Duke Energy Corp. (DUK) presents a compelling investment opportunity for income-oriented investors. The company's strong dividend history, regulated business model, and robust growth prospects make it an attractive choice for long-term wealth building, counsels John Gardner, founder and principal of Blackhawk Wealth Advisors’ Market Insights.
Duke has a long-standing commitment to reward shareholders through consistent dividend payouts. Last year was the 98th consecutive year that Duke Energy paid a quarterly cash dividend on its common stock. The company has also increased its dividends for 12 consecutive years.
Dividend growth is an often-overlooked fundamental metric by income investors. The ability to consistently increase dividends is a testament to stable cash flow and effective management. Duke Energy has a 5-year dividend growth rate of 6%.
The economic boom after World War II brought unprecedented demand for electric power. As fancy refrigerators, range-top ovens, and television sets became middle-class staples, the increased demand for modern-day conveniences prompted a shift to coal-fired generation.
Today, Duke Energy is dedicated to identifying, integrating, and scaling up new technologies that make electricity cleaner, more reliable, and affordable. Duke is now focused on supporting clean energy and meeting the high demands from data centers.
The company recently announced agreements with Amazon.com Inc. (AMZN), Alphabet Inc. (GOOGL), and Microsoft Corp. (MSFT) to address rapid load growth caused by oncoming data centers and accelerate clean energy in the Carolinas. These technology giants are significantly driving electricity demand, primarily through extensive and rapidly expanding data center operations.
These data centers are essential for supporting cloud services, AI development, and other digital operations. The facilities require vast amounts of power to run servers, cooling systems, and other infrastructure needed to store and process massive amounts of data.
Looking ahead, Duke Energy faces a bright future thanks in part to AI. One reference: Even a simple ChatGPT task uses 10 times the energy that a normal Google search does. Duke Energy is expected to capitalize on this increasing energy demand.
On top of the stable and sustainable investment income DUK provides, it is quite possibly an attractive “total return” stock. It is the combination of income and growth that equates to total return.
The mean 12-month price target of about $124 represents nearly 12% upside from DUK’s price levels in late 2024. Add in the dividend and DUK could provide a total return of more than 15% in the year ahead.
Subscribe to Blackhawk Wealth Advisors’ Market Insights here…
