For many years, utility stocks have been considered solid and reliable investments. Customer electricity demand grows, and utilities benefit while investors feel excited. However, those times may be about to change. In this article, I aim to deliver a clearer picture on where the utilities, Duke Energy Corp (NYSE:DUK) and American Electric Power Company Inc (NYSE:AEP) stand. My argument makes a largely statistical case for suggesting which stock is the best bet for your profits.
Great Plains Energy Incorporated (NYSE:GXP) has a diverse generation platform of more than 6,600 MW of capacity. The company’s generation mix is largely dominated by coal. Coal is used for 83% of the power generation, while nuclear fuel makes up approximately 14% of the remaining generation. At a time when gas prices were significantly lower and the Environment Protection Agency was hot on the heels of utility providers, urging them to switch to cleaner sources of fuel, Great Plains Energy Incorporated (NYSE:GXP) stuck with coal production and is now placed better than its competitors as gas prices have skyrocketed.
Duke Energy Corp (NYSE:DUK) develops cost saving initiatives to reach earnings base growth. On May 30, the company received rate case approval from North Carolina Utilities commission. That provides the total increase in rates of $178.7 million, or an average increase of 5.5% for all customers, over the 2013-2014 periods. Nevertheless, even with the approved rate increase, the company’s rates remain below the national average. The approved rate increase will be used to recover investments already made to modernize the system and ensure safe and reliable service for customers every day.
American Electric Power Company Inc (NYSE:AEP) delivers electricity to more than 5 million customers in 11 states. On July 17, the company terminated its $1 billion credit agreement, dated February 13, 2013, and entered into a $1 billion Term Credit Agreement, dated as of July 17, 2013. This is a replacement Credit Agreement entered into to provide additional liquidity during the corporate separation process for Ohio Power Company.
Financials and stock performance
Great Plains Energy’s EPS has been fluctuating for the last 5 years, making a gain one year and having a dismal performance in the next. The company’s payout ratio is at 63% and is not very promising, especially when the utility company’s dividend payment was almost twice the current amount in 2004, while having a payout ratio in the 60%-range.