From One Of The Best, To One Of The Worst: Exelon Corporation (EXC), The Southern Company (SO)

What’s The Next Move?
For investors in Exelon, they have to be hanging onto CEO Chris Crane’s statement that this lower dividend provides the, “capacity to invest in growth.” However, the company’s dividend cut forecasts something completely different. Exelon has one of the stronger balance sheets of the group with a debt-to-equity ratio of 0.80. By comparison, only Integrys has a better ratio at 0.56. Both Duke and Southern Co. have debt-to-equity ratios of 0.88 and 0.98 respectively. This would seem to argue that Exelon should have been fine. Most companies don’t cut their dividend to grow faster; they cut the dividend to protect themselves from financial problems.

Exelon’s free cash flow reversal has been significant. To go from over $700 million in positive free cash flow to $500 million negative in one year is a problem that won’t easily be reversed. Exelon carries the lowest yield of their peers, and their operating margin is the lowest of the group as well. When there are three other companies with better yields, better growth rates, and better margins, there isn’t a reason to stick around and see what happens. The Exelon investment thesis has changed. Investors would be wise to open their eyes to this harsh reality and change their portfolio accordingly.

The article From One Of The Best, To One Of The Worst originally appeared on Fool.com and is written by Chad Henage.

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