NextEra Energy, Inc. (NEE), Duke Energy Corp (DUK): Three Things to Know Before You Buy This Stock

Financial future
Over the next few years Duke Energy Corp (NYSE:DUK) plans to spend about 30% of its annual $6 billion capital budget on growth projects. The addition of cheaper natural gas to its regulated business should lead to 4%-6% long-term earnings growth. Further, Duke Energy Corp (NYSE:DUK) believes it has the ability to grow its stock dividend even as it maintains a target payout ratio of 65%-70%. Given that the dividend on its stock has been growing at a 2% annual rate that’s the minimum that I’d expect to see going forward.

Overall, that’s pretty good growth for a utility. It’s fairly in line with what we can expect from its industry peers like NextEra Energy, Inc. (NYSE:NEE) or Dominion Resources, Inc. (NYSE:D). Though, I will point out one key difference, Dominion Resources, Inc. (NYSE:D) has been able to grow its dividend by 7% annually the past few years and believes it can keep up the pace given its plan to grow earnings by 5%-6% through 2018. Meanwhile NextEra Energy, Inc. (NYSE:NEE) sees 5%-7% earnings growth through 2016 with a plan to boost its dividend 10% annually through 2014. All that means is that an investment in Duke Energy will come with slower dividend growth.

Final thoughts
To summarize, Duke Energy offers investors several fairly compelling reasons to buy its stock. Not only is it the nation’s largest utility, but its earnings are now more secure while still growing in the future. As you can see on the slide below, the company offers a lot to investors including scale, diversity, and flexibility:

Source: Duke Energy Investor Presentation

The bottom line here is that while Duke Energy might not be the fastest-growing utility, it does offer slow and steady growth. Slow and steady, as you know, is what wins the investing race and is what makes Duke Energy’s stock a solid choice for your investing dollars.

The article 3 Things to Know Before You Buy Duke Energy Stock originally appeared on Fool.com.

Fool contributor Matt DiLallo is short Apr 2013 $35 puts on Exelon. The Motley Fool recommends Dominion Resources (NYSE:D) and Exelon.

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