Great Dividend Plays: Consolidated Edison

| About: Consolidated Edison (ED)

When you are uncertain where the market will go, it may pay to invest in one of the steadiest stocks in the market, Steady Eddie -- Consolidated Edison (NYSE:ED). This is essentially a regulated utility that has a reputation for being well run. It has raised its dividend for 38 straight years. It steadily invests in infrastructure. It prides itself on its reliability and its customer service. This pride is not misplaced. It won the 2011 National Award for Outstanding Reliability Performance by PA Consulting Group for its electricity delivery in 2010.

Its two main subsidiaries are Con Edison of New York (CECONY) and Orange and Rockland (O&R). Between these two ED delivered 42% of New York state's 2011 electric peak consumption. Between the two it has 3.6 million electric customers, 1.229 million gas customers, and 1,735 steam customers. It also owns and operates much of the infrastructure necessary to provide all of these services. No one else can possibly begin to replace ConEd, they would never be able to build the infrastructure at a reasonable cost. Effectively ConEd has a captive consumer market. However, it does not abuse this boon. Instead it takes pride in its great management, its reliability, and its customer satisfaction. This is the mark of a truly great company. It is a mark of a company that is likely to have a long lived future as an appreciated and growing concern. Its relatively even rate base growth has a 5-year CAGR of 7.63%. This is good consistent growth.

All the above is good, but ED is also moving with the times. It is encouraging oil to gas conversions. This is one of NYC's Clean Air Imperatives. As the price of natural gas has fallen this year, requests for this changeover service have been going up. This should in the end help ED's natural gas customer base.

ED is expanding into solar. In fact 30 MW of ED owned solar capacity were in-service on Mar. 31, 2012. It has another 14 MW under construction (as of March 31, 2012). It has approximately $2B in capital expenditures planned for 2012, and this is not a one year phenomenon. It has spent about $2B per year over the last five years. It is keeping up its facilities, and it is expanding and modernizing them. This is a good trait. This "goodness" shows on the bottom line too. ED's net income has increased each of the last three years from $897 million for FY2009 to $1,003 million for FY2010 to $1,062 million for FY2011.

One doesn't hear talk of rolling blackouts or brownouts in NYC as you are currently hearing in Texas. Instead you hear that ED is educating people on how to conserve energy during the peak periods (hot summers and cold winters). In fact it has a whole list of energy saving programs. If I were a New Yorker, I'd much prefer to be hear about energy saving programs than blackouts and brownouts.

This is a responsible company. This is a company that you can feel safe having your money in. The market bears this out. ED has outperformed the SPDR S&P500 ETF SPY by approximately 51% over the last five years. When you add in the extra approximately 13% differential in dividend payouts over those five years, ED has beaten the SPY by approximately 64%. On top of this ED has a Beta of 0.17. This means it will get beaten down much less than the overall market, if the overall market heads downward. For those worried about Europe, China, and even the US economies, this is a big plus.

The 5 year chart of ED adds some technical direction to this trade.

(Click to enlarge)

The slow stochastic sub chart shows that ED is currently overbought. This probably means that it would be technically better to wait for at least a small pull back. The main chart shows that ED is above its upper Bollinger Band. This is another signal telling you ED is overbought. However, ED is firmly above its 200-day SMA, and it is showing a very strong up trend. Its 50-day SMA seems to be turning upward. These are positive signals.

In sum technically ED can be bought, but averaging in would be a good idea. A prudent investor might choose to wait for at least a minor retracement. If Greece decides to leave the EU, I am sure this would provide such an opportunity. The Greek elections, which may decide that, will be June 17, 2012. In either case, averaging in, is a good strategy.

Note: Fundamental fiscal data that did not come from ED's web site came mostly from Yahoo Finance.

Good Luck Trading.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ED over the next 72 hours.