In an interesting twist on debt financing, energy utility giant, Duke Energy announced it is targeting small individual investors with a $500 Million debt issue. The debt issue, named PremiereNotes, will allow small investors to put up as little as $1,000.
The question is will investors bite at the low yielding issue? Duke Energy is saying that the PremiereNotes will yield at least 0.25% over the average money market funds rate, based on the weekly published rates. That puts the yield in the paltry 1% area. In todays low rate environment, that seems extremely low. For those investors already in money market funds, it may make sense to put some into the Duke Energy PremiereNotes. But in doing so they are taking on a little more risk, for little extra reward.
The Duke Energy PremiereNotes issue will not be rated by any rating agency, and the funds invested in the notes will not be insured by the FDIC. Something to think about for the risk averse investor.
For the less risk averse investor I would ask why invest in these Duke Energy PremiereNotes at all, when you can purchase Duke Energy common stock with a dividend yield around 5.31% at today’s current price? They’ve managed to pay a dividend every quarter since 1987, and increased those dividends from 16 cents per share in 1987 to 24.5 cents this year. Add to that the current stock price is well below it’s highs of 2006 and you have a yield that higher than it’s average yield over the last 20 years, and the chance for some capital gains in addition to your 5.3% dividend yield.
More info on Duke Energy:
Residential – Duke Energy
Providing gas and electricity services to Ohio, Indiana, and Kentucky. Includes information for consumers, employees and corporate clients.
North Carolina – North Carolina – Duke Energy
North Carolina. Free CFLs · Make a contribution to the solution. Paperless Billing · Duke Energy/Progress Energy Merger …
Fixed Income Investors -Duke Energy
Duke Energy’s fixed-income investors seek a constant and secure return on their investments. This section provides information about our long-term debt, …
Fixed Income FAQs -Duke Energy
Where can I obtain the CUSIPs for Duke Energy’s bonds? CUSIPs can be found …
Duke Energy to sell debt to small investors – Business …
Apr 5, 2011 … Duke Energy said Monday that it hopes to raise as much as $500 million by selling debt directly to small investors.
Duke Energy Co. (DUK) Given “Neutral” Rating by Zacks Investment Research Analysts
American Banking News, on Mon, 21 Mar 2011 06:55:52 -0700
Equities research analysts at Zacks Investment Research reiterated a “neutral” rating on shares of Duke Energy Co. (NYSE: DUK) in a research note to investors on Friday. The analysts currently have a $19.00 price target on the stock. …
Progress played the field, got Duke
News & Observer, on Sat, 19 Mar 2011 21:17:42 -0700
BY JOHN MURAWSKI – Staff Writer Long before Progress Energy sealed its merger deal with Duke Energy in January, the Raleigh-based utility was flirting with other suitors for a potential corporate union. Duke and Progress executives have lauded their …