has averaged 2.8% per year. This number is 2.0% on a 3-year basis. DUK Dividend data by YCharts These are the most "recent" hikes: July 2022: 2.0% July 2021: 2.1% July 2020: 2.1% July 2019: 1.9% July 2018: 4.2% In other words, as long as inflation remains close to the Fed's target of 2.0% investors avoid losing purchasing power - ignoring reinvested dividends. With that said, there are two things worth mentioning here. First, the company has kept up with the S&P 500 despite these slow dividend growth rates. The fact that its yield is close to 4.0% is playing a major role here. Second, the company is currently investing in renewables. Duke's Value As I already briefly mentioned, Duke Energy is an $84 billion market cap giant in the utility sector. The company is the second-largest company in the regulated electric utility industry behind its Florida-based peer NextEra Energy (NEE). Through five subsidiaries, the company services Indiana, Southwest Ohio, The Carolinas, and Florida. Duke Energy In 2021, the company generated 81.3% of the power it sold to customers. 18.7% was purchased power. Just 1.5% was hydro and solar power. Roughly 30% was nuclear power. Natural gas came in slightly bigger at 31.8% with coal accounting for 18.2% of power generation. Ignoring third-party power, this is what the breakdown of the company's current generated net output in gigawatt-hours looks like. Duke Energy The company's commercial renewables produce more than 2,760 MW in 21 states. In this segment, 52% is generated by wind followed by 46% solar and just 2% fuel cell/storage. Like all major utilities, Duke Energy aims to become carbon neutral in the future. By 2030, the company aims to generate less than 5% of its energy from coal, followed by a full exit by 2035. The problem is that this is extremely expensive. Hence, the company is expected to invest more than $10 billion in capital expenditures on a constant basis. This year, for example, CapEx is expected to be $12.1 billion. While the company was able to achieve positive free cash flow prior to the aggressive energy transition, it is now unable to generate enough cash from its operations to meet investment requirements. TIKR.com What this means is that the company needs to borrow money for its CapEx plans and to pay a dividend. Normally, companies pay dividends with free cash flow. Hence, Duke Energy is expected to end up with more than $80 billion in net debt in 2024. That's up from $40 billion prior to 2015. TIKR.com On top of that, the company issues common stock to fund its operations. Over the past three years, the company issued $8.9 billion in net new debt. It also issued shares worth $3.1 billion. Over the past five years, the company increased the number of common shares outstanding by 9.9%. That's 1.9% per year. With this in mind, it's important to mention that the company does generate shareholder value. The company isn't just piling on new debt and diluting existing shareholders, but actually improving its business - at least when it comes to real dollars. The chart above doesn't just show net debt, it also shows the book value per share at the very bottom. The book value means total assets minus liabilities divided by the number of shares outstanding. In other words, it also incorporates an increasing number of shares outstanding, which is extremely important. What we see is an increase from $58.6 in 2013 to $66.9 in 2024 (expected). That's an annual compounding growth rate of 1.1%. Again, please note that this incorporates share dilution. The same goes for (expected) earnings per share (note the "per share" part). Between 2012 and 2024E, EPS is growing by 2.7% per year, which supports the average dividend growth rate. TIKR.com However, while EPS has been improving, Credit Suisse believes that slower EPS growth is likely. The bank mentioned higher interest rates when it lowered its stock price outlook. As reported by Seeking Alpha: [...] Credit Suisse downgraded shares to Neutral from Outperform with a $114 price target, following the utility's Q2 results the bank says point to an "increased risk of a re-base to the 5%-7% long-term EPS compound annual growth rate. While encouraged to see a sale of Duke's commercial renewable energy business earlier than expected, "after considering dilution from the sale and wider pressure from interest rates on Duke's variable rate debt, we see downside to consensus EPS estimates," Credit Suisse analyst Nicholas Campanella wrote. This is what the company commented on head and tailwinds in its 2Q22 earnings call: We expect third quarter adjusted earnings per share will be slightly lower than 2021, mainly due to favorable weather in the prior year, higher interest expense, tax timing and lower contributions from Commercial Renewables. This will be partially offset by higher revenues from rate cases, riders and wholesale. In the fourth quarter, we expect to see favorability from several drivers, including normal weather, higher loan, lower O&M and higher revenue from rate cases and riders. With regard to rates, we're seeing something interesting, which I will discuss in the next "segment". Valuation Higher rates are a problem for companies with a lot of debt. Utilities have a lot of debt and a high need for future funding. Hence, I do not disagree with Credit Suisse that higher rates are a reason to believe that EPS growth will weaken a bit. However, EPS growth will remain strong and investors are not ignoring utilities because of higher rates. The opposite is true. DUK is up 4% year to date. The S&P 500 is down 13%. The most recent decline in 10-year yields caused DUK to rally more than 12% from its 2022 lows. All it took was a 40 basis points decline in 10-year yields.

Aug 02

Duke Energy (NYSE:DUK) Is Increasing Its Dividend To $1

The board of Duke Energy Corporation ( NYSE:DUK ) has announced that it will be paying its dividend of $1 on the 16th...

Shareholder Returns

	DUK	US Electric Utilities	US Market
7D	3.8%	2.5%	1.4%
1Y	5.3%	8.4%	-8.4%

Return vs Industry: DUK underperformed the US Electric Utilities industry which returned 8.5% over the past year.

Return vs Market: DUK exceeded the US Market which returned -9% over the past year.

Price Volatility

Is DUK's price volatile compared to industry and market?
DUK volatility
DUK Average Weekly Movement	3.1%
Electric Utilities Industry Average Movement	3.4%
Market Average Movement	7.6%
10% most volatile stocks in US Market	17.1%
10% least volatile stocks in US Market	3.1%

Stable Share Price: DUK is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.

Volatility Over Time: DUK's weekly volatility (3%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1904	27,605	Lynn Good	https://www.duke-energy.com

Duke Energy Corporation, together with its subsidiaries, operates as an energy company in the United States. It operates through three segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure, and Commercial Renewables. The Electric Utilities and Infrastructure segment generates, transmits, distributes, and sells electricity in the Carolinas, Florida, and the Midwest; and uses coal, hydroelectric, natural gas, oil, renewable generation, and nuclear fuel to generate electricity.

Duke Energy Fundamentals Summary

How do Duke Energy's earnings and revenue compare to its market cap?
DUK fundamental statistics
Market Cap	US$86.68b
Earnings (TTM)	US$3.80b
Revenue (TTM)	US$26.59b

22.8x

P/E Ratio

3.3x

P/S Ratio

Is DUK overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
DUK income statement (TTM)
Revenue	US$26.59b
Cost of Revenue	US$13.98b
Gross Profit	US$12.60b
Other Expenses	US$8.81b
Earnings	US$3.80b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)	4.93
Gross Margin	47.41%
Net Profit Margin	14.29%
Debt/Equity Ratio	136.1%

How did DUK perform over the long term?

See historical performance and comparison

Dividends

3.6%

Current Dividend Yield

80%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is DUK undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

2/6

Valuation Score 2/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for DUK?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for DUK. This is calculated by dividing DUK's market cap by their current preferred multiple.
What is DUK's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$86.68b

DUK key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	6.1x
Enterprise Value/EBITDA	13.6x
PEG Ratio	3x

Price to Earnings Ratio vs Peers

How does DUK's PE Ratio compare to its peers?

DUK PE Ratio vs Peers

The above table shows the PE ratio for DUK vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	24.7x
SO Southern	28x	7.9%	US$84.7b
AEP American Electric Power Company	20.8x	7.8%	US$53.6b
EXC Exelon	24.2x	8.6%	US$46.0b
XEL Xcel Energy	25.8x	6.7%	US$42.1b
DUK Duke Energy	22.8x	7.5%	US$86.7b

Price-To-Earnings vs Peers: DUK is good value based on its Price-To-Earnings Ratio (22.8x) compared to the peer average (24.7x).

Price to Earnings Ratio vs Industry

How does DUK's PE Ratio compare vs other companies in the US Electric Utilities Industry?

Price-To-Earnings vs Industry: DUK is expensive based on its Price-To-Earnings Ratio (22.8x) compared to the US Electric Utilities industry average (22x)

Price to Earnings Ratio vs Fair Ratio

What is DUK's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

DUK PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	22.8x
Fair PE Ratio	24.7x

Price-To-Earnings vs Fair Ratio: DUK is good value based on its Price-To-Earnings Ratio (22.8x) compared to the estimated Fair Price-To-Earnings Ratio (24.7x).

Share Price vs Fair Value

What is the Fair Price of DUK when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: DUK ($112.58) is trading above our estimate of fair value ($90.23)

Significantly Below Fair Value: DUK is trading above our estimate of fair value.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is less than 20% higher than the current share price.

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Future Growth

How is Duke Energy forecast to perform in the next 1 to 3 years based on estimates from 12 analysts?

Future Growth Score

1/6

Future Growth Score 1/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

7.5%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: DUK's forecast earnings growth (7.5% per year) is above the savings rate (1.9%).

Earnings vs Market: DUK's earnings (7.5% per year) are forecast to grow slower than the US market (14.4% per year).

High Growth Earnings: DUK's earnings are forecast to grow, but not significantly.

Revenue vs Market: DUK's revenue (3.8% per year) is forecast to grow slower than the US market (7.8% per year).

High Growth Revenue: DUK's revenue (3.8% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: DUK's Return on Equity is forecast to be low in 3 years time (9.5%).

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Past Performance

How has Duke Energy performed over the past 5 years?

Past Performance Score

5/6

Past Performance Score 5/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

1.2%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: DUK has high quality earnings.

Growing Profit Margin: DUK's current net profit margins (14.3%) are higher than last year (12%).

Past Earnings Growth Analysis

Earnings Trend: DUK's earnings have grown by 1.2% per year over the past 5 years.

Accelerating Growth: DUK's earnings growth over the past year (31.7%) exceeds its 5-year average (1.2% per year).

Earnings vs Industry: DUK earnings growth over the past year (31.7%) exceeded the Electric Utilities industry 10.1%.

Return on Equity

High ROE: DUK's Return on Equity (7%) is considered low.

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Financial Health

How is Duke Energy's financial position?

Financial Health Score

0/6

Financial Health Score 0/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: DUK's short term assets ($11.6B) do not cover its short term liabilities ($16.5B).

Long Term Liabilities: DUK's short term assets ($11.6B) do not cover its long term liabilities ($104.3B).

Debt to Equity History and Analysis

Debt Level: DUK's net debt to equity ratio (134.7%) is considered high.

Reducing Debt: DUK's debt to equity ratio has increased from 128.4% to 136.1% over the past 5 years.

Debt Coverage: DUK's debt is not well covered by operating cash flow (12%).

Interest Coverage: DUK's interest payments on its debt are not well covered by EBIT (2.5x coverage).

Balance Sheet

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Dividend

What is Duke Energy current dividend yield, its reliability and sustainability?

Dividend Score

4/6

Dividend Score 4/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

3.57%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: DUK's dividend (3.57%) is higher than the bottom 25% of dividend payers in the US market (1.48%).

High Dividend: DUK's dividend (3.57%) is low compared to the top 25% of dividend payers in the US market (3.99%).

Stability and Growth of Payments

Stable Dividend: DUK's dividends per share have been stable in the past 10 years.

Growing Dividend: DUK's dividend payments have increased over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: At its current payout ratio (79.8%), DUK's payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: DUK is paying a dividend but the company has no free cash flows.

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Management

How experienced are the management team and are they aligned to shareholders interests?

3.4yrs

Average management tenure

CEO

Lynn Good (62 yo)

9.08yrs

Tenure

US$16,451,236

Compensation

Ms. Lynn J. Good has been the Chairman of the Board of Edison Electric Institute since June 2018. Ms. Good serves as the President at Duke Energy Carolinas, LLC since July 1, 2013. Ms. Good has been the Ch...

CEO Compensation Analysis

Compensation vs Market: Lynn's total compensation ($USD16.45M) is about average for companies of similar size in the US market ($USD12.88M).

Compensation vs Earnings: Lynn's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: DUK's management team is considered experienced (3.4 years average tenure).

Board Members

Experienced Board: DUK's board of directors are considered experienced (5 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: DUK insiders have only sold shares in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/08/18 00:00
End of Day Share Price	2022/08/18 00:00
Earnings	2022/06/30
Annual Earnings	2021/12/31