Assessing the Sustainability of Edison International's Upcoming Dividend
Edison International (EIX, Financial) recently announced a dividend of $0.78 per share, payable on 2024-01-31, with the ex-dividend date set for 2023-12-28. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Edison International's dividend performance and assess its sustainability.
What Does Edison International Do?
Edison International is the parent company of Southern California Edison, an electric utility that supplies power to 5 million customers in a 50,000-square-mile area of Southern California, excluding Los Angeles. Edison Energy owns interests in nonutility businesses that deal in energy-related products and services. In 2014, Edison International sold its wholesale generation subsidiary Edison Mission Energy out of bankruptcy to NRG Energy.
A Glimpse at Edison International's Dividend History
Edison International has maintained a consistent dividend payment record since 2004. Dividends are currently distributed on a quarterly basis. Edison International has increased its dividend each year since 2003. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 20 years.
Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Edison International's Dividend Yield and Growth
As of today, Edison International currently has a 12-month trailing dividend yield of 4.16% and a 12-month forward dividend yield of 4.40%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Edison International's annual dividend growth rate was 4.70%. Extended to a five-year horizon, this rate decreased to 4.50% per year. And over the past decade, Edison International's annual dividends per share growth rate stands at 8.70%.
Based on Edison International's dividend yield and five-year growth rate, the 5-year yield on cost of Edison International stock as of today is approximately 5.18%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Edison International's dividend payout ratio is 0.92, which may suggest that the company's dividend may not be sustainable.
Edison International's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Edison International's profitability 7 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported net profit in 9 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Edison International's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Edison International's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Edison International's revenue has increased by approximately 7.50% per year on average, a rate that underperforms approximately 52.78% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Edison International's earnings increased by approximately -28.90% per year on average, a rate that underperforms approximately 87.87% of global competitors.
Engaging Conclusion
In conclusion, while Edison International has a commendable history of dividend payments and growth, the current payout ratio and the mixed performance in growth metrics present a nuanced picture for investors. The company's strong profitability rank and yield on cost offer positive signals, but the sustainability of its dividend in light of the payout ratio and earnings growth rate requires careful consideration. Value investors seeking informed financial decisions should weigh these factors and monitor the company's future performance closely. Could Edison International continue its streak of dividend increases, or will the challenging growth metrics necessitate a strategic reassessment?
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
