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Consolidated Edison, Inc. (NYSE:ED) has pleased shareholders over the past 10 years, by paying out dividends. The stock currently pays out a dividend yield of 3.5%, and has a market cap of US$27b. Does Consolidated Edison tick all the boxes of a great dividend stock? Below, I'll take you through my analysis.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Does it pay an annual yield higher than 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share risen in the past couple of years?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
Does Consolidated Edison pass our checks?
Consolidated Edison has a trailing twelve-month payout ratio of 65%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect ED's payout to remain around the same level at 67% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.6%. Furthermore, EPS should increase to $4.54.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. ED has increased its DPS from $2.36 to $2.96 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes ED a true dividend rockstar.
In terms of its peers, Consolidated Edison produces a yield of 3.5%, which is high for Integrated Utilities stocks but still below the market's top dividend payers.
Considering the dividend attributes we analyzed above, Consolidated Edison is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I've compiled three essential aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for ED’s future growth? Take a look at our free research report of analyst consensus for ED’s outlook.
- Historical Performance: What has ED's returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.