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Instant Analysis: Con Ed Raises Its Dividend

By Eric Volkman - Jan 26, 2016 at 6:04PM

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The company will pay $0.67 per share, 3% higher than before.

What happened?
Consolidated Edison (ED 0.42%) continues to keep its dividend light on. The big utility has declared a 3% bump in its quarterly distribution to $0.67 per share.

This is entirely in character for the company. It is, after all, a Dividend Aristocrat -- one of the very few stocks on the market that has raised its dividend at least once annually for a minimum of 25 years in a row. With this hike, Con Ed's raise streak now stands at 42 consecutive years.

The company's stated goal is to pay a dividend amounting to between 60% and 70% of adjusted earnings. The new distribution is 46% of the adjusted per-share profit it posted in its most recently reported quarter.

Con Ed will pay its freshly enhanced dividend on March 15 to shareholders of record as of Feb. 17. At the current stock price, the payout yields 3.9%. That's well above the current average (2.3%) of stocks on the S&P 500 index, although it's more or less comparable with other big utilities such as American Electric Power and fellow Dividend Aristocrat Questar.

Does it matter?
Incumbent utilities can be excellent picks for income investors. It's not unusual to find high-yielders like Con Ed, American Electric Power, and Questar, which pay their distributions on a reliable basis. For the most part, utilities have a steady and predictable business model, since their customer base, usage, and rates are easier to gauge compared to other types of enterprises.

Con Ed is one of the steadiest operators in a steady industry. The company's Q3 was indicative of this -- operating revenues rose slightly on a year-over-year basis to $3.4 billion, while bottom line declined marginally (to $428 million).

For the quarter, Con Ed was slightly free cash flow-negative, but this will probably balance out; on an annual basis, the company tends to land in the black. There's no reason to think that habit will change anytime soon, so we can count on this most reliable of utilities maintaining its Aristocrat status well into the foreseeable future.

Eric Volkman has no position in any stocks mentioned. Nor does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Consolidated Edison, Inc. Stock Quote
Consolidated Edison, Inc.
ED
$98.91 (0.42%) $0.41

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