PSEG Raises Dividend Despite Challenging Macro Environment

| About: Public Service (PEG)

Public Service Enterprise Group Inc. (NYSE:PEG) increased its quarterly common stock dividend to 34.25 cents per share, a 3% raise over the company's existing quarterly dividend rate of 33.25 cents. This indicates an annual dividend of $1.37 per share. The first dividend at the incremental rate is payable in 2010 on March 31, 2010, to shareholders of record on March 10, 2010.

Public Service stays focused on maximizing shareholder value, both through share price appreciation and increasing dividend payouts. The company has been paying regular common stock dividends since 1907. Public Service’s strong balance sheet and cash flows provide substantial financial flexibility and cushion in the present challenging business environment.

The company ended the third quarter of 2009 with a total liquidity of $3.2 billion, comprising $0.1 billion of cash and $3.1 billion of credit facility, and debt-to capitalization ratio of 46.5% (Zacks Industry Average is 68%).

Public Service Enterprise Group based in Newark, New Jersey, is a diversified utility holding company. Its operations are mostly located in the Northeastern and Mid-Atlantic parts of the U.S. Public Service Enterprise’s robust portfolio of regulated as well as non-regulated utility assets provides the company with a steady earnings base and significant growth prospect over the long run.

The company has been striving to optimize generation margins by improving cost-structure, performance and reliability of its nuclear as well as fossil units. Management has taken several measures to improve financial stability and reduce the overall risk profile of the company.

Public Service Enterprise has been pursuing growth opportunities in the core U.S. market and increasing capital allocation in projects that provide good risk-adjusted returns. Going forward, low-cost nuclear fleet, assumed rate relief and added generating capacities will drive the company’s earnings growth.

However, the present unfavorable macro backdrop, rising cost of coal, higher pension and financial costs, and power-price volatility might overshadow the positives. Thus, we maintain our market Neutral recommendation on the Zacks #3 Rank ('hold') stock.

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