How Will Duke Energy (DUK) Stock Respond To Dividend Increase?

NEW YORK (TheStreet) -- Shares of Duke Energy Corp. (DUK) are down -0.75% to $73.63 after the company today declared a quarterly cash dividend on its common stock of 79.5 cents per share, an increase of 1.5 cents per share or about 2%.

This increase is the same as in 2013, the first full year of Duke Energy's merger with Progress Energy.

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The dividend is payable on Sept. 16 to shareholders of record at the close of business Aug. 15.

The company expects to achieve its targeted dividend payout ratio of between 65% and 70% of its adjusted diluted earnings per share in 2014.

TheStreet Ratings team rates DUKE ENERGY CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate DUKE ENERGY CORP (DUK) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • DUK's revenue growth has slightly outpaced the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 12.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $1,373.00 million or 25.84% when compared to the same quarter last year. In addition, DUKE ENERGY CORP has also modestly surpassed the industry average cash flow growth rate of 18.24%.
  • DUKE ENERGY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DUKE ENERGY CORP increased its bottom line by earning $3.73 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($4.58 versus $3.73).
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • The gross profit margin for DUKE ENERGY CORP is currently lower than what is desirable, coming in at 34.48%. Regardless of DUK's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -1.46% trails the industry average.
  • You can view the full analysis from the report here: DUK Ratings Report

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