When a utility stock pays a dividend that yields 11 percent it is either an overlooked steal or the equity of a company with big problems–and a dividend that’s soon to be either eliminated or reduced. EDF, France’s state controlled nuclear energy giant, looks more the latter than the former. But never underestimate the determination of French politicians–right, left and center to protect and subsidize their civilian nuclear power establishment. To understand this byzantine story of French public and private partnerships, let’s start with EDF’s current stock price. It’s priced in Paris this morning at about €9.60, slightly above the 52 week low. And down from a high of €28.78 more than two years ago. To compound its woes, EDF’s stock sells at about 63 percent of its book value. This typically indicates the market’s view that either current earnings provide a below-cost-of-capital return or that investors don’t believe the assets are worth the value carried on EDF’s books. By way of contrast, a financially sound elec-tric utility in the U.S. sells at about 1.5 times its book value and its shares offer investors a yield of less than 4 percent.
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