Tuesday, September 27, 2011

Consolidated Energy's High Yield

Energy companies are always attractive to investors for their dividend payouts. Utility companies are good at getting consistent cash flows because of the payments from utility customers. One of the largest utility companies in the country is offering up a solid dividend payout. That company is Consolidated Edison (ED).

Consolidated Edison is known for providing energy service to the residents of New York. The utility company also services parts of the New Jersey and Philadelphia area. The company has a long history of providing electric service to customers having been founded in 1823. Electric, gas, and steam are all industries in which the firm actively participates in.

Consolidated Edison generates the bulk of its revenue from its electric services. Consolidated Edison is a slow growth performer delivering growth below 1% over the past five years and future growth is pegged at just 2%. The firm has generated revenue of $13 billion dollars each of the past three years and creates over $3 billion dollars in cash flow.

The company currently trades at 4.5 times earnings growth and 15 times earnings. The company trades at 1.5 times book value and 1.2 times sales. The firm is heavily levered as most energy companies are with $10 billion in debt. The firm has no trouble servicing its debt due to the large amount of cash that it earns.

Consolidated Edison attracts a lot of income investors because of the stability of the company’s earnings and its dividend payout. The company has increased its dividend for 38 consecutive years. Consolidated Edison pays a dividend of $2.40 per share and has a yield of 4.2%. This yield is actually lower than the 5 year yield of 5.2%. The payout ratio of 67% is easily sustainable.

Consolidated Edison is a company that should be of interest to investors seeking dividend growth and a consistent cash payout.

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