We recently compiled a list of the 12 Best Electric Utility Stocks to Buy Now. In this article, we are going to take a look at where Duke Energy Corporation (NYSE:DUK) stands against the other electric utility stocks.
Electric utility stocks are publicly listed companies that are overseen by government bodies. They generate revenue by supplying reliable energy to customers.
Morningstar energy and utilities strategists Travis Miller and Andrew Bischof find grounds to invest in utility stocks, stating that Utilities’ 2024 rally slowed in October as interest rates began to climb, but utilities stocks are still hanging on to their outstanding returns from the previous year. As of mid-February, the majority of US utilities are trading close to our estimates of their fair values.
Generally speaking, utility companies have high dividend yields and appear to be overpriced at the moment. According to Miller and Bischof:
“Utilities continue to grow their dividends at an impressive rate.” “Nearly all utilities have already announced dividend increases for 2025 or are on track to announce increases in the first quarter. We expect 5% median sectorwide dividend growth in 2025.”
Although they set their predictions below the mainstream, Miller and Bischof predict that the demand for electricity from data centers will almost double. They claim that the outlook for data center electricity demand is trending toward the bull-case scenario from their 10-year forecast in 2023. They stated:
“We remain below consensus forecasts as we believe several constraints—such as regulatory approvals, tight supply chains for equipment, and grid reliability during peak demand—will affect project timing and growth opportunities.”
The utilities sector, the worst-performing broader market group in 2023, recovered in 2024 as the power demand surged due to electrification, decarbonization, and artificial intelligence. The Energy Information Administration forecasts that global power consumption will climb by 75% by 2050, with data centers emerging as a main contributor.
Looking forward, according to Deloitte’s outlook, in 2025, the power and utilities sector will prioritize grid upgrading, nuclear expansion, distributed energy, workforce transformation, and carbon management. Secondly, increasing demand for electricity due to electrification and AI-powered data centers will force utilities to integrate clean energy sources and improve grid efficiency. Cost-sharing schemes and fair tariffs will be crucial. Partnerships and creative financial arrangements that solve waste and safety issues will hasten the implementation of nuclear power. Thirdly, distributed energy resources, such as virtual power plants and microgrids, will boost the efficiency and resilience of the system. Fourthly, utility companies will also make investments in workforce transformation, focusing on innovation-driven talent development, modular skills, and technology training to solve labor shortages. Lastly, notwithstanding technological and legal obstacles, utilities will increase carbon capture, storage, and offset programs in order to achieve decarbonization efforts. These tactics will assist utilities in striking a balance between cost-effectiveness, sustainability, and dependability in the face of rising electricity demand and changing energy regulations.
As per EY’s Power and Utilities Outlook 2025, the use of renewable energy and technology, as well as the modernization of infrastructure, present opportunities for utilities despite their high prices and growing demand.
Aerial view of a power plant near a lake lit up at night, showing off the company’s expansive electricity generation capabilities.
Our Methodology
We sifted through holdings of Electric Utility ETFs and online rankings to form an initial list of 30 Electric Utility stocks. From the resultant dataset, we chose the top 12 stocks most favoured by hedge funds, using Insider Monkey’s database of 1,009 hedge funds in Q4 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Duke Energy Corporation (NYSE:DUK)
Number of Hedge Fund Investors: 62
Duke Energy Corporation (NYSE:DUK) is one of the country’s largest power company stocks. It has two business divisions. The first one is Electric utilities and infrastructure, which manages regulated utilities for 8.4 million retail electric consumers in North Carolina, South Carolina, Florida, Indiana, Ohio, and Kentucky. The second segment is Gas utilities and infrastructure, which distributes natural gas to 1.7 million customers in North Carolina, South Carolina, Tennessee, Ohio, and Kentucky.
Duke Energy (NYSE:DUK)’s utility portfolio, which is governed by government organizations that determine its rates, produces consistent revenue. As a result, it has steady cash flow to grow its utility companies and pay dividends.
The company outperforms numerous electricity stocks due to a few criteria. Its stable energy businesses that provide consistent revenue are complemented by a solid financial profile, which includes an investment-grade credit rating. Furthermore, it has a conservative dividend payout ratio, which allows it to make investments in cleaner energy. Duke Energy (NYSE:DUK) is making significant investments to improve its business practices and reduce its carbon footprint.
BMO Capital maintained its Outperform rating on Duke Energy (NYSE:DUK) shares and increased its price objective from $123 to $128. The firm reiterated its optimistic outlook on shares during its meeting with the company’s management team. The analyst informs investors in a research note that BMO continues to see a defensive profile and low-touch regulatory calendar with a visible growth inflection driving multiple expansions with continued execution.
Overall, DUK ranks 4th on our list of the Best Electric Utility Stocks to Buy Now. While we acknowledge the potential for DUK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DUK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stock To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
