Consolidated Edison Inc. (ED) is a holding company that owns Consolidated Edison Company of New York, and Orange & Rockland Utilities. On August 1, 2013, the company reported second-quarter earnings of $0.59 per share, which beat the consensus of analysts' estimates by a penny. Since last writing about the stock back on September 15, 2013, I stated the stock could trade sideways for a bit and then should go up. Since that time the stock is up 3.41% excluding dividends, and is beating the S&P 500, which has gained 2.68% 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.
The company currently trades at a trailing 12-month P/E ratio of 16.55, 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 14.87 is currently inexpensively priced for the future in terms of the right here, right now. Next year's estimated earnings are $3.82 per share and I'd consider the stock inexpensive until about $57. The 1-year PEG ratio (7.92), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is expensively priced based on a 1-year EPS growth rate of 2.09%. Below is a comparison table of the fundamentals metrics for the company from the time I wrote the last article to what it is right now.
EPS Next YR ($)
Target Price ($)
EPS next YR (%)
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 4.33% with a payout ratio of 72% of trailing 12-month earnings while sporting return on assets, equity and investment values of 2.5%, 8.5% and 7.5%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I believe the 4.33% yield of this company is good enough for me to take shelter in for the time being. The company has been increasing its dividends for the past 39 years at a 5-year dividend growth rate of 0.8%. Below is a comparison table of the financial metrics for the company from the time of the last article to what it is right now.
Payout TTM (%)
Looking first at the relative strength index chart [RSI] at the top, I see the stock muddling around in middle-ground territory with a value of 58.8 with upward trajectory indicating a bullish pattern. To confirm that, I will look at the moving average convergence-divergence [MACD] chart next and see that the black line is above the red line with the divergence bars increasing in height, also indicating a bullish pattern. As for the stock price itself ($56.75), I'm looking at the 200-day simple moving average to act as resistance and the 50-day moving average to act as support for a risk/reward ratio, which plays out to be -1.09% to 1.23%.
- The company declared a quarterly dividend of $0.615 per share with an ex-date of November 8, 2013, and pay date of December 15, 2013.
Utility stocks catch the eye of investors who seek regular cash payments in the form of dividends. Consolidated Edison is one of these companies with a dividend yield of 4.33%. Just remember that utility stocks have fallen out of favor with the rise in interest rates and can pose a potential threat to your initial capital investment, so don't lose sight of that. 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 situations of how the stock is currently trading are what is telling me that it can trade upwards for a bit and test the 200-day moving average. But I don't think it can break above the 200-day for now. The stock is inexpensive on future valuation, has good technicals, and pays a high yield. For these reasons 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!