Aesop was born into slavery in Greece around 620 BC. His tremendous intelligence did more than earn him his freedom. He rose to become a respected advisor to kings and city-states.
One of Aesop’s most famous fables is the tortoise and the hare. An arrogant, speedy hare brags to a plodding turtle about how fast he is. The plodding turtle challenges Aesop to a race. The hare took a commanding lead and looks back, feeling confident that he will win the race. The hare decides to take a ‘power nap’. The slow and steady turtle passes the hare and wins the race.
The moral of Aesop’s fable: slow and steady wins the race.
Aesop’s story of the tortoise and the hare reminds me of Consolidated Edison, Inc. (NYSE:ED).
Consolidated Edison’s History
Consolidated Edison can trace its history back to 1823 – nearly 200 years ago. Back then, the company was known as New York Gas Light Company.
In 1884, representatives of several gas light utilities throughout New York came together and consolidated their respective companies into a new business – the Consolidated Gas Company of New York. The company continued to grow and acquire gas, electric, and steam companies serving New York City and Westchester County. In 1936, the company changed its name to Consolidated Edison.
Consolidated Edison has paid increasing dividends for 41 consecutive years. The company is the only utility in the S&P 500 with 30+ years of increasing dividends. Consolidated Edison’s dividend growth over the last 41 years is shown below:
Source: Data from Yahoo! Finance
Among the investors that Insider Monkey follows, Consolidated Edison is not very popular with only 15 investors holding around 1.40% of the company’s outstanding stock at the end of June. During the second quarter, the number of funds bullish on the company declined by seven. In the current round of 13F filings, Michael Messner’s Seminole Management reported ownership of 826,782 shares of Consolidated Edison held as of the end of September.
Consolidated Edison Business Overview
Consolidated Edison is primarily a regulated utilities business. The company has generated 89% of its revenue from its regulated utilities business segments through the first 9 months of fiscal 2015.
Source: 2015 EEI Conference Presentation, slide 25
The company operates in 3 segments:
– Competitive Energy Business
CECONY stands for Consolidated Edison Company Of New York. O&R stands for Orange & Rockland. Together, these two segments make up Consolidated Edison’s regulated utilities business.
The company’s Competitive Energy Business segment which participates in infrastructure projects, provides energy related products to wholesale and retail customers, and sells electricity purchased on wholesale markets to retail customers.
Low Stock Price Standard Deviation & High Yield
Investing in ‘turtles’ is not right for everyone. If you are looking for a high dividend yield, safety, and inflation matching (or beating) growth, then Consolidated Edison is a suitable investment.
The company’s stock is currently offering investors a high dividend yield of 4.2%. For comparison, the 20 year U.S. Treasury Bond ETF (TLT) is offering investors a yield of just 2.6%.
Unlike a bond, Consolidated Edison’s dividend payments are growing (albeit slowly). The company has managed dividend growth of 1.4% a year over the last decade. This is about in line with inflation over the same period. The company should grow its dividend payments faster over the next decade (more on that in the future growth section of this article).
Consolidated Edison has a 10 year stock price standard deviation of just 16.7%; the second lowest of any large cap dividend stock with 25+ years of dividend payments for reference, Johnson & Johnson (NYSE:JNJ) has the lowest.