Empire District Electric Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Missouri-based utility Empire District Electric (NYSE: EDE  ) were getting powered down by investors today, losing as much as 20% in intraday trading on heavier-than-average volume.

So what: The plunge today came after the company announced that it will be suspending its dividend for the remainder of 2011 and then reinstating it thereafter at a rate $0.25 per quarter, or roughly 22% below the most recent dividend. The suspension comes following the devastating tornado that ripped through Joplin, Missouri. The company said that the storm destroyed between 8,000 and 10,000 structures and that this will reduce the company's revenue and load.

Now what: Since dividends are typically the primary reason that investors stick slow-moving utilities in their portfolios, this is obviously a big hit for Empire District shareholders. Of course, I can't help but point out that taken in perspective with the havoc that the storm wreaked on Joplin, it's not all that bad. So what should investors do now? I would suggest that they avoid a knee-jerk sell and adjust their models for the new reality -- a couple of quarters without a dividend followed by a $1.00 annual rate. At that point they can make a sober decision about whether the now-lower price is justified or whether it's time to join the other investors rushing for the exits.

Want to keep up to date on Empire District Electric? Add it to your watchlist.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool’s disclosure policy prefers dividends over a sharp stick in the eye.


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  • Report this Comment On May 26, 2011, at 10:38 PM, CaptBoo wrote:

    Another view on EDE is that today the stock is incredibly cheap. I'm betting in the next few days it recovers at least 10%.

  • Report this Comment On May 27, 2011, at 3:13 PM, divvyinvestor wrote:

    I just doubled up on EDE today.

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