The last time I wrote about Consolidated Edison Inc. (ED) I stated, "I'm going to avoid pulling the trigger here and wait to see how they report." After I wrote the article, it popped 2.77% versus the 0.1% gain the S&P 500 (SPY) posted. It's quite unfortunate that I didn't plow money into the company at the time but it's okay because my original investment appreciated. ConEd is a holding company that owns Consolidated Edison Company of New York and Orange & Rockland Utilities.
On November 4, 2013, the company reported fourth 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 2.32% excluding dividends (up 1.97% including dividends), and is losing to the S&P 500, which has gained 21.12% 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 utility sector of my dividend portfolio.
The company currently trades at a trailing 12-month P/E ratio of 15.7, 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 14.77 is currently inexpensively priced for the future in terms of the right here, right now. Next year's estimated earnings are $3.74 per share and I'd consider the stock inexpensive until about $56. Below is a comparison table of the fundamentals metrics for the company for when I wrote all articles pertaining to the company.
EPS Next YR ($)
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 4.56% with a payout ratio of 72% 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 4.56% 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 40 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.
Payout TTM (%)
Looking first at the relative strength index chart [RSI] at the top, I see the stock near overbought territory with a current value $65.44. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is above the red line with the divergence bars increasing in height, indicating bullish momentum but looks to be getting stretched here. As for the stock price itself ($55.27), I'm looking at the 200-day simple moving average (currently at $55.58) to act as resistance and $54.78 to act as support for a risk/reward ratio, which plays out to be -0.89% to 0.56%.
- The company declared a quarterly dividend of $0.63. The quarterly dividend was a 2.6% increase from the prior year with an ex-date of 10Feb14 and payday of 15Mar14.
This company remains a slow growth and slow dividend increasing company, which may be good for any dividend growth investor. I believe it is important to select stocks, which are undervalued and ConEd is one of those names in this industry. Fundamentally the company is inexpensively priced based on 2015 earnings and expensive on future growth potential. Financially the dividend is secure. On a technical basis I believe the bullish momentum is getting long in the tooth. Due to the expensive valuation on next year's earnings growth potential, tiring technicals, and severe run-up in the stock from the beginning of the year I'm not going to be buying a position at this price.
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!