Consolidated Edison Inc (NYSE:ED) is a holding company which owns Consolidated Edison Company of New York and Orange & Rockland Utilities. On August 1, 2013, the company reported second-quarter earnings of $0.55 per share, which was in-line with the consensus of analysts' estimates. Since last writing about the stock back on August 14, 2013, I stated the stock had some downward pressure, and since that time, the stock is down 6.51% excluding dividends, and is losing to the S&P 500, which has lost 0.36% in the same time frame. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis to see if it's worth buying some more of the company right now for the utilities sector of my dividend portfolio.
Edison currently trades at a trailing 12-month P/E ratio of 15.37, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 14.32 is currently inexpensively priced as well for the future in terms of the right here, right now. Next year's estimated earnings are $3.83 per share, and I would consider the stock cheap until about $57.
The 1-year PEG ratio (7.02), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is expensively priced based on a 1-year EPS growth rate of 2.19%. Analysts don't anticipate any growth for the coming year, so if growth is your thing, then I would not really buy it for that right now. These low growth rates are very typical for a mature utility company such as Consolidated Edison. Below is a comparison table of the fundamentals metrics for the company from the last time I wrote the article to what it is right now.
EPS Next YR ($)
Target Price ($)
EPS next YR (%)
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. Edison boasts a dividend of 4.48% with a payout ratio of 67.5% of trailing 12-month earnings while sporting return on assets, equity and investment values of 2.6%, 8.9% and 7.5%, respectively, which are all respectable values but nothing to go write home about. Because I believe the market may get a bit choppy here and would like a safety play, I believe the 4.48% yield of this company is good enough for me to take shelter in for the time being. The company kicked off its career by paying a dividend, and I have no doubts it will continue to raise it in the future with the low payout ratio.
Payout TTM (%)
Looking first at the relative strength index chart [RSI] at the top, I see the stock muddling around in oversold territory with a value of 34.6 but the trajectory is flat. To confirm that, I will look at the moving average convergence-divergence [MACD] chart next and see that the black line is below the red line with the divergence bars flattening in height. As for the stock price itself ($54.88), I'm looking at the 20-day simple moving average to act as resistance and $54.50 to act as support for a risk/reward ratio, which plays out to be -0.69% to 1.76%.
- The company was downgraded to "hold" from "buy" with a price target of $58 down from $67 at Jeffries. Jeffries cites lower estimates based on reduction in retail margins at the company's unregulated business.
Edison is inexpensively valued based on future earnings, but expensive on future growth prospects (one-year outlook). Financially, the dividend payout ratio is safe, and I don't doubt management will continue to increase the dividend going forward albeit at a very low rate. The technical situation of how the stock is currently trading is what is telling me that it can trade sideways for a bit, and I believe it should be going up soon. I'm going to layer into my position and buy a small batch in the stock again for now and see what happens.
Disclaimer: These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!