EXELON CORPORATION (NYSE: EXC)

Sail Boat in the bay just off the City of Havre de Grace

 

I have Baltimore Gas and Electric that supplies my home with gas and electric. I just found out this morning that my utility company is being bought out by Exelon Corporation (NYSE: EXC). This will make Exelon the largest Utility in the Northeast United States.

In the latest of a wave of utility mergers, Chicago giant Exelon (EXC_) announced Wednesday it is picking up Pepco Holdings (POM_) for $6.8 billion in cash, making it the top player along the mid-Atlantic.

The combination of Exelon's BGE in Baltimore, ComEd in Chicago and PECO in Philadelphia with Pepco's Atlantic City Electric in New Jersey, Delmarva Power in Delaware and Pepco in Washington, D.C., will serve 10 million customers with a rate base of $26 billion and further expand Exelon's regulated holdings, ensuring a balanced earnings mix as power prices recover, Exelon said.

The purchase works out to $27.25 per share, nearly a 20% premium over its closing price Tuesday of $22.79. Exelon said it anticipates the acquisition being "significantly" accretive to its adjusted earnings in the first full year after closing.



As I walk to the public library, I pass this house in the City.

 



What is Darnell's angle on this stock?

In the 1970s, I created a "Buy and Hold" Strategy called the Williams Plan. The strategy calls for buying stock in utility companies and using the dividends of these companies to buy more utility stocks giving more dividends. By doing this, the investor compounds their dividend. Does it work? Well put it this way, Stephanie, my oldest daughter was able to take the money that I started investing for her when she was born and got the following items 18 years or so later;

• A current model car

• Books for college

• A down payment on her new families first house.

As I leave the Public Library, I walk past the pink house.

 

I don't own Exelon or Pepco but I suggest buying this stock for the Williams Plan. Exelon recent price is $34.66 per share with a dividend of $1.24 per share per year. That is a yield of 3.58% per year. I suggest this for a long term buy and hold strategy. An investor can use this stock in a ShareBuilder's Plan or a regular cash account to take advantage of dividend compounding.