Generating Income Without Bonds: Exelon Corporation (EXC) and More

Duke has been paying a dividend of $3.06 per share and earned $4.32 per share in 2012. In 2013 they are expected to earn $4.35 per share and in 2014 are expected to earn $4.61 per share. Assuming no dividend growth, Duke will be paying less than two thirds of their income in dividends in 2014. Duke’s five year growth rate is projected at 3.56% which means both Duke’s stock price and dividend should continue to grow in the future. Duke has also exceeded earnings expectations on their past four quarters which could indicate that their projected growth rate could be conservative.

Consolidated Edison has been paying a dividend of $2.46 and earned $3.75 per share in 2012. In 2013 they are expected to earn $3.81 per share and in 2014 are expected to earn $3.86 per share. That means if Consolidated Edison continues to pay $2.46 a year in dividends, in 2014 they will end up paying under 64% of their net income. Consolidated Edison has a lower five-year projected growth rate than Duke at 2%, but Consolidated Edison currently pays 5% less of it’s income in dividends.

The takeaway

Dividend cuts are very often the sign of a bad investment, so I would stay away from Exelon. I prefer Duke over Consolidated Edison due to its higher growth rate, but both Duke and Consolidated Edison should grow and generate income (generate, get it?) for years to come. Both of these stocks will work well in a risk adverse portfolio. Both stocks have run recently, so to start a position I would purchase the first third here and continue to build a position as their prices begin to pull back.

The article Generating Income Without Bonds originally appeared on Fool.com and is written by Justin Boucher.

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