What happened

Underperforming the market through the first six months of 2020, Consolidated Edison (ED -0.27%) tumbled 20.5%, according to data from S&P Global Market Intelligence, while the S&P 500 fell 4%. The utility's inability to keep up with the overall market is a familiar refrain over the past two years. In 2019, for example, shares of Con Edison climbed 18% while the S&P 500 soared 29%, and in 2018, the stock sank 10% as the S&P 500 dipped 6%.

While investors will often turn to utility stocks during periods of market volatility, this wasn't the case with Con Edison in the first half of 2020. Due to a variety of downgrades, a weak Q1 earnings report, and a downward revision in management's 2020 forecast, investors fled their positions in Con Edison's stock.

Utility vehicles on a residential street.

Image source: Getty Images.

So what

Like many stocks, Con Edison plummeted in mid-March. Whereas the decline in most companies stemmed from the countrywide onset of stay-at-home orders, Con Edison's shareholders had something else in mind: shrinking confidence in the company's ability to service its debt.

On March 17, for example, Moody's downgraded Con Edison's long-term rating to Baa2 from Baa1. And the agency wasn't alone in its view. One week later, Fitch Ratings lowered its outlook to negative from stable. Addressing the revised outlook, Fitch stated that, "Of particular concern is the revenue impact from lower kilowatt hours sales and escalation of bad debt expense, especially in light of Governor [Andrew] Cuomo's executive order to 'stay at home' and the resultant shuttering of non-essential commercial businesses."

Subsequent to the revised outlooks from Moody's and Fitch, Con Edison found itself the subject of further skepticism from Wall Street. For example, in early April, Ryan Levine, an analyst at Citi, lowered the stock's price target to $78.50 from $89, according to Thefly.com. Similarly, Michael Weinstein, an analyst at Credit Suisse, lowered his price target to $78 from $92 while maintaining an underperform rating on the stock; and Sarah Akers, at Wells Fargo, lowered her price target to $78 from $99 while keeping an equal weight rating.

In addition to the pessimistic opinions of analysts, Con Edison's Q1 earnings report shook investors' resolve. For example, the company reported a year-over-year decline in operating revenue from $3.5 billion in Q1 2019 to $3.2 billion in Q1 2020. Likewise, it reported a shrinking bottom line: Diluted earnings per share fell from $1.31 in Q1 2019 to $1.12 in Q1 2020.

The company's less-auspicious 2020 outlook represented further concern. Whereas management had originally forecast 2020 adjusted EPS of $4.30 to $4.50, it lowered this guidance in early May to $4.15 to $4.35 per share.

Now what

For dividend-minded investors, Con Edison's forward dividend yield of 4.15% may seem enticing, but there are valid concerns regarding its financial health. Besides, there are plenty of better options for investors looking at yield.