Duke Energy Corp (DUK): A Good Investment in the Utility Sector

CenterPoint Energy, Inc. (NYSE:CNP) is a public utility holding company engaging in the electric transmission and distribution business in the Texas Gulf Coast, which includes the city of Houston. Its largest business, Houston Electric, posted an operating income of $492 million. The customer growth is expected to grow by 2% for 2013. CenterPoint Energy, Inc. (NYSE:CNP) has a much smaller market cap ($10 billion) than Duke Energy. Its operating cash flow is also in the lower range which signifies that it is difficult for the company to make new investments.

The Southern Company (NYSE:SO) is another public holding supplying power to the states of Alabama, Georgia, Florida and Mississippi. The company has a P/E ratio of 17.9 and a dividend yield of 4.1%, both lower than Duke Energy. The stock had made a consistent upward trend from the last 4 months like Duke Energy. However, the revenue growth estimates are much lower for the coming years.

Conclusion

Duke Energy Corp (NYSE:DUK)’s performance has been at its peak for some time now out of all the utility stocks. The company made some huge capital expenditure in the recent past, but still it has been able to increase its dividends year on year. With a strong revenue and earnings growth, the stock is a safe pick for dividend investors. Moreover, the new investment plans lying ahead will enable Duke Energy Corp (NYSE:DUK) to generate strong cash flows in the future which is a primary requirement of such high risk businesses. Even if there is a downturn, the cash flows generated over the lifetime of the project will mitigate the risk to a large extent. To sum it up, I would prefer this stock the most in the electric utility industry both for its stronger risk handling capabilities and the consistent earnings growth over the years.

The article A Good Investment in the Utility Sector originally appeared on Fool.com and is written by Sujata Dutta.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.