Shares of Duke Energy (DUK -0.78%) rose 14.6% in 2021, according to data provided by S&P Global Market Intelligence. While that lagged the S&P 500's nearly 27% gain, it was a solid showing for a utility stock. Powering the company's gains was its better-than-expected financial results and progress on its long-term growth plan.
Duke Energy generated solid financial results through the third quarter of 2021. It grew its year-to-date adjusted earnings to $4.30 per share, up 5.1% from the year-ago period. The utility benefited from higher retail electric volumes, higher base rates, and recently completed commercial renewable energy projects. That had the utility on track to deliver full-year earnings within its narrowed guidance range of $5.15 to $5.30 per share. It increased the low end of that range from its initial guidance of $5.00 to $5.15 per share due to the strength of its operations.
The company also continued to make excellent progress on its long-term strategy. Duke Energy aims to invest $59 billion between 2021 and 2025 to expand and modernize its operations, reduce its carbon emissions, and improve reliability. These investments should support 5% to 7% annual adjusted earnings-per-share growth through 2025.
One aspect of its strategy is securing less dilutive funding to support this investment level and enhance EPS growth. Last year, it took a significant step forward by agreeing to sell a 19.9% interest in Duke Energy Indiana to Singapore's sovereign wealth fund, GIC, for $2.05 billion. In September, it closed the first phase of that transaction, selling an 11.05% stake for $1.025 billion. That's helping address the company's equity needs for funding its $59 billion clean energy investment plan.
After several months of dialog, the company also entered into a cooperation agreement with activist investor Elliott Management. Elliott initially wanted Duke to break apart into three separate publicly traded companies, issue preferred stock to Elliott to help fund its growth, and appoint new directors to the board. However, Elliott eventually settled for two board seats, as Duke successfully raised non-dilutive capital via the deal with GIC and unveiled a large-scale clean energy transition investment plan.
Duke Energy delivered solid returns for its investors in 2021. It expects that trend to continue in the coming years. Its clean-energy investment plan should support 5% to 7% annual EPS growth. Combine that with a dividend yield of 3.8%, and Duke sees the potential to generate double-digit annual returns in the coming years. That's solid return potential for a lower-risk utility investment.