Duke Energy's Dividend Stability and Its Implications for Income Investors

In an era of persistently high interest rates, income investors are increasingly scrutinizing the resilience of dividend-paying stocks. Utility companies, long considered defensive assets, face a unique challenge: balancing debt-driven infrastructure investments with the need to maintain attractive yields. Duke Energy (DUK) stands at the intersection of these dynamics, offering a case study in how regulated utilities navigate financial headwinds.

A Legacy of Dividend Stability

Duke Energy's dividend track record is nothing short of remarkable. The company has paid dividends for 98 consecutive years, with a 5-year compound annual growth rate (CAGR) of 2.00% as of 2025, according to GuruFocus. This consistency is critical for income investors, especially in a high-rate environment where bond yields compete for yield-hungry portfolios. As of October 2025, Duke's forward dividend yield ranges between 3.33% and 3.48%, per StockAnalysis, outpacing the 10-year Treasury yield of approximately 3.9%. While the yield appears attractive, investors must weigh it against the company's financial leverage.

Financial Metrics: Strengths and Vulnerabilities

Duke Energy's debt-to-equity ratio of 2.65 as of June 2025, according to Macrotrends, underscores its reliance on debt to fund capital-intensive projects. This level of leverage is not uncommon in the utility sector but raises questions about sustainability in a rising rate environment. More concerning is the interest coverage ratio, which stood at 2.03 for Q3 2025 and 2.35 for fiscal 2024, based on GuruFocus interest coverage. These figures fall below Ben Graham's conservative threshold of 5, suggesting limited margin of safety if borrowing costs rise further. However, Duke's regulated monopoly status-operating in controlled markets with predictable cash flows-mitigates some of this risk.

Industry Comparisons and Strategic Positioning

Duke Energy's dividend resilience is bolstered by its strategic focus on renewable energy. With over $50 billion invested in clean energy projects since 2020, according to DirectorsTalk Interviews, the company is aligning itself with long-term regulatory trends that favor stable returns. This contrasts with peers like NextEra Energy and Dominion Energy, which have similarly strong yields but vary in their debt management approaches. For instance, Duke's interest coverage ratio of 2.03 lags behind NextEra's 3.5 as of 2025, highlighting a potential vulnerability. Yet Duke's disciplined capital expenditure program-targeting $12 billion in annual investments through 2027-suggests a balance between growth and prudence.

Risks for Income Investors

The primary risk for Duke Energy shareholders lies in its debt profile. A further increase in interest rates could strain cash flows, potentially forcing the company to prioritize debt servicing over dividend growth. Additionally, regulatory changes in states like North Carolina and South Carolina-where Duke operates key assets-could disrupt earnings forecasts. While the utility's regulated status provides a degree of insulation, it is not immune to political or economic shifts.

Conclusion: A Calculated Bet for Income Portfolios

Duke Energy remains a compelling option for income investors seeking steady dividends, particularly those willing to tolerate moderate risk. Its 3.4% yield, combined with a 98-year payout streak, offers a rare blend of reliability and growth. However, the company's financial metrics-particularly its interest coverage ratios-warrant close monitoring. For investors who prioritize absolute safety, Duke may not match the robustness of lower-leverage utilities. But for those who accept a measured level of risk in exchange for competitive yields, Duke Energy's dividend stability is a testament to its enduring appeal in a high-rate world.