Duke Energy At 52-Week High On Investments & Acquisitions

Shares of Duke Energy Corporation (NYSE:DUK) scaled a new 52-week high of $81.60 on Jun 10, before closing slightly lower at $81.24. With a market cap of around $55.97 billion, the company has seen its shares gain roughly 16.7% in this year, outperforming the 2.6% gain of the S&P 500 over the same period.

What’s Driving Duke Energy?

Duke Energy is a premier utility service provider offering efficient power and energy services across various states in the U.S. and several international locations. The company is focused on expanding its scale of operations and implementing modern technologies at its facilities. Duke Energy invests heavily in infrastructure and expansion projects. For Duke Energy Carolinas and Florida, the company expects to spend about $11.35 billion and $6.85 billion, respectively, in the 2016–2020 period.

Duke Energy has undertaken several projects and plans to invest about $25 billion to $30 billion in growth projects over the 2016–2020 time frame. Also, the company expects to make capital investments of $9.225 billion in 2016, $8.8 billion in 2017 and $8.3 billion in 2018. Management believes that these investments will support the targeted earnings growth rate of 4–6% through 2020. Additionally, it has plans to invest around $3 billion to $5 billion in commercial renewables in its gas pipeline investments through 2020. Moreover, the company is committed to the construction and expansion of the scale of its solar and wind projects across the U.S.

Duke Energy is systematically and strategically boosting its regulated business mix through a series of acquisitions and divestitures. In Oct 2015, it announced plans to acquire Piedmont Natural Gas in a transaction which will add a well-established natural gas business and platforms to its portfolio. The deal will be accretive to earnings in 2017. Strategically, this acquisition will lay the foundation for establishing a broader gas infrastructure platform within the company, based on its recent gas pipeline investments and complementing Duke Energy’s existing gas LBT business in the Midwest.

On Jun 10, the proposed acquisition took a step ahead with an agreement with the North Carolina Public Staff on certain stipulations, which will ensure that there will be no adverse impact on customer bills or services of both companies. If the stipulations are fulfilled, then the acquisition “will meet the standard for approval” by the North Carolina Utilities Commission (NCUC). On Jul 18, the NCUC will hold a hearing on the proposed acquisition. If approved by the NCUC, Duke Energy and Piedmont will try to close the transaction by 2016 end.

As far as investor-friendly moves are concerned, the company has maintained a stable dividend payment history. It has distributed quarterly cash dividend for 88 consecutive years supported by stable liquidity. Duke Energy has $4.09 billion available liquidity as of Mar 31, 2016. It continues to target annual growth in dividend, consistent with its long-term earnings growth rate. Through 2020, the company expects to maintain its long-term dividend payout ratio in the range of 70% to 75% of its adjusted earnings per share.

Duke Energy currently has a Zacks Rank #3 (Hold).

Stocks to Consider

A few better-ranked stocks in the utility space include Spark Energy, Inc. (NASDAQ:SPKE) , NiSource Inc. (NYSE:NI) and CenterPoint Energy, Inc. (NYSE:CNP) . While Spark Energy sports a Zacks Rank #1 (Strong Buy), both NiSource and CenterPoint Energy carry a Zacks Rank #2 (Buy).

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