Investors might invest in a good company with solid returns -- but is it the place where their hard-earned profits are best spent? Let's compare big dividend-dealing utilities FirstEnergy (FE -1.14%) and Consolidated Edison (ED -1.25%), to see where we should stash our cash.
The earnings
Sales are a good place to start for these two companies, because up until 2011, they were mirror images of each other. But in 2011, FirstEnergy merged with Allegheny Energy, a 1.6 million customer utility that doubled FirstEnergy's "clean coal" capacity. The top line grew accordingly, while Consolidated Edison stock revenue slumped. In the past five years, FirstEnergy sales are up 12.3%, while Con Ed's have taken a 10.3% dip.
FE Revenue Annual data by YCharts
But where it matters to most to investors, FirstEnergy comes in second for adjusted earnings per share. FirstEnergy's adjusted EPS has fallen a whopping 60% over the past five years, but Consolidated Edison stock adjusted EPS is still in the red at -11.7%.
FE EPS Diluted Annual data by YCharts
The dividend
Currently, FirstEnergy shareholders enjoy a 5.9% yield on their shares, a highly respectable rate. But digging deeper, we find that much of that increasing yield has come from a slumping stock price. Consolidated Edison stock offers a still substantial 4.2% yield, and its stock has risen 52% in the same period that FirstEnergy's has fallen 53%.
In absolute terms, FirstEnergy's distributions have stayed flat over the past five years, while Consolidated Edison stock has bumped its dividends up a slight 5.1%. These dividend stalwarts stand in stark contrast to the likes of Exelon (EXC -0.90%) and Atlantic Power (AT), both of which went in for a dividend haircut this year.
Exelon dropped its distribution a whopping 40% as it looks to keep in investor credit rating squeaky clean and balance its books. "We have an opportunity to invest in growth," said Exelon CEO Chris Cane during the company's Q4 earning call. "We cannot do that efficiently if we're leaning on a balance sheet to maintain an 80% to 90% payout level."
Atlantic Power sliced a whopping 66% off the top of its own distribution, dismantling its 10.2% dividend yield. However, share prices of Atlantic Power have fallen to the tune of 66% this year, ironically pushing the company's annual estimated yield back up to an unbelievable 17.9%.
While FirstEnergy's share price and yield follow Atlantic's pattern on a slower, less extreme scale, Consolidated Edison stock has slowly grown alongside its steady dividend.
The future
Looking ahead, Consolidated Edison stock is preparing for the future. The company plans to spend $2.4 billion in capital expenditures in 2013, a move that should create lasting improvements. Just last week, it announced a $100 million natural gas infrastructure investment to switch more New Yorkers off fuel oil heating. While $100 million is so small chunk of change, the decision will save Consolidated Edison stock and its customers unnecessary spending down the road.
And while FirstEnergy is making moves of its own, it's currently focusing funds on paying off its burdensome debt load. The company highlighted debt as a top issue for 2013 and has already spent $1.5 billion to drop its competitive business' overexpenditures.
FirstEnergy or Consolidated Edison Stock
For now, at least, FirstEnergy comes in second. Consodilated Edison has proved over the past five years that it has what it takes to slowly and steadily increase value for investors. With a sustainable dividend today and smart spending for tomorrow, Consolidated Edison stock is the better buy.
