Shares of Con Ed Offer Stable Growth in a Volatile Environment

For more than 190 years, Consolidated Edison (ED) has managed to serve the world's most challenging marketplace: metropolitan New York.

The company's principal business segments are Consolidated Edison of New York's regulated utility undertakings, Orange & Rockland Utilities' regulated utility undertakings and its competitive energy dealings.

Utilities are by nature slow-moving but steady. But for those looking for income, Con Edison is a compelling buy. In late Monday trading, shares were off a little over one percent. 

Con Edison's key metrics are admittedly sluggish. It annual top line barely moved from $11.9 billion in 2006 to $12.5 billion last year.

But Con Edison has pushed net income higher. Free cash flow, once under pressure, is now consistently positive.

For the foreseeable future, Con Edison should help insulate investors from earnings volatility.

Analysts expect an upswing of 2.12% in earnings per share on an average annual basis over the next five years.

It could be argued that Con Edison's 3.7% dividend yield is low when compared with diversified utilities such as Exelon, with a 4.2% yield or Pattern Energy, which sports a massive 8%-plus yield

But Pattern Energy's share price has dropped more than 40% since mid 2014. Exelon's share price has dipped more than 30% over the past five years. 

Consolidated Edison has an advantage in that it delivers electricity but doesn't produce it. The company purchases electricity from wholesale suppliers, a result of deregulation in New York in the 1990s. That approach helps drive its profitability.

Supported by its consistent earnings stream, Consolidated Edison should deliver solid dividends over the long term.

The stock's superior low risk, long-term total return potential coupled with the fact that it's been paying dividends every year since 1975 makes it a highly attractive income proposition.

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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.

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