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The Recently Recommended Monthly Stock Special
Recently Recommended

The recently recommended company is *Duke Energy (DUK)....

Comparison DUK (recently recommended stock of the month) vs SP500 (by Vanguard SP500 Index Fund) in the last 10 years.

Company Information:

Founded in 1916 and headquartered in Charlotte, North Carolina, Duke Energy has grown from a local electric utility into an international energy provider, which owns 58,200 megawatts of power generation in the United States, and more than 4,300 megawatts of electric generation in Latin America. DUK operates in the vibrant Southeastern United States, where population growth continues to exceed national averages and it has shown willingness to not only grow through major acquisitions, but to also restructure its collection of business units to achieve maximum efficiency. The company's other major venues – Ohio and Latin America - offer excellent potential for continued expansion. Its current total market capitalization of $54.4 billion makes DUK a large capitalization stock (a large-cap stock has a market capitalization value of more than $10 billion) and its long history of consistent earnings growth and dividend payments makes it a solid company.


It is considered a diversified business with a durable competitive advantage over its rivals and enjoys a solid management and corporate culture. According to Yahoo! Finance, consensus estimates call for the company to earn about $4.56 per share this year, and to go to about $4.80 per share in 2018. It has paid dividends to investors since 1926 and has increased its payments for 13 consecutive years. During the past five years, it has increased its dividends at an average annual rate of 22.9%, with its quarterly payment of $0.89 per share currently providing a yield of 4.49%.


The value of dividends reinvestment: A hypothetical investment in Duke Energy Corp. has grown cumulatively (including dividends reinvested) 4,028.04% during the past forty years. The same investment has grown only 746.92% during the same period of time, excluding dividends. Its Price to Earnings (P/E) ratio (a measure of valuation) of 20.0 is 2.4% below its industry average and 11% below the S&P 500® index, and according to Morningstar, the stock is trading 10.3% below its Fair Value Estimate, making it attractive for investors with a long-term investment horizon.


Technically (from the chart’s perspective) DUK also looks attractive, trading 15.4% below its all-time high, while it is forming a long base (price consolidation pattern) between $72 and $92 approximately, in which $72 is acting as a technical support level. Vanguard Total Stock Market Index and Vanguard 500 Index are major shareholders of DUK, holding 2.41% and 1.71% of its shares respectively. The stock is also one of the 63 holdings of the mutual fund managed my Moneypaper Advisors, the MP 63 Fund (DRIPX). DUK’s main competitors are Southern Co. (SO) and NextEra Energy Inc. (NEE). Duke’s Beta (a measure of the volatility, or systematic risk in comparison to the market as a whole as evidenced by the S&P 500 Index) is 0.03 so the stock is 99.97% less volatile than the Market.


Best and worst years during the past 10 years: Its best year was 2011, in which DUK returned, including dividends, 29.1%. On the flip side, its worst year was 2008, when the stock declined 21.1% including reinvested dividends. Duke’s dividend reinvestment plan charges no fees for cash investing, dividend reinvestment, automatic investment or termination of the plan. With the stock being fundamental and technically attractive, this may be an excellent entry point for investors with a longer-term investment horizon.


Disclosure: Mario Medina has no position in Duke Energy (DUK), and has no plans to initiate any position in the immediate future. However, the author is the co-manager of the MP 63 Fund (DRIPX), which does hold a position in the company. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with DUK and this article is not intended as a recommendation to invest as the information published does not take into account any subscriber's personal finances, goals or risk tolerance. Accordingly, you should be aware of all the risks associated with any financial investment, and should consult an independent financial advisor for any personal investment advice.


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