Last update on 2024-06-27

Consolidated Edison (ED) - Dividend Analysis (Final Score: 5/8)

Discover Consolidated Edison's dividend performance with a score of 5/8. Comprehensive analysis reveals stability and growth over 25 years.

Short Analysis - Dividend Score: 5

We're running Consolidated Edison (ED) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Consolidated Edison (ED) has been evaluated on eight different criteria to determine the performance and stability of its dividend policy. The dividend yield of 3.5616%, which is higher than the industry average, suggests a stronger return for investors. However, the average annual growth rate for dividends over the past 20 years is slightly below the preferred 5% benchmark. The payout ratio is also higher than desired, averaging 70.59%. Earnings and cash flow indicate potential sustainability issues as recent trends show dividends approaching or surpassing earnings. Nonetheless, the company has displayed remarkable stability in dividends and has consistently paid them for over 25 years, demonstrating financial health. Stock repurchases have been limited, which might affect shareholder value.

Insights for Value Investors Seeking Stable Income

Based on this analysis, Consolidated Edison (ED) shows some strong points like its high dividend yield and exceptional stability over the years; however, concerns such as a high payout ratio and sustainability issues must be considered. If you’re an income-focused investor, ED might be worth considering due to its stable dividend returns, but it may not be the best pick for those looking for capital growth through stock appreciations and buybacks. Proceed with caution and keep an eye on their payout ratios and earnings coverage!

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Explain why dividend yield is important to consider for Consolidated Edison (ED).

Consolidated Edison's (ED) current dividend yield of 3.5616% is above the industry average of 3.12%, indicating a stronger return for investors relative to its peers. Over the past 20 years, ED's dividend yield has fluctuated but generally exceeded the industry average. For instance, in 2023, its yield was 3.5616% compared to the industry average of 3.12%. Since 2003, the highest was 6.0108% in 2008, during the financial crisis, showcasing resilience. Generally, higher yields suggest better immediate income but must be analyzed with payout ratios to ensure sustainability. In latest trends, a steady or rising yield aligned with rising dividends per share and stable stock prices depict company strength and reliable shareholder payouts.

Average annual Growth Rate higher than 5% in the last 20 years?

Dividend Growth Rate analyzed over a significant period, such as 20 years, provides a clear picture of the company's ability to increase payouts. A growth rate above 5% is considered healthy and desirable as it suggests that the company has a solid financial foundation and generates enough profit to reward its shareholders.

By analyzing the given dividend data for Consolidated Edison over the past 20 years, we can observe varying increments and drops in dividend per share. The Dividend Per Share values over the span of 2003 to 2023 went from 0.9009 to 2.5316. Calculating the compound annual growth rate (CAGR) for these periods would give the exact growth rate. Using the formula CAGR = (EV/BV)^(1/n)-1, where EV is the ending value (2.5316), BV is the beginning value (0.9009), and n is the number of years (20), the CAGR = (2.5316/0.9009)^(1/20)-1 = 4.96%, which is slightly below the 5% threshold. While just short of the 5% ideal rate, it indicates a steady growth, which is commendable but not excellent. The significant annual variations suggest some volatility in payouts. This trend might be observed as mixed—its steady growth could be appealing to some investors, while others may consider the volatility a potential risk.

Average annual Payout Ratio lower than 65% in the last 20 years?

Average Payout Ratio lower than 65% in the last 20 years?

Analyzing the data from 2003 to 2023, the average payout ratio for Consolidated Edison (ED) was 70.59%. Except for a few years (2008 with 53.531, 2012 with 62.4613, 2014 with 67.8459, 2015 with 64.1611, 2017 with 55.8874, and 2018 with 64.7542), the payout ratio has generally been above the desired threshold of 65%. This trend is concerning because a payout ratio higher than 65% means the company is distributing a significant portion of its earnings as dividends. Although Consolidated Edison's payout ratio has not met the optimal average, it has demonstrated resilience by maintaining consistent shareholder returns over the long term, but sustainability could be questionable given the average remains high.

Dividends Well Covered by Earnings?

Earnings per share (EPS) should sufficiently cover dividends per share to ensure sustainability.

Analyzing the data from 2003 to 2023, we see that Consolidated Edison (ED) has had an Earnings per Share (EPS) generally higher than the Dividend per Share (DPS) in most years. The trend shows a decreasing coverage ratio, reaching a low of around 0.447 in 2023. This indicates that in recent years the company’s dividends are close to or even surpassing its earnings, raising concerns about sustainability. Investors need to monitor this trend carefully as diminishing coverage can indicate potential liquidity issues or decreased earnings reliability.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow

Examining if Consolidated Edison's free cash flow sufficiently covers its dividends over time is vital since it gives insights into the company's ability to sustain dividend payments without relying heavily on debt or diluting shareholders. Positive ratios are favorable, indicating that free cash flow surpasses dividend payments; consistent negative ratios suggest reliance on other financing means.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years ensure reliable income for investors. A consistent dividend with no significant drops (over 20%) is crucial for income-seeking investors.

Consolidated Edison (ED) has demonstrated remarkable stability in its dividend payments over the past 20 years. The dividend per share increased consistently from $2.24 in 2003 to $3.24 in 2023. There was no year where the dividend dropped by 20% or more, indicating a very stable dividend trend. This is a positive sign for income-seeking investors as it reflects the company's commitment to providing a reliable income stream. Such stability is also an indicator of the company's financial health and management's dedication to shareholder returns.

Dividends Paid for Over 25 Years?

Dividends paid consistently for over 25 years show a company's reliable and strong financial health. It builds investor trust and signifies stable, growing profitability.

Consolidated Edison (ED) has consistently paid and grown its dividends for over 25 years, from $2.12 in 1998 to $3.24 in 2023. This trend is undoubtedly positive as it demonstrates the company's reliable financial health and its commitment to returning value to shareholders. An increasing dividend also signals confidence in future profitability and long-term stability, which are attractive qualities for investors.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases indicate a company's confidence in its own financial health and can enhance shareholder value by reducing the number of shares outstanding.

Over the past 20 years, Consolidated Edison (ED) has demonstrated limited stock repurchases, with only three notable years of reliable repurchases: 2013, 2014, and 2023. During these years, the company effectively bought back shares, positively impacting shareholder value. However, the overall trend shows an increasing number of shares, rising from 221.8 million in 2003 to 347.7 million in 2023. This overall increase indicates dilution of share value for existing shareholders, which can be considered a negative trend. The average stock repurchased over the past 20 years stands at a modest 2.2962%, further supporting the inference that stock repurchasing has not been a significant focus for the company. Consequently, this trend reflects poorly on shareholder value enhancement through buybacks for Consolidated Edison.