Opinions
Jim Cramer - Mad Money
Duke Energy
DUK-N
WATCH
May 14, 2021
$103.555
Stock price when the opinion was issued
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This, along with a lot of utilities in the US can be divided into regulated and unregulated. This is more into the regulated business where rates are guaranteed by the government. Yields a relatively strong. A defensive play. If your time horizon is relatively long and you are looking for a stable business this will allow you to sleep at nights.
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COMMENT
A good quality company, but the problem he has with yield is that we are entering period where we are going to have a rate raise in the US next week. If that is true, utilities are probably the sector that he would avoid most, especially in the US. He would look at a US pipeline instead, or even a telco.
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BUY
They supply natural gas and electricity to 9 million in the south, east and midwest. They're transitioning away from coal into low-carbon energy as they target 5-7% annual earnings growth in the next five years. It's working. It's up 2% YTD, trades at less than 20x PE and pays a 5% dividend. Utilities are a nice place to hide--they're steady businesses that pay safe diviends.
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They have an attractive core business with operations in the Carolinas, Florida and the midwest. But they also have liabilities that led to credit downgrade last March. He wouldn't be excited by a slow, steady utilities company at this stage of the cycle, but Next Era has been trying to buy DUK for the past year. DUK pays you a 3.7% yield to wait. They reported a solid quarter this week. Shares were up 2%. They've benefited from the input of a non-hostile activist investor.