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Dear Mr. Berko:

Dear F.L.:

I like Progress Energy Inc. (PGN – $37.16) primarily for its $2.48 dividend, which is well covered, yields 6.7 percent and has increased in each of the past 20 years. And I like PGN’s high power rates, which will increase again in January 2010 and will impressively improve its return on capital. I like PGN because I believe the board will continue to raise the dividend at a consistent rate. I also like PGN because I think the stock could trade in the high $40s within the coming three to four years.

FPL Group Inc., another Florida utility (FPL – $50.22) has 4.5 million customers in a 27,000-square-mile area in the eastern and southern part of the state. Several industry analysts believe that FPL will increase earnings by 17 percent in 2010 to $4.80 per share and to $5.50-$5.60 per share in the foreseeable future. The current dividend yields 3.8 percent. They also see the dividend growing from this year’s $1.89 per share to $2 next year, and Value Line believes FPL could be a $70 to $80 stock in the next four to five years.

I like Florida utilities because the Florida Legislature is one of the most crooked, corrupt body politics in the nation, and Florida’s five utilities have the Florida Public Service Commission by their wallets. The cozy relationship between these utilities and the Public Service Commission assures each utility of brother-in-law tax breaks, special land-use permits, higher consumer rates and myriad legislative favors, even when strongly opposed by the public.

This incestuous relationship is so blatant that state businessmen seeking favors, utility executives, builders, insurance executives, developers, bankers and legislators drink, party and play together. Without question, the Florida Legislature is one of the best legislatures that money can buy. A fistful of dollars, a few cases of whiskey or gender favors can assure the giver of some very lucrative government contracts. A Florida state senator once told me: “Voters are sheep waiting to be fleeced.”

Prestige Brands Holdings Inc. (PBH – $6.92) is a $310 million revenue company. PBH generates those revenues selling Clear Eyes, Murine, Chloraseptic, Compound W, New Skin, Comet, Choir Boy, Spic and Span, Denorex, Cutex, Prell shampoo, Oxipor and myriad other brands, the sales of which are too small to be important to the huge firms that used to make them.

PBH outsources its production, so the company has a very small capital investment. Earnings this year should be 71 cents a share, and next year, under its new CEO, earnings could rise to 83 cents.

I’d keep the 1,000 shares you bought in July 2008 at $11.23 and consider buying another 1,000 at $6.92. In the next 12 to 16 months, PBH could trade at the $11 to $12 level, and that’s 55 percent to 70 percent appreciation.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. © Copley News Service