Currently, utilities are known for their strong dividend paying ability. Almost as if they are a fixed income producing asset. This leads me into the one dividend aristocrat that catches my eye – Consolidated Edison.
I am a huge history guy and love the wealth that was created from the late 1800s and early 1900s. Thomas Edison definitely was a founding father of this old wealth that continues to transpire and “light” our economy today. I understand utilities, I know how they physically work and I know what benefit and value it provides: Providing energy to fuel the day-to-day of operations. Let’s think big businesses, industries, etc., all the way to our entertainment platforms and this stems into our very own households. The need is and for now – will always be there, therefore, this is a very used product that will always be used.
The real reason why I want to dive into Consolidated Edison (ED) is due to the fact that I have owned FirstEnergy (FE) and have been unhappy as a shareholder/minority business owner. This could help fuel my decision to cut my position away from FirstEnergy and leak my proceeds into Edison. Though I am loyal to my birth-city of of Akron, Ohio – I am more loyal to my stock portfolio and financial freedom aspirations. Let’s see what Edison has to offer:
- They are an Aristocrat, paying increasing dividends for 25+ years. The 3 year average dividend growth rate, however, is only a 1.64%. However, this far beats what I currently own, especially that FirstEnergy slashed their dividend earlier this year.
- After their 2nd Q, showing a 6 months to date EPS of $1.95, leads to a projected EPS of $3.90. The share price of Edison at Friday’s close was $58.12, which leads to a P/E below 15 at 14.90. This is undervalued in my book, even if they’ve gone up 5.1% since year end in terms of share price. I like seeing this below 15.
- Dividend Yield: Currently is at 4.34%, well above the S&P average of sub-1.90% and is above my FE at 4.16%. The 5 year dividend yield average is 4.57%, which is 23 bps higher than the current yield. I’d obviously like to see this as a closer gap.
- Payout Ratio: Based on EPS of $3.90 and a dividend quarterly $0.63 ($2.52 per year), this equates out to a payout ratio of roughly 64.60%. This is a tad higher than the 60% that I like to see. When pressed against FirstEnergy, is far better as FE has over a 100% payout ratio currently, aka is this sustainable?
- Refer back to 1. Joking. This company was named best green for utilities in 2014 for reducing omissions, etc. I do like that and think that’s a great initiative for costs and services to provide customers. EPS Q over Q grew at 18% from prior year to this year, net income 6 months grew at 11.76% year over year. I like this, can you dig it?
With that being said – they will be added to my watch list at the moment. Transitioning this from First Energy could be a good move, as it would be in a better performing company who has always increased their dividend year after year. Overall Pros: Higher yield, Grows Dividend, Payout Ratio is better, P/E is undervalued, yield is above S&P, Aristocrat, YOY higher performance. What Utility company do you own? Thoughts on this old Edison company? Would YOU transition out of FirstEnergy and move into Edison? Would love the feedback! Thanks everyone, talk to you all soon.