Duke Energy Corp (DUK) Earnings: Is Bigger Better for This Dividend Stock?

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Is Duke’s dividend dynamite?
Duke boosted its dividend 200% in 2012, and investors currently enjoy a 4.8% dividend yield. The company is nearing the end of its massive $9 billion 6,600 MW modernization project, which could clear up finances for additional payout increases. But the dividend stock’s regulated utilities are in the middle of a myriad of rate-increase applications, and outcomes will ultimately determine how big its bottom line becomes.

Duke Energy Corp (NYSE:DUK)’s future also depends on natural gas pricing. Thirty-seven percent of its regulated utility capacity comes from gas, with another 39% from coal and 17% from nuclear. But its energy diversity should keep any major price spikes under control, with coal and nuclear becoming more cost competitive if gas heads higher.

Source: Duke Energy 2012 Sustainability Report

Although natural gas spikes or stumbles won’t have major effects on Duke, less-hedged utilities such as Atlantic Power Corp (NYSE:AT) could feel a major squeeze. With 58% gas capacity and plans to focus its future on gas and wind, Atlantic Power Corp (NYSE:AT)’s lack of diversity could put it in a tough position in the quarters ahead.

Can Duke become king?
With merger expectations matched and a larger regulated position to ensure sustainable sales, Duke Energy Corp (NYSE:DUK)’s latest quarter has put it in a good position for the future. The dividend stock is already up 17% for 2013, and Duke’s energy diversity will continue to protect it from price wars that other utilities will have to fight.

Looking ahead, investors will need to watch small profit leaks to make sure Duke can keep delivering. Continued international fumbles or a regulatory loss could push down Duke’s upside and decrease its ability to deliver on its dividend.

The article Duke Energy Earnings: Is Bigger Better for This Dividend Stock? originally appeared on Fool.com and is written by Justin Loiseau.

Motley Fool contributor Justin Loiseau has no position in any stocks mentionedbut he does use electricity. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo.The Motley Fool recommends Exelon.

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