It finally happened. Exelon Corporation (EXC) announced a dividend cut that will become effective in Q2 2013. The quarterly dividend has been slashed from $0.525 to $0.31, a decrease of 41%.
I was a former shareholder of EXC, but recently exited out of my position in mid January. Although I no longer have any stake in the company, it still pains me to see this news.
The market reaction was somewhat of a surprise to me. The stock price actually increased after the bad news was announced last week. I’m guessing investors took the news as “positive”, since analysts were expecting an even larger dividend cut. EXC shares are currently trading at $31.08, compared to $28.40, which was the low reached after the Q3 earnings report. After Q3 earnings, investors started heavily speculating that a dividend cut might be imminent in the future.
I previously told myself that if I decided to exit out of EXC, I would do so before an official dividend cut was announced by management. I was certain any more bad news would completely tank the stock. However, this time around, it seems the bad news was really already baked into the stock price! I haven’t been investing in stocks long enough to recall another instance of something like this happening… This is an interesting datapoint for me, moving forward.