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.
Income is mostly generated in electric segment:
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
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:
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