Consolidated Edison is the holding company of three wholly owned subsidiary, Consolidated Edison Company of New York, Inc. (CECONY), Orange and Rockland Utilities, Inc. (O&R) and the competitive energy businesses. CECONY is the entity to deliver the electricity, natural gas and stream to customers in two areas of New York City and Westchester County. O&R is to deliver electricity and natural gas in south Eastern New York, northern New Jersey and North Eastern Pennsylvania. And the third subsidiary is to provide supply of retail and wholesale electricity and energy services.
What is interesting about Consolidated Edison is that it begun to paid the dividend to investor from 1885, more than a century ago. And it kept raising its dividend consecutively for the last 37 years. And the stock price has been increasing overtime. Let’s look at the chart dated back 30 years ago.
The share has increased around $5 in 1978 to $56 currently with the compounded annual return of around 7.6%. However, following Capital IQ, as ED continuously pays the dividends for nearly 40 years, and if the dividends are kept being reinvested, the total return would be up to 11,000%, meaning the compounded rate of high return at 15.3% for around 33 years.
The payout ratio is quite high, over the last 10 years; the ratio is more than 50%.
Of course with the type of Utilities Company, we would expect the majority of assets are in PP&E, and that is true with the case of ED, with 68% of total assets is in net PP&E, and the regulatory assets including things like Unrecognized pension and other postretirement costs, Future federal income tax, Environmental remediation costs, etc. with the weight of 20% over the total assets.
The capitalization contains nearly 30% of long term debt, and there is nearly 20% deferred tax liabilities, which can be considered as the interest-free loan from the government which the company doesn’t expect to pay in the short-run.
The level of long-term debt is reasonable for the amount of operating cash flows that the company generates. But the level of capital expenditure of high due to the maintenance the upgrade of the net PP&E makes the free cash flows negative for most of the years.
With the long standing history record of increasing dividends for 37 years, stable operating cash flows with reasonable amount of debt, combined with the valuation earning multiples of 15 is equivalent to the relative historical valuation of P/E over the last 05 years, ED can be considered the conservative stocks to hold for the long-term, especially for those investors prefer constant, increasing dividends.
What is interesting about Consolidated Edison is that it begun to paid the dividend to investor from 1885, more than a century ago. And it kept raising its dividend consecutively for the last 37 years. And the stock price has been increasing overtime. Let’s look at the chart dated back 30 years ago.
The share has increased around $5 in 1978 to $56 currently with the compounded annual return of around 7.6%. However, following Capital IQ, as ED continuously pays the dividends for nearly 40 years, and if the dividends are kept being reinvested, the total return would be up to 11,000%, meaning the compounded rate of high return at 15.3% for around 33 years.
The payout ratio is quite high, over the last 10 years; the ratio is more than 50%.
| per share | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| EPS | 3.21 | 3.02 | 2.38 | 2.27 | 2.94 | 2.95 | 3.47 | 4.37 | 3.14 | 3.47 |
| Dividends | 2.2 | 2.22 | 2.24 | 2.26 | 2.28 | 2.3 | 2.32 | 2.34 | 2.36 | 2.38 |
| Payout ratio | 69% | 74% | 94% | 100% | 78% | 78% | 67% | 54% | 75% | 69% |
Of course with the type of Utilities Company, we would expect the majority of assets are in PP&E, and that is true with the case of ED, with 68% of total assets is in net PP&E, and the regulatory assets including things like Unrecognized pension and other postretirement costs, Future federal income tax, Environmental remediation costs, etc. with the weight of 20% over the total assets.
The capitalization contains nearly 30% of long term debt, and there is nearly 20% deferred tax liabilities, which can be considered as the interest-free loan from the government which the company doesn’t expect to pay in the short-run.
The level of long-term debt is reasonable for the amount of operating cash flows that the company generates. But the level of capital expenditure of high due to the maintenance the upgrade of the net PP&E makes the free cash flows negative for most of the years.
With the long standing history record of increasing dividends for 37 years, stable operating cash flows with reasonable amount of debt, combined with the valuation earning multiples of 15 is equivalent to the relative historical valuation of P/E over the last 05 years, ED can be considered the conservative stocks to hold for the long-term, especially for those investors prefer constant, increasing dividends.
