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By Renee O'Farrell

Duke Energy (NYSE:DUK) reported its first quarter earnings on the morning of May 4. The results were disappointing. The company's net income dropped to $295 million or 22 cents a share. The same quarter last year, Duke brought in $511 million or 38 cents a share. Excluding one-time items, like a $420 million cost overrun relating to its Edwardsport power project, Duke's earnings per share would have been 38 cents. Analysts were expecting earnings of 36 cents a share. However, Duke did manage to beat analyst expectations regarding its revenue. While the company brought in only $3.63 billion, down from $3.66 billion for the same quarter last year, analysts were expecting its revenue to come in close to $3.61 billion.

Duke's revenues results are even more encouraging given that the number of heating degree days was at the lowest ever during the first quarter. Had the quarter contained the average number of heating days, the company's earnings would have been boosted 4 cents a share. Higher customer rates and reduced operational and maintenance costs helped to offset some of that difference.

"Duke has agreed to acquire in-state rival Progress Energy (NYSE:PGN) in a deal that would create the largest U.S. utility. The deal was announced more than a year ago but Duke still has not been able to secure approvals from federal regulators," reports the Associated Press. "If the deal is not completed by July 8 or if regulators push up the cost of the deal by forcing the companies to sell plants or change rates, it could be abandoned." The Associated Press explained, "The companies have filed a plan with federal regulators to address their concern that the combined company would have too much market power in the Carolinas. The company would build transmission lines and take other measures to help smaller utilities get access to power from other generators. Duke is asking state regulators to review the proposed plan even before it is approved, so they are in a position to vote on the deal quickly if federal regulators sign off on it." Duke CEO Jim Rogers says that "Duke remains committed to the deal and that it is on track to complete it by July 1."

Several hedge funds seem to be bullish on Duke. During the fourth quarter, Louis Navellier's Navellier & Associates, Louis Bacon's Moore Global Investments, Clint Carlson's Carlson Capital and Jean-Marie Eveillard's First Eagle Investment Management all initiated new positions in the company.

Right now, Duke is trading at $21.50 a share. Analysts are expecting Duke to earn $1.42 a share this year, down from $1.46 a share last year, and $1.48 a share next year. As such, the company has a forward price to earnings ratio of 14.53 times its future earnings, compared to an average of 15.37 for its peers. Over the next five years, analysts expect the company's earnings to grow at an average rate of 3.67% a year, versus expectations of 7.45% for its industry.

Of course, this is still better than the earnings growth expected for rival Exelon (NYSE:EXC). At its current price of $38.70 a share, the company has a low forward price to earnings ratio of 12.65, but it doesn't have a very encouraging outlook. Analysts expect Exelon's earnings to fall by an average of 10% a year for the next five years. The company earned $4.16 a share last year, missing analyst expectations by 6 cents. Going forward, consensus estimates put Exelon's earnings at only $3.04 this year, rising to just $3.06 a share in 2013.

Competitor Dominion Resources (NYSE:D) has stronger earnings expectations. Analysts say this company's earnings will grow by an average rate of 5.40% a year over the next five years. Last year, Dominion earned $3.05 a share, missing analysts estimates of $3.11 by 6 cents a share. This year, the company is expected to bring in $3.21 a share, rising to $3.43 a share in 2013. At its current trade price of $52.23 a share, Dominion is priced at 15.23 times its future earnings.

Overall, I wouldn't recommend a buy rating on any of these dividend stocks. Duke's low expected earnings growth and the uncertainty of the acquisition of Progress Energy is enough to give me pause. Exelon's negative earnings growth is a definite pass. In the case of Dominion, the stock is priced relative to its future earnings at approximately the same rate as its peers, but it has smaller earnings growth estimates.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Avoid These 4 Dividend Stocks