Keeping his Hold rating on DPL, Inc. (DPL) shares at this time, Zacks senior utility industry analyst Jon Kolb explains where he sees headwinds for the company in the coming quarters:

'DPL continues to benefit from its stable regulated electric power operations. Moreover, the liquidation of the company's investment portfolio provides sufficient capital for expanding the utility's operating base, reducing debt and interest expense, buying back stock and/or increasing the dividend.

'However, increased purchased power costs, ongoing investigations by the SEC and the IRS, and uncertainty over the successful allocation of new capital toward greater earnings power remain concerns. Accordingly, we maintain a market-neutral HOLD recommendation on DPL common stock with a six-month target price of $31.50. Price appreciation to our near-term valuation target, coupled with the recently increased $0.275 per share quarterly cash dividend, which we deem sustainable and secure, represents annualized total return potential of 14.9%.

'As of the date of this report, DPL trades at 15.7x and 13.0x, respectively, our 2008 and 2009 earnings per share estimates, or at a slight discount to the industry median multiple yet within the range of comparable diversified energy utilities. Meanwhile, relative sales, cash flow and book value multiples indicate either significant premium DPL valuations or at least a valuation at the upper-end of the range of its comparable competitors. Such conflicting valuation metrics, combined with above industry average long-term earnings growth expectations, forecasted year-over-year EPS through 2009, and a competitive dividend yield collectively support a neutral recommendation on the stock noting a bias toward a potential future upgrade.'