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Consolidated Edison’s Expected Dividend Growth and Payout Ratio
By Vincent Kruger
Oct 19, 2018 | 8:25 AM
Dividend statistics
Consolidated Edison (ED) expects to increase its earnings 4% over the next few years, which is in line with the industry average. Analysts are forecasting a 4% dividend increase over the next few years.

Consolidated Edison’s management expects the company’s payout ratio to be 60%–70% going forward. Its five-year average payout ratio is ~35%. A payout ratio indicates the portion of a company’s profits distributed to shareholders in the form of dividends.

ED stats

Utilities (XLU) normally pay a large portion of their earnings in the form of dividends. So a higher payout ratio isn’t unusual. Duke Energy (DUK) is among the few utilities with higher payout ratios. Its payout ratio was 83% in 2017, which was higher than many of its peers. NextEra Energy (NEE), the largest holding of the Utilities Select Sector SPDR ETF (XLU), had a payout ratio of 59% in 2017, which was much lower than its peers.

Utilities usually pay stable dividends and have slow stock movements. To learn which S&P 500 utility stocks stood out and returned the most in the last five years, be sure to read The Earnings and Valuation of the Best-Performing Utilities.

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How's Consolidated Edison Doing in Terms of Total Returns?
By Vincent Kruger
Oct 19, 2018 | 8:25 AM
Market performance
Consolidated Edison (ED) expects ordinary earnings and dividend growth for the next few years. Its long dividend payment history and stable growth might attract conservative investors. The stock has been lagging this year. So far, it has fallen more than 8%, while the broader utilities have an average gain of 3% for the year.

ED stk

Total returns
Let’s see how Consolidated Edison’s long dividend payment history contributed in terms of total returns over a longer period. In the last year, it returned (including dividends) -5%, and the broader utilities returned 2%. Over the past five years, ED’s total returns were 8%, and utilities (XLU) at large returned 11% compounded annually. So despite its long dividend-increase streak, it underperformed its peers in the past five years due to a weaker market performance.

Total returns from the broader markets were 11% in the last year and ~12% in the last five years compounded annually.

The Fed expects one more rate hike this year. It will be the fourth one in 2018, which could hamper utilities going forward. Rising rates result in higher debt servicing expenses for utilities, which generally dents their profitability. However, since the last rate hike, utilities at large have risen ~5% as investors took shelter in them amid the broader market turmoil. Utilities usually pay stable dividends and have slow stock movements.

https://marketrealist.com/2018/10/hows-consolidated-edison-doing-in-terms-of-total-returns