Consolidated Edison: A smart dividend option?
Consolidated Edison (ED) increased its dividend for the 43rd consecutive year on January 19, 2017. The company declared a quarterly dividend of 69 cents per share, which is payable on March 15, 2017. It’s an annualized increase of 8 cents per share, which translates to a 3% yearly increase. Last year, it paid total dividends of $2.68 per share.
Among the companies in the S&P 500 Index, Consolidated Edison has one of the longest dividend-increasing streaks.
Consolidated Edison is currently trading at a dividend yield of 3.8%, marginally higher than the industry average. The Utilities Select Sector SPDR (XLU) currently yields 3.6%. In comparison, the top utilities by market capitalization, Duke Energy (DUK) and Southern Company (SO), currently yield nearly 4.5%.
In the last five years, Consolidated Edison’s dividends grew at a pace of ~2% compounded annually. Though this growth rate is relatively low compared to others in the sector, the company’s consistent payout increase over a long duration makes it a remarkable name among utilities.
Consolidated Edison management anticipates that it will continue to pay nearly 60%–70% of its adjusted earnings to common shareholders in the future.
Utilities are often referred to as “widow-and-orphan stocks” due to their stable dividend payouts and smooth stock movements. Utilities’ earnings are comparatively stable and predictable, as they are more focused on routine operations instead of exploring any substantial growth opportunities.