Duke Energy (NYSE:DUK) announced yesterday that it's upping its quarterly dividend for the sixth consecutive year. While the move might seem like an obvious win for Duke Energy stock investors, savvy shareholders want to know whether the utility can maintain its increasingly large distribution. Here's what you need to know.

Dividend without end?
Duke's newest dividend clocks in at $0.78 per share, 2% higher than previous distributions. At current prices, Duke Energy stock's new yield clocks in at 4.7%, a substantial 1.3 percentage points above the industry average. This is the 87th consecutive year that Duke has paid out to investors, and the sixth straight year it's upped its annual distribution.

But, dynamite dividends today can mean financial destruction tomorrow if a company overextends itself. Utilities rely heavily on cash flow to keep their earnings churning, and examining a company's track record can give up a healthy peck of perspective.

DUK Dividend Chart

DUK Dividend data by YCharts 

Over the last few years, Duke energy stock's dividend has increased a substantial 6.1%. PPL (NYSE:PPL) and FirstEnergy (NYSE:FE) have also managed to increase their own distributions. But while PPL has made major regulatory wins in both its United States and United Kingdom business units, FirstEnergy has fallen on tougher times. The utility managed better-than-expected Q1 results, but its $20 billion in debt could prove troublesome – and a larger dividend won't exactly help.

The dividends of both Exelon (NYSE:EXC) and Atlantic Power (NYSE:AT) took major dips earlier this year, as each utility eased back on overextended distributions. Exelon will focus on balancing its books and maintaining its credit rating to enable more growth: "We [Exelon] have an opportunity to invest in growth," said CEO Chris Cane. "We cannot do that efficiently if we're leaning on a balance sheet to maintain an 80% to 90% payout level."

Relatively tiny Atlantic Power found its own enlarged dividend at odds with its "growth by acquisition model," and hopes this latest move will free up funds for the company to more effectively pursue growth opportunities. The utility is currently being sued by several firms for issues related to its dividend downsize, but is moving full steam ahead with natural gas and renewable energy expansions.

Are dividends the best choice?
Dividends are one of the most direct ways a company can return value to shareholders -- but it's not always the best way. Speaking directly to shareholders CEO-to-be Lynn Good noted:

We realize the importance of the dividend payment to our shareholders. One of our primary financial objectives has been to consistently grow the dividend annually. The strength of our balance sheet and significant regulated business mix has allowed us to do exactly that for the past six consecutive years.

According to our own assessment, Good's not cooking the books. Duke has managed to increase its dividend over the years, and its current margins hint that it's not sacrificing long-term effectiveness. With a $12.5 billion modernization project well underway, its industry-beating 35.2% gross margins, and 17.6% operating margins, probably aren't going away anytime soon. With a reasonable 1.01 debt-to-equity ratio to boot, Duke Energy's stock has a dividend that's here to stay.

Fool contributor Justin Loiseau has no position in any stocks mentionedbut he does use electricity. You can follow him on Twitter @TMFJLo and on Motley Fool CAPS @TMFJLo.

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