Company Description: Consolidated Edison, Inc., through its subsidiaries, provides electric, gas, and steam utility services in the United States.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1.) Avg. High Yield Price, 2.) 20-Year DCF Price, 3.) Avg. P/E Price and 4.) Graham Number. ED is trading at a discount to 3.) and 4.) of the four valuations listed above. If I exclude the high and low valuation, and average the remaining two valuations, ED is trading at a 11.3% premium. Based on my system ED gets a Star for being fair valued since it is trading lower than the Graham Number, which is generally difficult to do. As calculated above, ED is trading at a premium , which leaves me less than enthusiastic about its fair value Star.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description: 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate, 3.) Years of Div. Growth, 4.) 1-Yr. > 5-Yr Growth and 5.) Payout 15% of avg. ED only earned one Star in this section for 3.) above - it has grown dividends for at least 10 years at an anemic 1% average.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1.) NPV MMA Diff. and 2.) Years to >MMA. ED did not earn any Stars in this section; in fact, it had one deducted for having a negative NPV MMA Diff. That means for every $1,000 invested I would be $572 better off if I sold my ED investment and put it in money market account. Not a glowing endorsement.
Other: During the summer, blackouts and brownouts plagued ED as it tied to keep the power on in New York. This only added to the company's woes.
Conclusion: ED earned one Star in the Fair Value section, one Star in the Dividend Analytical Data section and had one Star deducted in the Dividend Income vs. MMA section for a net total of One Star, which rates it as a 1-Star Very Weak stock. At the time of this writing, my annualized return since I purchased ED is 7.8%, which includes dividends and share price appreciation. ED is not a stock I want to hold in my portfolio and I have already begun eliminating my position as opportunities present themselves.
Disclaimer: As always this is only my opinion and you should not rely on it. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I do (embarrassingly) own shares of ED.
Do you have some stocks in your portfolio that in hindsight, you wish you never bought?
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