Duke Energy is Moving Forward

Dr. Osman is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Recently, Progress Energy Carolinas, a subsidiary company of Duke Energy (NYSE: DUK), filed a rate case with the NCUC requesting an average 11% net increase, or $359 million, in retail revenues. The case hearing will begin in March 2013. If approved by the NCUC, consumers will see a net rate increase of 14.2% in mid-2013. This is the biggest rate case filed in the courts, and the success of the case would certainly support the expansion plans, as well as enhance the group’s profits.

Recent Moves

Duke Energy closed Q3 with some remarkable figures. The net profit of the company stood at $594 million in Q3 2012, which is 25.8% higher than the same quarter last year. The decline in diluted EPS is because of a significant increase in the weighted average number of outstanding shares, which totaled $699 million. At the other end of the spectrum, the total liquid assets of the company amounted to $10.1 billion; this was 61.1% higher than the same period last year. The net worth of the company is well over $40.9 billion, which is almost 80% higher year over year. 

A number of major construction projects are almost at the final stage of completion, which will foster operational activities, and the company will be in a position to offer more products to customers.

Duke Energy Vs. The Rest

Given its market capitalization of $43.8 billion and a recent merger with Progress Energy, Duke is now the largest regulated utility in the United States. 

Indicator

DUKE Energy Corp

Southern Co

SCANA Corp

Market Cap

$43.8 billion

$37.6 billion

$6.0 billion

Trailing P/E

19.5

16.9

14.7

P/B Ratio

1.1

1.9

1.5

Earnings Growth

8.2

4.3

0.2

Dividend Yield

4.91

4.54

4.31

Debt/Equity

0.9

1.0

1.2

Return on Equity

5.1

12.1

10.4

With the hovering earnings growth rate of 8.2% and a dividend yield ratio of 4.91, Duke Stock is the choice of every investor. The stock promises to yield mammoth dividends and payouts, higher than the competing companies in the comparison table above. A higher trailing P/E ratio clearly indicates that the majority of investors expect a substantial earnings growth rate from Duke Stock in the near future.  

Southern (NYSE: SO) and SCANA (NYSE: SCG) are also making good progress, especially in yielding strong dividends. Southern is faring far better than SCANA Corp, with a comparatively higher dividend yield ratio of 4.54, a higher return on equity of 12.1, and a higher trailing P/E ratio of 16.9.

To achieve the financial objectives and to stand out from the competition, Duke will focus on the NCUC rate case, merger integration and synergies, the crystal river 3 repair or retire decision, and nuclear fleet performance optimization.

Foolish Summary

Duke targets a long-term earnings growth range of 4%–6% in adjusted diluted EPS for the next few years. This would be no small feat, and it would be sufficient to gain long-term investor’s attention. Furthermore, the company intends to grow its dividend within a 65%–70% target payout ratio, based upon adjusted diluted EPS. The expectation of a high payout ratio indicates genuine potential for the company, and I expect this stock to be a choice of long-term investors within the energy industry.


ecofinstat has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Southern Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus

Compare Brokers

Fool Disclosure