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The last time I wrote about Consolidated Edison Inc. (NYSE:ED) I stated that I was going to buy a small batch in the stock because I was still concerned about interest rates dropping the price of the stock. Since the last article it dropped 1.01% versus the 3.58% gain the S&P 500 (NYSEARCA:SPY) posted. Consolidated Edison Inc. is a holding company that owns Consolidated Edison Company of New York and Orange & Rockland Utilities. On November 4, 2013, the company reported third quarter earnings of $1.48 per share, which beat the consensus of analysts' estimates by $0.06. In the past year the company's stock is down 3.81% excluding dividends (up 0.39% including dividends), and is losing to the S&P 500, which has gained 24.92% 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 more shares of the company right now for the utilities sector of my dividend growth portfolio.

Fundamentals

The company currently trades at a trailing 12-month P/E ratio of 15.28, 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 14.27 is currently inexpensively priced for the future in terms of the right here, right now. Next year's estimated earnings are $3.77 per share and I'd consider the stock inexpensive until about $57. The 1-year PEG ratio (41.3), 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 0.37%. Below is a comparison table of the fundamental metrics for the company for when I wrote all articles pertaining to the company.

Article Date

Price ($)

TTM P/E

Fwd P/E

EPS Next YR ($)

Target Price ($)

PEG

EPS next YR (%)

14 Aug13

58.71

16.45

15.32

3.83

57

7.51

2.19

14 Sep13

54.88

15.37

14.32

3.83

57

7.02

2.19

17 Oct13

56.75

16.55

14.87

3.82

57

7.92

2.09

15Nov13

58.07

16.5

15.21

3.82

57

9.12

1.81

15Dec13

54.33

15.43

14.27

3.81

57

10.15

1.52

14Jan14

53.78

15.28

14.27

3.77

57

41.3

0.37

Financials

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 4.57% with a payout ratio of 70% of trailing 12-month earnings while sporting return on assets, equity and investment values of 2.5%, 8.7% 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 4.57% 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 1%. Below is a comparison table of the financial metrics for the company for when I wrote all articles pertaining to the company.

Article Date

Yield (%)

Payout TTM (%)

ROA (%)

ROE (%)

ROI (%)

14 Aug13

4.19

67.5

2.6

8.9

7.5

14 Sep13

4.48

67.5

2.6

8.9

7.5

17 Oct13

4.33

72

2.5

8.5

7.5

15Nov13

4.24

70

2.5

8.7

7.5

15Dec13

4.53

70

2.5

8.7

7.5

14Jan14

4.57

70

2.5

8.7

7.5

Technicals

(click to enlarge)

Looking first at the relative strength index chart [RSI] at the top, I see the stock waffling around in middle-ground territory with a value of 41.75. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is just about to cross above the red line with the divergence bars increasing in height, indicating bullish momentum. As for the stock price itself ($53.78), I'm looking at $54.34 to act as resistance and $53.41 to act as support for a risk/reward ratio which plays out to be -0.85% to 1.04%.

Recent News

  1. The company's rates have been frozen but can increase in 2016. Gas and electricity rates for New York have been frozen for the next couple of years, but have a built-in rate increase.
  2. Credit Suisse (NYSE:CS) picked its five favorite utilities for 2014. Not on that list unfortunately is Consolidated Edison, Credit Suisse actually lowered its earnings outlook for ConEd after the company reached an agreement to have a 9.2% ROE on electric utilities and 9.3% on steam and gas.
  3. Citi (NYSE:C) cut ConEd to "neutral" from "buy."

Conclusion

Interest rates began to decrease again after flirting with 3% on the 10-yr treasury, but ConEd's stock has done nothing but continue to go down. Fundamentally the company is inexpensively priced based on future earnings but expensive as all hell on future growth potential. Financially the dividend is well covered by earnings. Technically there seems to be some slight bullishness. I'm going to avoid pulling the trigger here and wait to see how they report. The next earnings report is scheduled for 27Jan14.

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. 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 ConEd Is Just A Vehicle For Dividends At This Point