Despite lower energy demand, Pepco was able to deliver 2% earnings growth in 2011 to $283 million, compared with $277 million in 2010. This growth was primarily the result of rate increases, higher margins on electricity sales and reduced interest expense.

Pepco also invested $900 million in infrastructure upgrades and plans to invest about $5.6 billion during the next five years in energy distribution and transmission systems improvements.

The company has filed for rate increase approvals in three states. If approved, Pepco's annual earnings should see a 10% boost. These rate increases are expected to go into effect in mid-2012.

Pepco pays a $1.08 annual dividend and yields just under 6%. Cash flow provides three-fold coverage of the dividend. In the past five years, dividend growth has been just 1%, but analysts say future earnings gains, projected at 4%-5% a year, can support rising dividends.

2. PP&L Corp. (NYSE: PPL)
Yield: 5%
PP&L controls 19,000 megawatts of power-generating capacity and delivers electricity and natural gas to about 10 million customers in the United States and the United Kingdom.

The company has aggressive plans to improve capacity generation. Last year, it acquired two Kentucky utilities and bought a Pennsylvania power plant just last month.
In 2011, the company registered a strong performance by its U.K. subsidiary and was benefited by a favorable Supreme Court ruling that allowed PP&L to be refunded the rent money it used to pay the state of Montana for its hydroelectric operations in the Missouri River. These two events alone resulted in nearly 60% earnings growth compared with the year before, bringing in a total of $1.5 billion, and a 25% growth in earnings per share (EPS) to $2.70. Consensus analyst estimates predict 5% earnings growth   in each of the next five years. 

PP&L's dividend payout is less than one-third of cash flow, and the company recently hiked the dividend 3% to a $1.44 annual rate. This was the eighth dividend increase in nine years. PP&L shares yield roughly 5% based on the new dividend rate.

3. The Southern Co. (NYSE: SO)
Yield: 4%
Southern Co. owns more than 42,000 megawatts of power-generating capacity and is the largest generator of electricity in the Southeastern United States.