Printed on January twenty second, 2024 by Bob Ciura

The Dividend Kings encompass firms which have raised their dividends for no less than 50 years in a row. Due to their unparalleled streak of annual dividend will increase, it is not uncommon to view the Dividend Kings as among the many greatest dividend progress shares within the inventory market.

You possibly can see the total listing of all 54 Dividend Kings right here.

We additionally created a full listing of all Dividend Kings, together with related monetary statistics like dividend yields and price-to-earnings ratios. You possibly can obtain the total listing of Dividend Kings by clicking on the hyperlink under:

 

Consolidated Edison (ED) just lately elevated its dividend for the fiftieth consecutive 12 months. Because of this, the corporate now joins the unique listing of Dividend Kings.

Over time, utilities have change into relied upon for his or her regular dividend payouts, even throughout recessions. This text will analyze the corporate’s enterprise overview, future progress prospects, aggressive benefits, and extra.

Enterprise Overview

Consolidated Edison is a large-cap utility inventory. The corporate generates roughly $14 billion in annual income and has a market capitalization of roughly $31 billion.

The corporate serves over 3 million electrical prospects, and one other 1 million fuel prospects, in New York. It operates electrical, fuel, and steam transmission companies.

On October 1st, 2022, Consolidated Edison introduced that it was promoting its curiosity in its renewable power enterprise to RWE Renewables Americas, LLC for $6.8 billion. The transaction is anticipated to shut within the first half of 2023. Because of this transaction, Consolidated Edison is not going to concern widespread inventory this 12 months whereas additionally withdrawing its share issuance steering for 2023 and 2024. The corporate sometimes usually points shares for financing.

On November third, 2023, Consolidated Edison reported third quarter outcomes for the interval ending June thirtieth, 2023. For the quarter, income grew 7% to $3.87 billion, which was $36 million greater than anticipated. Adjusted earnings of $561 million, or $1.62 per share, in comparison with adjusted earnings of $579 million, or $1.63 per share, within the earlier 12 months. Adjusted earnings-per-share had been $0.03 above estimates.

As with prior quarters, larger price bases for fuel and electrical prospects had been the first contributors to leads to the CECONY enterprise, which is accounts for the overwhelming majority of the corporate’s property. Common price base balances are anticipated to develop by 6% yearly by way of 2025. Consolidated Edison expects capital investments of almost $15 billion for the 2023 to 2025 interval.

Consolidated Edison offered up to date steering for 2023 as nicely. The corporate now expects adjusted earnings-per share in a spread of $5.00 to $5.10 for 2023, up from $4.85 to $5.00 and $4.75 to $4.95, beforehand. On the new midpoint, this is able to be a ten.5% improve from the prior 12 months.

Development Prospects

Earnings progress throughout the utility business sometimes mimics GDP progress. Over the following 5 years, we anticipate Consolidated Edison to extend earnings-per-share by 3.5% per 12 months.

We anticipate ConEd to proceed its sample of modest progress shifting ahead. ConEd ought to proceed to generate modest earnings progress every year by way of a mixture of latest buyer acquisitions and price will increase, helped by the gradual enchancment of the U.S. financial system and a return to normalized climate circumstances,

The expansion drivers for Consolidated Edison are new prospects and price will increase. One good thing about working in a regulated business is that utilities are permitted to boost charges regularly, which just about assures a gradual stage of progress.

Supply: Investor Presentation

Consolidated Edison expects to extend its price base by ~7% every year, by way of 2024. This can be a pure method for a utility to generate regular income and earnings progress.

One potential menace to future progress is rising rates of interest, which might improve the price of capital for firms that make the most of debt, equivalent to utilities. Luckily, the market is more and more anticipating the Federal Reserve to cease elevating rates of interest this 12 months and probably even start to chop them. Decreasing charges helps firms that rely closely on debt financing, equivalent to utilities, so traders don’t should be involved about Consolidated Edison in a falling-rate cycle.

Even when charges do proceed to go up, Consolidated Edison is in sturdy monetary situation. It has an investment-grade credit standing of A-, and a modest capital construction with balanced debt maturities over the following a number of years. A wholesome steadiness sheet and robust enterprise mannequin assist present safety to Consolidated Edison’s dividends.

Traders can fairly anticipate low single-digit dividend will increase every year, at a price much like the corporate’s annual adjusted earnings-per-share progress.

Aggressive Benefits & Recession Efficiency

Consolidated Edison’s fundamental aggressive benefit is the excessive regulatory hurdles of the utility business. Electrical energy and fuel providers are obligatory and important to society. Because of this, the business is very regulated, making it just about inconceivable for a brand new competitor to enter the market. This supplies quite a lot of certainty to Consolidated Edison.

As well as, the utility enterprise mannequin is very recession-resistant. Whereas many firms skilled massive earnings declines in 2008 and 2009, Consolidated Edison held up comparatively nicely. Earnings-per-share throughout the Nice Recession are proven under:

• 2007 earnings-per-share of $3.48
• 2008 earnings-per-share of $3.36 (3% decline)
• 2009 earnings-per-share of $3.14 (7% decline)
• 2010 earnings-per-share of $3.47 (11% improve)

Consolidated Edison’s earnings fell in 2008 and 2009 however recovered in 2010. The corporate nonetheless generated wholesome earnings, even throughout the worst of the financial downturn. This resilience allowed Consolidated Edison to proceed rising its dividend every year.

The identical sample held up in 2020 when the U.S. financial system entered a recession because of the coronavirus pandemic. Final 12 months, ConEd remained extremely worthwhile, which allowed the corporate to boost its dividend once more.

Valuation & Anticipated Returns

Utilizing the present share value of ~$89 and the midpoint of 2023 steering, the inventory trades with a price-to-earnings ratio of 17.6. That is above our honest worth estimate of 16.0, which is according to the 10-year common price-to-earnings ratio for the inventory.

Because of this, Consolidated Edison shares seem like overvalued. If the inventory valuation retraces to the honest worth estimate, the corresponding a number of contractions would cut back annualized returns by 1.9%.

Luckily, the inventory might nonetheless present constructive returns to shareholders, by way of earnings progress and dividends. We anticipate the corporate to develop earnings by 3.5% per 12 months over the following 5 years. As well as, the inventory has a present dividend yield of three.7%.

Utilities like ConEd are prized for his or her secure dividends and protected payouts. Placing all of it collectively, Consolidated Edison’s complete anticipated returns might appear to be the next:

• 3.5% earnings progress
• -1.9% a number of reversion
• 3.7% dividend yield

Added up and Consolidated Edison is anticipated to return 5.3% yearly over the following 5 years. This can be a modest price of return, however not excessive sufficient to warrant a purchase suggestion.

Earnings traders could discover the yield engaging, as the present yield is meaningfully larger than the yield of the S&P 500 Index and grows very persistently. The corporate has a projected payout ratio of 64%, which signifies a sustainable dividend.

Closing Ideas

Consolidated Edison generally is a precious holding for revenue traders, equivalent to retirees, because of its 3.7% dividend yield. The inventory gives safe dividend revenue, and can also be a Dividend King, which means it ought to elevate its dividend every year.

Subsequently, risk-averse traders trying primarily for revenue proper now–equivalent to retirees–might see higher worth in shopping for utility shares like Consolidated Edison. Nevertheless, we price the inventory as a maintain at at this time’s present value of $89.

The next articles comprise shares with very lengthy dividend or company histories, ripe for choice for dividend progress traders: