Tuesday, August 20, 2013

Investopedia: Veolia Offers A Decent Dividend, But Both Uncertainty And Upside

When last I wrote about European utility company Veolia (NYSE:VE) for Investopedia (back in March of 2012), I was cautious about the near-term prospects on the stock given the Street's likelihood of buying into (or rather, not buying into) the company's asset disposal and cost-cutting plans. The stock then proceeded to lose about one-third of its value over the next nine months, as worries about both management's ability to execute and the health of Western Europe's economy weighed on shares.

As this was happening, though, the company actually started making progress, and the shares have been moving up strongly since mid-summer as the Street has finally started buying the turnaround story. From where Veolia sits today, I see both opportunity and risk – I happen to side with the bulls who believe management will succeed in its cost-cutting targets, but I also have my worries about the extent to which the company may have to surrender these benefits to customers in order to maintain the business. All told, I see only modest upside to the shares right now, but the dividend isn't bad and I think the company can contain most of the risks it faces.

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