What happened

Shares of Consolidated Edison (ED 0.15%) rose 11.4% in November, according to data provided by S&P Global Market Intelligence. Powering the utility stock higher was its better-than-expected third-quarter results.

So what

Consolidated Edison reported excellent Q3 figures last month. The utility generated $579 million, or $1.63 per share, of adjusted earnings. That was up nearly 16% year over year and $0.17 per share ahead of the analysts' consensus estimate. The primary driver was higher earnings at its CECONY subsidiary, thanks to lower costs, higher income from interest-bearing investments, and the resumption of billing late fees. 

The company's strong showing in the quarter enabled it to boost the low end of its guidance range. Consolidated Edison now expects adjusted earnings in the range of $4.50 to $4.60 per share, up from its prior view of $4.40 to $4.60 per share.

Consolidated Edison's report also highlighted its recent agreement to sell its clean energy business for $6.8 billion. The utility expects the deal to close early next year. Because of that sale, the company won't need to issue equity to finance its expansion plan this year or next and will evaluate its equity needs for 2024. It plans to use the cash to repay over $1 billion in debt when it matures next year, invest in its regulated utilities, and institute a share repurchase program. Consolidated Edison expects to invest $15.7 billion through 2024, with 70% on safety and reliability projects and 30% on green investments.

Bank of America analyst Julien Dumoulin-Smith liked that deal. He upgraded shares of Consolidated Edison last month from underperform to neutral while boosting the firm's price target from $78 to $95 a share. He believes the sale will de-risk the company's earnings mix, making it a primarily regulated business. Meanwhile, the proceeds should enable the utility to grow its earnings per share by 5% to 7% per year as it invests in regulated expansion projects. The analyst also assumes the company will buy back $1.8 billion of its shares.

Now what

Consolidated Edison rallied last month, powered by its strong third-quarter report. That has the utility on track to deliver full-year results at the upper end of its guidance range. Meanwhile, its clean energy sale will give it the funds to invest in growing its core utility operations, repay debt, and buy back stock. This capital allocation strategy will further support its plan to grow earnings by 5% to 7% annually. That should enable Consolidated Edison to continue increasing its dividend, which currently yields 3.3%. The company holds the longest dividend growth streak of any utility in the S&P 500 at 48 straight years. That makes it an ideal stock for those seeking steadily rising dividend income.