Consolidated Edison provides a wide range of energy-related products and services – mainly electrical and gas systems and steam production for New York City. Company was founded in 1823 year – wow.

Con Edison is a regulated business with a limited potential for growth. Also dividends are not growing very fast (low single digit growth), but utilities are well known as a hedge against inflation in long term.

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Income is mostly generated in electric segment:

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As it comes to financials (estimates):

Market cap ~ $20B

Net debt ~$13.5B (quite a lot)

Payout ratio ~66%

Return on equity ~9.3%

Beta = -0.1

Dividend yield 3.8%

 

Estimated valuation ratios:

EV/EBITDA = 9.1

P/E =17.4

 

Con Edison (ED) is one of The Dividend Aristocrats paying increasing dividends since 1975 year. Currently dividend yield is around 3.8% – attractive in comparison to market, but historically company was paying significantly more – even up to 7.5% in 2009. Moreover company is not buying back shares and leverage is significant (which is normal for utilities but still a lot).

 

Drawdown risk analysis:

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Con Ed shares are currently around all time high levels – not interesting for me. I am waiting for around 30%+ drawdown to analyse company deeper ($49). On the other hand beta is very low and shares should go in oposite direction to market –  I see not so much potential to grow with current high valuation.

 

Summing up, I would definitely buy Consolidated Edison instead of bonds – in case of ED dividends are rising and coupons in bonds don’t. But I am not planning to buy ED for my shares portfolio – My investment horizon is very long I expect higher risk & return.

 

Disclosure ED – no position