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Con Ed Dividend Built for Recession

Con Ed Dividend Built for Recession

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Tuesday, 08 January 2019 05:16 PM Current | Bio | Archive

Fears of slowing global economic growth and escalating trade tensions caused the S&P 500 Index, the most widely-tracked market index, to decline nearly 5% in 2018 (including dividends).

In times of economic uncertainty, investors can reduce volatility in their portfolios by buying dividend stocks with recession-resistant business models. One stock that immediately comes to mind is utility giant Consolidated Edison (ED).

Consolidated Edison (ED) has paid dividends to shareholders for over a century. And, it has increased its dividend for the past 44 years, making it a member of the Dividend Aristocrats, an exclusive group of stocks in the S&P 500 Index with 25+ consecutive years of dividend increases.

Built To Last

Consolidated Edison is an electric and gas utility company in New York, serving over 4 million electric and gas customers. The stock has a market capitalization of $24 billion, making it one of the largest publicly-traded utilities. Consolidated Edison has a highly stable business model. Last quarter, earnings-per-share increased 7%. Earnings also rose by 7% through the first nine months of the year.

Perhaps the most attractive quality that Consolidated Edison offers investors is its highly recession-resistant business model. As a utility, Consolidated Edison sees stable demand each year, even during recessions. This is simply the nature of the business; everyone needs heat and electricity, no matter the condition of the economy.

For example, the company’s profits held up very well during the Great Recession of 2008-2009. Consolidated Edison’s EPS declined just 3% in 2008 and 7% in 2009, and returned to growth in 2010 with an 11% increase. Consolidated Edison has a keen ability to remain profitable from year to year, which keeps its dividend intact.

The other appealing aspect of the regulated utility business model is that Consolidated Edison is permitted to raise its rates each year. Consolidated Edison expects to grow its rate base by an average of 6% per year through 2020. The combination of customer growth and rate increases fuels modest earnings growth each year, which enables the company to continue raising the dividend.

Reliable Dividend Growth Stock

Consolidated Edison has a current dividend payout of $2.86 per share, which results in a dividend yield of 3.8%. This far exceeds the 2% average dividend yield of the S&P 500 Index. And, Consolidated Edison investors can look forward to dividend increases each year, at a rate similar to the company’s EPS growth.

With an expected dividend payout ratio below 70%, Consolidated Edison’s dividend appears to be highly sustainable. Even a recession in the U.S. will likely not impact the company’s ability to continue paying dividends to shareholders.

Volatility has spiked in the market in recent months. Risk-averse investors could see the recent volatility as a good reason to buy dividend stocks with high yields and defensive business models, such as Consolidated Edison.

Ben Reynolds is CEO of Sure Dividend. Sure Dividend helps individual investors build high quality dividend growth stock portfolios for the long run.

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BenReynolds
With an expected dividend payout ratio below 70%, Consolidated Edison’s dividend appears to be highly sustainable. Even a recession in the U.S. will likely not impact the company’s ability to continue paying dividends to shareholders.
consolidated, edison, dividend, aristocrat
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2019-16-08
Tuesday, 08 January 2019 05:16 PM
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