When You Are Scared, Rely On 'Steady Eddie' -- Consolidated Edison

Dec.16.11 | About: Consolidated Edison (ED)

When the world economy starts to turn negative as it has recently, you want to park your money somewhere safe. You want to continue to earn money with as little downside risk as possible. Consolidated Edison Inc. (NYSE:ED) -- aka Steady Eddie -- is a utility that should allow you to do that.

Consolidated Edison Inc., through its subsidiaries, provides energy services to residential, commercial, industrial, and government customers in the US. Its subsidiary, Consolidated Edison Company of New York Inc. (CECONY), delivers electricity to approximately 3.3 million customers in New York City and Westchester County. It delivers gas to approximately 1.1 million customers in Manhattan, the Bronx, and parts of Queens and Westchester County. It delivers steam to approximately 1,760 customers in parts of Manhattan. It operates 62 area distribution substations and various distribution facilities, 38 transmission substations, and 62 area stations. It operates electricity generation plants with an aggregate capacity of 698 megawatts that run with gas and fuel oil. It has 4340 miles of mains and 385,396 service lines for natural gas distribution. It operates 5 steam only generating stations. ED, through its subsidiary, Orange and Rockland Utilities Inc. (O&R), supplies electricity to approximately 0.3 million customers in southeastern New York, and in adjacent areas of northern New Jersey and northeastern New York, and gas to approximately 0.1 million customers in southeastern New York and adjacent areas of northeastern Pennsylvania. O&R operates 554 circuit miles of transmission lines, 13 transmission substations, 61 distribution substations, 84,809 in-service line transformers, 3,774 pole miles of overhead distribution lines, and 1,727 miles of underground distribution lines. O&R operates 1,744 miles of mains for natural gas distribution and 81 miles of mains for natural gas transmission. In addition, ED engages in the sale and related hedging of electricity to wholesale and retail customers, and sale of energy related products and services. It participates in infrastructure projects (Yahoo Finance).

No one is going to copy this infrastructure in a very congested New York and northeastern New Jersey. ED has what amounts to a near monopoly in the area. However, it does not just sit back, and try to gouge its customers. It won the 2011 National Award for Outstanding Reliability Performance by PA consulting Group for the company’s electricity delivery in 2010. ED received the organization’s ReliabilityOne™ Award for the Northeast Region, as well as an award for Outstanding System-Wide Reliability. Ed ranked 17th among Corporate Responsibility Magazine’s “Best 100 Corporate Citizens” -- 2nd among all utilities. ED’s “Green Power” renewable energy program cut fossil fuel consumption in 2010 by an amount equivalent to 380,000 barrels of oil. This all sounds like a company that sets the highest standards for itself. This is a company that gives its customers an extremely high priority, but still manages to run a highly profitable business that pays a good and reliable dividend (4.10%) to its shareholders. It treats its shareholders with the same respect that it shows its customers. It has a 5 year percentage EPS Growth estimate per annum of 3.69% -- steady growth. No wonder people think of ConEd as “Steady Eddie”.

Long term the technical data backs up the fundamentals. The approximately 40 year chart below shows just how steady this stock has been over the long term.

Click to enlarge
(Click to enlarge)

The broad red line in the chart approximates the long term trend line. This tells you the stock is over bought for the near to medium term. A reasonable price to buy the stock at is in the low $50’s (about $53-$54). ED is above its 50-day SMA and far above its 200-day SMA. The 200-day SMA (in the 3 month chart -- not shown) is just above $54. This agrees well with the long term price trend. The PE of 16.10 tends to make one think ED is overpriced. The overall US market has been extremely volatile since the spring of 2011. It is not surprising that good dividend paying utilities are trading at a premium. The coming EU recession will likely push the price down eventually. ED seems a great stock to own, if you want to make some money on the dividend. It is a great stock to own if you don’t want to lose longer term. The 40 year chart performance is undeniable. The near monopoly status in New York is a “warm fuzzy” that makes one want to hold ED. The great management approach is impressive. “Steady Eddie” is just what people think it is, and it is hard to fool scads of New Yorkers. If you want long term income and safety, this is a stock you want to own. You won’t find many stocks with long term charts as steady as this one.

If you want to compare ED to other electricity utilities, the following is a list of successful utilities and their dividends. I think you will find few if any that have charts like ConEd’s. The utilities with a price above $5 per share, a dividend yield above 4%, a PE below 20, positive revenue growth last quarter, and positive earnings growth last quarter are by dividend yield:

Caribbean Utilities Company LTD (OTC:CUPUF) -- 6.99%.

CPFL Energia S.A. -- ADR -- (NYSE:CPL) -- 5.59%.

Ameren Corp. (NYSE:AEE) -- 5.05%.

First Energy Corp. (NYSE:FE) -- 5.01%.

PPL Corp. (NYSE:PPL) -- 4.89%.

American Electric Power Company Inc. (NYSE:AEP) -- 4.86%

Hawaiian Electric Industries Inc. (NYSE:HE) -- 4.82%.

Duke energy Corp. (NYSE:DUK) -- 4.80%.

TECO Energy Inc. (NYSE:TE) -- 4.78%.

Westar Energy Inc. (NYSE:WR) -- 4.77%.

Entergy Corp. (NYSE:ETR) -- 4.70%.

Pinnacle West Capital Corp. (NYSE:PNW) -- 4.64%.

IniSource Energy Corp. (NYSE:UNS) -- 4.63%.

SCANA Corp. (NYSE:SCG) -- 4.57%.

Enersis S.A. -- ADR -- (ENI) -- 4.54%.

ALLETE Inc. (NYSE:ALE) -- 4.52%.

Portland General Electric Company (NYSE:POR) -- 4.35%.

The Southern Company (NYSE:SO) -- 4.28%.

CenterPoint Energy Inc. (NYSE:CNP) -- 4.21%.

Great Plains energy Inc. (NYSE:GXP) -- 4.10%.

Alliant Energy Crop. (NYSE:LNT) -- 4.10%.

CMS Energy Corp. (NYSE:CMS) -- 4.09%.

Xcel Energy Inc. (NYSE:XEL) -- 4.01%.

The Southern Company was the only one besides ConEd that I found with a strong long term uptrend. However, I did not look at them all. The good thing about buying a strong stock with a strong uptrend and strong fundamentals is that you can be pretty sure it will regain any short term losses it may experience in a slowing economy. Meanwhile it will pay you a great dividend. If you can afford to hold one of these stocks for several years, you can buy it with almost complete certainty that it will make you money. I am specifically talking of ED and SO. If you are unsure how long you want to hold the stock, you might want to wait to try to buy ED at approximately $54 of lower.

Good Luck Trading.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.