Before the Call: Will Duke Be King?

When fears of recession loom, the cautious investor's thoughts turn to safety. Large caps. Countercyclicals. And often enough -- utilities. For investors in Duke Energy (NYSE: DUK  ) , that choice has proved eminently Foolish (capital "F"), as this Motley Fool Income Investor pick "beat estimates" in each of its last three quarters. But 2007 is now past, and 2008 upon us. Tomorrow morning, we get our first clue to what this new year holds for Duke.

We'll have time aplenty to dissect Duke's specific numbers after the news comes out. But before we begin obsessing over its short-term performance, let's pause to review what investors think about Duke as a long-term investment. Our tool in this endeavor: Motley Fool CAPS, where we poll more than 100,000 investors for their views on more than 5,600 companies, Duke Energy included. Here's what Fools have to say about the company and its long-term prospects.

Up or down?
More than 1,000 investors have submitted ratings on Duke. Their verdict: Duke is definitely upper class.

95% of the Fools who cast a vote agree that Duke is a winner. Such widespread confidence in the company helped earn the company four CAPS stars out of a possible five -- but then again, many other utilities fare as well or better:

Electric Utilities Group

CAPS Rating

Exelon Corp.  (NYSE: EXC  )

*****

PPL Corp.  (NYSE: PPL  )

*****

Otter Tail (Nasdaq: OTTR  )

*****

FPL Group (NYSE: FPL  )

*****

Dynegy  (NYSE: DYN  )

*****

Xcel Energy  (NYSE: XEL  )

****

Duke Energy

****

Wall Street vs. Main Street
Shifting our attention from lay investors to the "professionals," Duke powers ahead to 100% approval among the 10 analysts whose opinions we track. (Which is actually curious, considering that the stock has underperformed the S&P 500 by more than five percentage points over the past year.)

Bull pitch
The top-rated CAPS pitch for Duke emphasizes the role of population growth in a regulated monopoly's success. According to lemoneater: "The population of the Carolinas appears to be growing steadily probably because the cost of living is lower here than many other areas. The customers are coming to Duke by virtue of where they are choosing to live."

Bear pitch
In contrast to the above bull pitch, which was written as recently as January, the fiercest growl from the bear camp sounded more than a year ago. Missy1976 wrote:

Just when you thought it was safe ... a divided Supreme Court ruled that carbon dioxide and other so-called greenhouse gases are air pollutants under the Clean Air Act, and that the Bush administration broke the law in its refusal to limit emissions of those gases. The 5-4 decision was ... a blow to the nation's auto and utility industries, among others.

So, to sum up, Duke's revenues should grow with the population base in the areas it serves. However, its costs could also grow as the U.S. government pushes utilities to shoulder more of the costs of environmental pollution. Both good, logical arguments. But when investing for "safe" returns, neither argument addresses your most important question: How big is Duke's dividend? Answer: 4.8%.

Who said that?
To find out what a lot of other Fools have to say about Duke, and to explore the plethora of additional financial data we've put together on the company, just click here.


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