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Consolidated Edison Inc (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.

Fundamentals

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.

Article Date

Price ($)

TTM P/E

Fwd P/E

EPS Next YR ($)

Target Price ($)

PEG

EPS next YR (%)

14Aug13

58.71

16.45

15.32

3.83

$57

7.51

2.19

14Sep13

54.88

15.37

14.32

3.83

$57

7.02

2.19

Financials

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.

Article Date

Yield (%)

Payout TTM (%)

ROA (%)

ROE (%)

ROI (%)

14Aug13

4.19

67.5

2.6

8.9

7.5

14Sep13

4.48

67.5

2.6

8.9

7.5

Technicals

(click to enlarge)

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%.

Recent News

  1. 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.

Conclusion

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!

Source: High-Yielding Consolidated Edison Is Consolidating At These Levels