Is Duke Energy Stock a Buy?
Hot isn't a word you'd even remotely associate with utility stocks, but what if Duke Energy (NYSE: DUK) is the hot investment you've been ignoring all along? Duke's lackluster performance in the past year or so compared with rivals such as Dominion Energy (NYSE: D) has miffed investors, but so far this year, the stock has mirrored the performance of the Dow Jones Utility Index, which is holding up firmly. Could that mean Duke Energy is a top utility stock buy now, at a time when the rally in most utility stocks has triggered valuation concerns?
While there are several factors to consider before buying a stock, it boils down to these three for utility stocks in my opinion: the company's operational growth prospects, the dividend, and the stock's valuation.
For a traditional utility like Duke Energy, earnings growth comes primarily from increases in the rates of services that depend a great deal on the amount of money the company spends on infrastructure, particularly if it's a regulated utility. A regulated utility owns all power generation, transmission, and distribution lines, and therefore enjoys a monopoly, in a particular region. The rates for electricity and gas for such regulated utilities, however, are decided by the state public utility commissions. Companies that regularly invest to expand and modernize infrastructure while improving energy efficiency are better positioned to win timely rate approvals from state regulators.
Source Fool.com
