3/22/2023 0 Comments Duke energy ifactorIt ends up as "value" on the balance sheet. It also helps that the company's total equity (total assets minus total liabilities) has been in a steady uptrend, which means money on investments isn't wasted. Hence, it's no surprise that share dilution has picked up with a surge of almost $28 billion in total long-term debt since 2014.īut then again, please be aware that the company does generate value as earnings per share growth is expected to remain positive - and it was positive in the past as well. This adds another $3.0 billion to the funding gap. However, bear in mind that the company also pays a 3.7% dividend yield. Free cash flow has consistently been negative since Duke (and its peers) started to ramp up CapEx after 2014. What this means is that the company needs external funds to cover CapEx. What we are looking at is roughly $9.7 billion in gross CapEx last year. The graph below shows the company's funding gap, although the high net debt level messes a bit with the visibility of the other indicators - my apologies for that. During the 2027-2031 period, CapEx will likely end up above $70 billion. Between 20, the company is expected to spend this much on modernization of its grid and push for net-zero through investments in nuclear, renewables, storage, and hydro. The company has a $63 billion 5-year CapEx plan. Share dilution is not going to end anytime soon. That may not seem like a lot, but it incorporates the company's massive share dilution during this period. While total net income has grown by 110% since 2007, earnings per share have increased by 6%. While share buybacks enhance the value of every share, issuing shares achieves the opposite. In 2021, the company had 769 million shares outstanding. Duke had 700 million shares outstanding in 2017. The thing is that utility companies issue stock to finance projects. However, it is important to buy utility companies that do not dilute shares so much that investors get dividends but end up with high capital losses in case they ever want to sell. With that said, there is no reason to buy utility companies for capital gains. Duke expects to benefit from the aforementioned increase in customers, and rate increases - among other factors. Through 2026, the company expects to grow earnings by 5-7% per year with $5.45 in EPS in 2022. The company's original guidance was $5.00-$5.30. In 2021, Duke generated $5.24 in adjusted earnings per share. O&M costs have declined by 1.4% per year since 2016 thanks to the transition away from coal, a modernized grid, and the ability of the company to leverage its scale to somewhat offset inflation. Meanwhile, the company continues to invest in cleaner energy sources, which is boosting capital expenditures ("CapEx") as I will show you in this article, but it lowers overall operating costs. In 2022, Duke expects to grow total retail electric volumes by 1.5% with up to 2.0% growth in industrial demand due to higher economic output. This makes sense as people moved to the Carolinas and Florida (among other states) from higher-taxed states. This came from 1.8% growth in the Carolinas and Florida (both 1.8%) and just 0.8% growth in the Midwest. In 2021, the company saw a 1.6% growth rate in electric customers. Industrial and commercial demand is much more volatile than residential demand, which is mainly dependent on secular trends like the adoption of technology and migration. The only cyclical aspect of the business is that higher economic growth boosts electricity needs. Utilities are among the most defensive investments in the world for the obvious reason that people and companies need electricity. 9% from gas, and 5% from commercial renewables. Headquartered in Charlotte, North Carolina, the company operates in the Carolinas, Indiana, Ohio, and Kentucky, as well as the Sunshine State, Florida.ĭuke generates roughly 86% of its earnings from regulated electricity. With a market cap of $81 billion, Duke is America's second-largest regulated electric utility company. In this article, I will write a much-needed update and explain why I like Duke so much. And that's a good thing as it's the safest dividend stock in my portfolio. I couldn't even tell you if it's at its all-time high or 5% below it. I don't know where the stock is trading most of the time. However, I also look for stocks that I enjoy. When I buy stocks I always look for quality first. 2 of them are utilities - the full list can be seen in my Seeking Alpha bio. Now I have 22 different stocks in my portfolio. Duke Energy ( NYSE: DUK) was indeed one of the first 6 stocks of my dividend growth portfolio, which I established in June of 2020. On June 26, 2020, I wrote an article called "Duke Energy: One Of The 6 Must-Own Dividend Stocks". JamesBrey/iStock via Getty Images Introduction
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