Investing Topics: Wholesale Electricity

Exelon Corp’s (NYSE: EXC) $6.9 billion all-cash takeover offer for Pepco Holdings (NYSE: POM) has gotten a mixed reception from investors, but the deal pushes the acquirer closer to resuming dividend growth.

Rising dividends are the essential fuel for higher stock prices. And nothing is more critical for payout growth than healthy, expanding businesses.

Not one of the hundreds of regulated utility mergers over the past century has failed to create a stronger, healthier company. Despite skepticism in some quarters, Exelon Corp’s (NYSE: EXC) $6.8 billion purchase of Pepco Holdings (NYSE: POM) is also set for success.

Savvy investors who buy the best utility stocks at the best prices will outperform the index huggers.

We run through the first quarter’s biggest winners and biggest losers, while revisiting the investment themes that should outperform in 2014.

After two consecutive winning months, it’s hard to believe utility stocks had so many detractors to start 2014. And it’s even more difficult to find anyone who will own up to being bearish then or now.

No US utility is better positioned to profit from America’s energy boom than Entergy Corp (NYSE: ETR). The company’s six electric utility units own and operate 22 gigawatts of power plants in Arkansas, Louisiana, Mississippi and Texas.

With large financial institutions and exchange-traded funds (ETFs) dominating daily trading, markets are as volatile as ever.

Fortunately, the key to success in utilities and essential services is the same as it’s been for more than a century: Spotting where investment will earn a fair return, and following the money to a rising stream of dividends.

As goes January, so goes the year. That old Wall Street adage doesn’t bode well for most of the stock market.

Fourth quarter and full-year earnings normally dominate the news this time of year. And rightly so: They’re what ultimately shape shareholder returns.