Duke Energy's Preferred Dividends Offer a Secure, Undervalued Income Play

In an investment climate where risk-free yields remain subdued and income-seeking investors face a dearth of options, Duke Energy's preferred stock emerges as a compelling case study in balancing safety and return. With the 10-year U.S. Treasury yield hovering at 4.13% as of November 2025, the appeal of higher-yielding alternatives has never been more pronounced. For Duke Energy (DUK), a utility giant with a 99-year streak of uninterrupted dividend payments, its preferred shares offer a unique blend of stability and income potential, particularly for investors prioritizing cash flow over capital appreciation.

A Legacy of Stability and Creditworthiness

Duke Energy's preferred stock, particularly its Series A Cumulative Redeemable Perpetual Preferred Stock (DUK.PRA), has long been a cornerstone for income portfolios. The company recently declared a quarterly dividend of $359.375 per share (or $0.359375 per depositary share) for 2025, payable on December 16. This translates to an annual yield of 5.75% for Series A, which currently trades at $24.98-a slight discount to its $25 liquidation preference. The discount suggests the market may be pricing in modest credit risk, yet Duke's overall corporate credit ratings-"Baa2" by Moody's and "BBB+" by S&P-underscore its robust financial position.

The company's preferred stock is rated "Baa3" (Moody's) and "BBB-" (S&P), placing it just below investment-grade benchmarks but still within the realm of acceptable risk for many institutional and retail investors. These ratings reflect Duke's strong cash flow generation, supported by regulated utility operations and a strategic pivot toward grid modernization and clean energy transition. Such initiatives not only align with long-term policy tailwinds but also insulate the company from the volatility that plagues other sectors.

Yielding in a Low-Yield Environment

Duke's preferred stock yield of 5.75% for Series A outperforms the 4.13% Treasury yield, making it a more attractive option for investors seeking income without sacrificing safety. While other preferred securities, such as those in the VanEck Preferred Securities ex Financials ETF (PFXF), offer average yields of 6.9%, Duke's shares stand out for their lower volatility and stronger underwriting. For context, Truist Financial's Series I preferred stock yields over 6.69%, but its financial-sector exposure introduces credit risk absent in Duke's regulated utility model.

The company's Series A Cumulative Quarterly Income Preferred Stock (QUIPS) further enhances its appeal, offering a 7.10% annual yield on a $25 liquidation amount. This structure, with quarterly distributions on fixed dates, provides predictable cash flow-a critical feature in an era where inflation and interest rate uncertainty complicate long-term planning.

Market Position and Valuation

Despite its strong fundamentals, Duke's preferred stock trades at a modest discount, suggesting potential undervaluation. As of November 2025, the Series A shares are priced at $24.98, implying a yield premium of approximately 5.75% for income investors. This discount could reflect market skepticism about the broader utility sector's growth prospects, yet Duke's focus on clean energy and infrastructure modernization positions it to benefit from regulatory and policy-driven tailwinds.

Moreover, Duke's financial metrics reinforce its ability to sustain dividends. The company reported a Return on Equity (ROE) of 0.0759 and a Return on Assets (ROA) of 0.0232 in 2025, figures that, while moderate, are consistent with its capital-intensive business model. Analysts have slightly adjusted price targets for Duke's common stock, reflecting nuanced shifts in valuation assumptions, but the preferred shares remain largely insulated from such fluctuations due to their fixed-income characteristics.

Conclusion: A Strategic Income Play

For investors navigating a low-yield environment, Duke Energy's preferred stock represents a rare combination of security and return. Its 5.75% and 7.10% yields significantly exceed Treasury rates while benefiting from the company's stable cash flows and strong credit profile. The slight discount to liquidation value offers additional margin of safety, particularly in a market where preferred securities are increasingly scrutinized for credit risk.

As utilities face growing demand from AI-driven energy consumption and decarbonization efforts, Duke's strategic alignment with these trends further cements its position as a defensive income play. For those prioritizing predictable cash flow and downside protection, Duke's preferred shares warrant serious consideration in a diversified portfolio.