July 31, 2009

Why is Pepco Holding, Inc. in the ERRI?

Posted in economic indicator, economic recovery, ERRI, U.S. Economy tagged , , at 5:35 pm by realitytax

Pepco Holdings, Inc. (POM) is a diversified energy company focused on distribution, transmission and “default supply” of electricity and the delivery and supply of natural gas, as well as energy generation, marketing and supply. The distribution, transmission and  supply of electricity and the delivery and supply of natural gas is conducted through Potomac Electric Power Company (Pepco), Delmarva Power and Light Company (DPL) and Atlantic City Electric Company (ACE) in the U.S. Mid-Atlantic region. Energy generation, marketing and supply is conducted through subsidiaries of Conectiv Energy Holding Company and Pepco Energy Services, Inc. and its subsidiaries. ACE, (along with Jersey Central Power & Light), is presently conducting an RFP to secure Solar Renewable Energy Certificates as part of the NJ Board of Public Utilities’ effort to encourage new solar energy projects.

POM was trading just over $10/share when much of the market struggled in early March, less than half the over $26 price the stock commanded in mid August of 2008 before investors realized that lack of accountability and transparency on Wall Street (and arguably in Washington) was precipitating a mortgage, credit, and liquidity crisis that would spread to the economy as a whole.

On July 23rd Pepco’s Board of Directors declared a dividend on common stock of 27 cents per share (payable Sept. 30, 2009, to shareholders of record on Sept. 10, 2009.)  Second-quarter 2009 earnings will be released August 6th. Investor sentiment is typically positive when the 50-day moving average is rising, especially if it’s also above the 200-day moving average. With that in mind, the 50-day average, which has been trending slightly upward, has remained below the downward trending 200-day average for the preceding year. Other technical indicators, such as the Chart pattern, complete a “mixed” outlook – there’s little sign that Pepco is about to break out ahead of the pack as reflected by share price.

With $3.2 billion in market capitalization, POM, a Mid-Cap stock, represents the ongoing market impact as what started out as a problem in the U.S mortgage lending industry undermined investor confidence and the economy; even utility companies were not exempt.   Pepco accounts for 10.03% of the initial ERRI fund valuation. It is the only utility in the equity component of the Economic Recovery Reality Index (ERRI.)

Institutions own a lower percentage of the 219,990,000 outstanding Pepco shares (57.7) that the average within the electric utilities industry (61.3) which itself is lower than the average 68.8% institutional owernship for the S&P 500 as a whole. Nonetheless, Pepco’s current dividend yield and 5 year average payout have been above industry averages.

Disclaimer: Readers are advised that the ideas, materials, and opinions contained herein should be used solely for informational purposes. The author does not purport to tell or suggest investment securities that should be bought or sold. Investors should always conduct their own research and due diligence and obtain professional advice before making any investment decision. Neither the author nor realitytax shall be be liable for any loss or damage caused by a reader’s reliance on information obtained in any posts, newsletters, special reports, email correspondence, or comments on the web site. The author is not a registered investment advisor or broker/dealer. The information contained herein does not constitute a representation by the publisher or a solicitation for the purchase (or sale) of securities. Opinions and analyses are based on sources believed to be reliable and are written in good faith, but no representation or warranty is made as to their accuracy or completeness, and we are not liable for errors or omissions. All such information should be independently verified with the companies mentioned. The author(s) receives no compensation of any kind from any companies that may be mentioned on this web site. Any opinions expressed are subject to change without notice. Owners, employees and writers may hold positions in the securities that are discussed; the intent is neither to suggest investment choices/strategies nor to influence market conditions, but rather to divulge methodology for inclusion of equities and sectors in the Economic Recovery Reality Index [ERRI]


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