Bert’s Recent Buy – Consolidated Edison (ED)

Lanny and I were painting the Dividend Diplomats’ headquarters last week (aka – his house).  He left to take a quick water break and came back pretty excited. When he gets this tone in his voice, I know that only means one thing….there is a great stock that’s price is falling.   He brought up the fact that Consolidated Edison’s stock price was down over 1.5% that day.  Instantly I was excited because ED is one of our Top 5 Foundation stocks.  After a brief discussion, I was sold. Here is why I added to my position in Consolidated Edison in June.

Why Consolidated Edison (ED) ?

Founded in 1823, Consolidated Edison is one of the oldest utility companies today.   The company has grown over time and is now one of the largest utility companies currently trading.   ED distributes electricity and gas to a massive market of customers, and the even operate steam plants in Manhattan.  As a dividend growth investor, the utility industry is always appealing as it provides a slow and steady cash flow due to the nature of the highly regulated industry.  It may not have the flash appeal as an up and coming growth stock in the tech industry, but that’s not why you seek an investment in the utility industry.

Consolidated Edison has also earned the coveted title of Dividend Aristocrat and the company has increased their dividend for 44 years (after their increase in January).  We will look at the company’s dividend growth later on in the article!  Overall, the company’s sales revenue from their last 10-K were over $12b and the company’s net income was $1.1b.  The company is pretty darn consistent as well, as their revenues and net income in 2017 were approximately the same as 2016 and 2015.  Man oh man do I love the consistency of this company. 

Dividend Diplomats’ Stock Screener – Consolidated Edison

I’m always interested in adding to a Dividend Aristocrat that I like.  But the valuation also has to make sense. Hence, why we run all purchase through the Dividend Diplomats’ Dividend Stock Screener.  For this analysis, I will use my purchase price of $71.50/share and a $4.27 shares EPS figures (average current year EPS estimates per analysts).  Here we go!

  1. Price to Earnings Ratio – The company’s P/E Ratio was  16.75X, which is below the broader market’s P/E Ratio
  2. Dividend Payout Ratio – With an annual dividend of $2.86/share, the company’s current payout ratio is 67%.  This is slightly above our 60% threshold; however, this is a utility stock and the industry is known for higher payout ratios.  I’m not overly concerned about the fact that ED’s payout ratio is just above our threshold.
  3. Dividend History and Dividend Growth Rate –  ED is a Dividend Aristocrat, so they easily check the box of having demonstrated their ability to grow their dividend over the long haul.  The company’s 5-year average dividend growth rate is only 2.86% percent. The amount is low, that’s for sure. But with the company’s yield and their history of low dividend increases, I’m not overly concerned about the growth rate.  The company has a rock solid dividend yield and a long-term dividend payment history. That’s what weighed heavily in my decision here.
  4. Dividend Yield –  At the time of purchased, ED’s dividend yield was 4%.  Yes, that was planned! But the yield is very nice and is above my portfolio’s weighted average dividend yield by over 100 basis points and it far exceeds the S&P 500’s dividend yield.
  5. Five-Year Average Dividend Yield –  ED’s 5-year average dividend yield is 3.90%.   ED’s dividend yield at the time of the purchase was 4%, indicating that the company could be slightly undervalued.

Summary – The Purchase

In total, I purchased 21 shares of ED at $71.50/share, adding $60.06 in forward dividend income. This purchase was in my traditional investment account.  I’ve mentioned several times that I already owned shares of ED.  These shares were in my Roth IRA, so I now own ED in two separate accounts.  But my combined position is 38.67 shares, producing $110.60 in forward dividend income annually.  This purchase did miss the ex-dividend date for the second quarter, so I’ll receive my first dividend income from the new position in September.  Overall, I couldn’t be happier with the position and I’m excited to continue to build a position in a Dividend Aristocrat.

What are your thoughts about my purchase?  Are you watching or considering ED as well?  Or would you have looked elsewhere for investment opportunities?  

-Bert

Facebooktwittergoogle_plusredditpinterestlinkedinmail

31 thoughts on “Bert’s Recent Buy – Consolidated Edison (ED)

  1. Bert, Thanks for the update and stock screen on ED. Utilities represent the largest sector in my dividend portfolio, but for some unknown reason to me, ED has never really been on my radar. I’ve got a couple smaller positions in AEP and WEC I have been considering adding to lately. Even though ED looks enticing, I probably won’t add it as a new position for now. Tom

    • TOm,

      Of course. I can’t blame you for not wanting to add to a sector if it is too high or you think the allocation is too great. I’m also an AEP shareholder and love that company too. If they remain beaten down, I may have to add to that position as well.

      Cheers,

      Bert

  2. Great buy Bert! I love collecting dividends for ED. They provide my electricity and I get paid enough dividends from them to pay the electric bill they send me for a full 3 months of the year, lol. 🙂 In a way it is like I’m only paying 3/4 of the year for electricity. Congrats on the buy! 😀

    • Thanks MDD! I love that concept of owning enough of the company that you pay for a service so the dividend covers your annual expense. The closest company I have to achieving that is AT&T, but hopefully one day FE will accomplish that for me too 🙂

      Bert

  3. Bert,
    Nice add there, of the utilities on sale I am currently watching D, NGG, PPL, and WTR. Where ED operates, it is hard or impossible to establish energy independence through solar, wind, or other means. Good long term add.
    – Gremlin

    • Gremlin,

      There are some great discounts on utilities. This year, I was able to establish a position in D. I will have to take a look at WTR and I know that Lanny loves that company. Utilities will always be there, and I’ll collect all those dividend checks along the way!

      Bert

  4. Congrats with this purchase. Very nice. It’s always to add to an existing position. And founded in 1823. Holy smoke, that’s quite a long time ago.

    I’ve been checking out on D lately to add to my portfolio. Right now, I only own SO.

    Is the painting job done, guys?

    • Glenn,

      Thank you very much. You’re right, I’m loving the larger position and the larger dividend that is going to ensue from it. I purchased D and I kind of wish I would have added more before the price started to climb. Oh well. Yes, the painting is done. Lanny put on some more paint in a few different areas and cleaned a few of my mistakes haha The color looks great!

      Bert

  5. Like ED a lot for a long term DGI portfolio. It’s one of my 3 ute holdings along with SO and D. I added a lot to my SO and D earlier this year when rate hike fears really dragged those two stocks down to yields that were too juicy to ignore. Did not add to my ED though. Good pick up. 2018 has been the year of utilities, REITs and staples all in the gutter. Why not buy at these better prices, values and yields.

    • Divhut,

      Those are two other great utility companies right there. D’s yield was amazing and I should have added more to it when I could have. Oh well, there will be other opportunities. I love the fact that 2018 has seen utility and consumer staple companies decline, two of my favorite sectors to go shopping in haha

      Bert

    • Ah yes, D. I’m pissed I didn’t get them in the low $60s. I initiated a large position closer to $70, but didn’t add when it fell two months later. No clue why. But I agree with your assessment about both companies.

      Bert

  6. Hi Bert,

    Good company, solid dividend. However i think it’s still a little overvalued. 10-year average P/E ratio is 15.4 and with a EPS of $ 4.27 gives a fair value of $ 66.

    I will wait for a little better entry point.

    Ethan

    • Ethan,

      Thanks for the comments and adding your statistics my friend. Interesting how you calculated the FV using the 10 year average. I dig your calculations. Looks like ED has a lot of room to go in your equation haha

      Bert

    • Desi,

      Thank you very much. Glad we can help point you in a certain direction. That’s what I love here. Rather than compete against each other, we are all sharing knowledge, ideas, and encouraging us to make the best investment decision possible.

      Bert

  7. I am not sure why but I haven’t considered ED, and I seem to be a little different than many with their core utility holdings as I currently only own CMS, NEE, and OGE. It is a sector that is a little underweight in my portfolio though so may need to consider some additional options, and will take a look at this one.

    • Divvy Dad,

      I feel like we’ve all asked ourselves that question about ED. It is a great company, not flashy at all. So it must miss the headlines. I also seem to forget about it time to time. I do not own any of the energy stocks in your portfolio, but will definitely check them out Thanks for the potential ideas!

      Bert

  8. Great buy and I say that also because I initiated a position as well last month :-). I bought 8 shares at $72,82 and also bought 23 shares of PPL.

    I think ED is a great company with a long (but slow) growth ahead of them.

  9. Hey Bert,

    great buy! – grabbing shares of ED with a yield of 4% is a good move. In my opinion ED is rock solid and this is one reason they are on my radar. I own only shares in Southern Co and want to diversify. We’ll see when i can pull the trigger.

    Recently i added 25 shares of W.P.Carey to my existing position. https://dividendsolutions.wordpress.com/2018/06/24/recent-buy-aktueller-kauf-13/

    Markets are volatile with all those tariffs talk and maybe REITs are not in that focus.

    DividendSolutions

    • Dividend Solutions,

      I appreciate the kind words here. There area ton of dividend investors that own SO, so I have to figure out whether or not I should invest in the company. WPC is a great pickup as well and I haven’t been paying as much attention to REITs as I probably should. But you gave me a great idea for screening tonight!

      Bert

Leave a Reply

Your email address will not be published. Required fields are marked *