Exelon Corporation (EXC), Atlantic Power Corp (AT): Will These Dividends Die in 2013?

FirstEnergy Corp. (NYSE:FE)‘s dividend is, unfortunately, an example of silly status quo. After it merged with Allegheny Energy in 2011, FirstEnergy became one of the largest utilities nationwide by customer size. But customers’ consumption can change, and FirstEnergy’s sales have suffered over the last two years even as the company has kept its dividend distributions steady. Fast forward to today: FirstEnergy has one of the highest dividend yields around (5.5%) – with one of the worst cash dividend payout ratios in town. If its dividend doesn’t get slashed, don’t expect any financial favors to come from this company’s cash flow.

Last but not least, Ameren (NYSE:AEE) offers a unique take on the dividend dilemma. When most utilities hung on to their dividends through the worst of the Great Recession (and felt their finances squeezed accordingly), Ameren went ahead and cut its dividend by 40%. With its books balanced, the company currently enjoys a 4.8% yield with one of the best cash flow positive dividend payout ratios around. Ameren’s focusing on its regulated division and, if it can trim off its generation assets without too much trouble, could become a formidable cash cow in the future.

Foolish bottom line
A steady dividend doesn’t make a company bad, and a slashed dividend shouldn’t automatically earn brownie points. Either decision is part of a corporation’s larger strategy to increase value, and a dividend of any size is no replacement for excellent management and solid fundamentals. Exelon and Atlantic earn bullish brownie points for pushing capital elsewhere, while Brookfield and Ameren get stars for sustainability. FirstEnergy investors shouldn’t necessarily run for the hills, but its current dividend doesn’t make the cut.

The article Will These Dividends Die in 2013? originally appeared on Fool.com and is written by Justin Loiseau.

Fool contributor Justin Loiseau has no position in any stocks mentioned, but he does use electricity. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo. The Motley Fool recommends Brookfield Infrastructure Partners and Exelon. The Motley Fool owns shares of Brookfield Infrastructure Partners.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.