Duke energy is US-based energy company. Duke has more than 4 million customers. They own and operate nuclear power plants as well. As per latest filing, Duke earned over $14 billion in revenues and has $28 billion in market capitalization. More about the company health here.
As a stock DUK should be a dream stock in your dividend portfolio with 4.6% yield. But this review is for its premier notes borrowing program, Duke’s debt instrument.
What is Duke energy premier notes? Although many companies issue notes in the market for individual investor, Duke energy went a few steps ahead and putting up advertisements on top financial sites and blogs to attract investments.
PremierNotes is a an investment route for you where you directly lend your money to Duke energy to help them maintain cash flow and run day-to-day business. In return they offer you floating rate interest on your money.
This is in many ways very similar investment as saving banks or CD’s. Don’t expect a big return either. Your money will actually lose value due to higher inflation rate.
As far as eligibility is concerned, if you can legally invest in CD’s or saving banks, you can buy premier notes. you can apply for Duke energy premier notes here.
What interest rate you may earn from Duke energy?
PremierNotes pays a floating rate of interest that is determined by Duke Energy on a weekly basis, and any rate changes become effective the following Monday. The interest rate also increases when you invest more. From their website current interest rates are as follows. Be aware that the rates change frequently, so always refer to rate page, before making investment decision.
Current Rates
| Amount | Rate | Yield |
|---|---|---|
| Under $10,000 | 1.20% | 1.21% |
| $10,000 to $49,999 | 1.40% | 1.41% |
| $50,000 and over | 1.60% | 1.61% |
Rates will always be at least ¼ percent greater than the average rate of taxable U.S. money-market mutual funds
Duke Energy premium Notes features
Following are some points which may help you to decide whether you want to invest in duke energy or not.
- You will have to invest minimum $1000. You can purchase premier notes by issuing personal and corporate check by the name of duke energy. They don’t accept payment by any bank check, credit card or any third party check.
- You can invest maximum $750,000 in premier notes.
- The interest on your investment will be calculated daily, and at the end of month it is added in you total investment.
- You can withdraw money from your premier notes by using premier notes redemption check. They also have wire redemption, phone withdrawal, direct withdrawal options.
- If your investment falls below $1000 then duke energy will notify you to withdraw your funds. You will have to withdraw funds within 30 days.
- Similarly if your investment exceeds $750,000 then you will get notification from Duke Energy and you will need to withdraw excess money within 30 days.
- The premium notes are not subject to market risk. They will pay you interest on it, though the rates will vary.
- These notes are not transferable.
- Whatever interest you will get on PremierNotes is taxable. So if you are looking to invest for saving tax, this is not for you.
- You will have to keep an eye on your investment capital. If your investment falls below minimum required amount a $20 fee is applied.
- Also they charge $15 for wire redemption, $10 for redemption of $250 or less.
Benefits of investing in Duke energy premier notes
- PremierNotes do not depend on share market, investment capital would be preserved.
- You get monthly interest on notes.
- Sound financial health for the company.
- In year 2011 their operating margin was nearly 20% which is highest since year 2006.
- 1.20% APY is one of the highest in the market now.
Cons for investing in duke energy premier notes:
- Premier notes are not insured by FDIC or by any other financial institute.
- If you invest same money in bank/CD, you could earn better interest than what you are getting on premier notes.
- Hold rating on the stock does not reflect Duke being one of the best stocks out there.
- As you will get floating rate on your investment, the return may come down drastically in future.
- You’ll lose money to inflation if you use PremierNotes as an investment vehicle.
- With minimum investment of $1000, this is not very flexible investment option.
Our rating on Duke energy PremierNotes
Based on the return of 1.20% APY, and the sound financial health of the company we are giving Duke energy PremierNotes an “Neutral” rating.
There are risks as Duke operates nuclear power plants, any day this is a threat to the health of the company and investors in general. With BP we have seen accidents do happen. PremierNotes being a debt instrument is safer bet than the stock. But, not having FDIC insurance is a big factor in my books.
If you want to park your money in short-term, depending on the duration you may want to go for 2 – 10 years CD option which are FDIC insured and offer better return than Duke energy. Even for parking your money for less than 2 years, some banks do offer competitive rates with FDIC insurance.
I will not put my money in Duke Energy PremierNotes.
Note – Duke energy contacted us mentioning a few anomalies in this review. I am going to paste few of the features they mentioned about this product.
When discussing the minimum interest rate the author must reference that the rates will be equal to the sum of the most recent seven-day average yield (non compounded) for all taxable money funds as reported weekly in the iMoneyNet Money Fund Averages™ and at least ¼ of one percentage point.
Interest in compounded daily and posted monthly to the investment account.
Generally speaking there are no fees for the investment except for wire transfers ($15), insufficient funds ($20), Stop Payment Requests ($15), Redemption for less than $250 ($10), and if the investment balance is less than $1,000 ($10/month). There are no fees/commissions to buy the notes, no account fees, there are free check writing privileges and ACH transfers.
There are differences between a fixed rate term investment (CD, savings account) and a floating rate demand investment (PremierNotes). They are used with a different investment objective in mind.
A PremierNotes investor is free to redeem any or all their investment anytime after their investment are processed, conveniently and without penalty.
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I invested $1,000 to start. Some things can only be done by mail. You cannot redeem or add funds via the internet, which is very strange in the 21st century. Customer service is handled by North Western bank, and they could not care less about customers.
Closing the account must be done in writing, another ridiculous burden. No transfers can take place until 7 business days after the first deposit is made. While the notes are somewhat safe based upon Duke Energy, they pay short of inflation, but what else can you do for a completely safe investment?
Although this “review” seems to be factually correct, it appears to have been written by someone for whom English is not their first language. You guys could really use a professional editor. Or writer. 🙂
That said, Duke is a good company and a good investment vehicle. However, the processes that they have in place to redeem your investment are cumbersome and archaic. If, as happened with me, a mistake occurs, it takes numerous phone calls, letters and more phone calls to get it straightened-out. I closed my account in frustration, which of course required more phone calls and letters.
Good post . I am thankful for the facts , Does anyone know where my company might get access to a template Player Performance Evaluation version to edit ?