Out Fox The $treet

Duke Energy (DUK) made significant news recently with the resigning of new CEO right at the closing of the merger with Progress Energy. The news was mind blowing considering the deal with shareholders, regulators, and consumers was that Bill Johnson from Progress Energy would run both companies with former Duke Energy CEO Jim Rodgers moving up to Chairman. How does this impact the stock? Outside of political and regulatory noise, it shouldn't honestly have a huge impact. Utilities are complex businesses, but it only takes a solid operator to run them. Jim Rodgers will have no problem running the merged entity. In fact, Jim Cramer remained bullish on the stock especially considering the stock price drop. 2012 Post Merger Earnings Guidance The bigger concern should be the lack of earnings growth and limited growth in the future. The combination created the country's largest utility as measured by enterprise value, market capitalization, generation assets, customers and numerous ...

Communication stocks completed another strong up week last week with both  AT&T ( T )  and  Verzion ( VZ )  rallying strong. As the world continues to fret over the problems in Europe, the perceived safety of the large dividends of these two stocks has attractive many buyers. Even with these large moves of the last 3 months (see  Figure 1 ), both stocks still pay dividends that exceed 4.5%. Naturally this level appears very attractive to most investors with the 10 Yr Treasury remaining around 1.6%. Why not jump at these yields? Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Investors continue to focus on dividends as the best and in some minds the only way to return capital to shareholders. That remains a big mistake as the population of stocks with a high dividend payout ratio, not to mention ones that even pay dividends has been shrinking just about every decade. Several key factors have influenced these decisions. First, the historical tax disadvantage of dividends versus long term capital gains has worked to weaken the focus on dividends. Second, the SEC instituting rule 10b-18 back in 1982 made it easier for firms to implement buybacks without stock manipulation charges. Third, market participants place such a great emphasis on maintaining steadily increasing dividends that corporate boards prefer the flexibility of buyback programs over the negativity of reducing a dividend. Read the full article on Seeking Alpha. Disclosure: Long COP, GPS, KSS, TRV. Please review the disclaimer page for more details. 

On Wall Street it appears that a good thing has to always end in a bubble as investors follow the herd. With interest rates on government debt so low, naturally investors finally began flocking into high dividend-paying stocks in the 2nd half of 2011. It only makes sense to grab a 4% yielding large cap when the 10-year Treasury pays a sub 2% rate. What doesn't make sense though is that investors have begun flocking to dividend-paying stocks with reckless abandon. The thought process is apparently void of any concept that capital appreciation or at least stabilization is so crucial in that 4% dividend paying off. Read the full article on Seeking Alpha. Disclosure: No positions. Please review the disclaimer page for more details. 

My utility holdings are making me nervous. First, utility stocks like Southern Co (SO), FirstEnergy (FE), Dominion Resources (D) and American Electric Power (AEP) have hit recent 52-week highs, with some even hitting all-time highs. Second, market analysts have become more bullish on the sector, making me more concerned the sector is too popular. The main reason for the recent strong performance of the sector is that high-dividend-paying stocks are in favor with government bond yields at historical low rates. Combine the yield with the relative security of the sector, and the stocks have held up in this weak market. Read full article at Seeking Alpha. Disclosure: Long FE. Please read the disclaimer page for more details.