Consolidated Edison: This 4.2%-Yielding Stock Appears To Be Undervalued
Seeking AlphaDividend Ideas | Utilities Consolidated Edison: This 4.2%-Yielding Stock Appears To Be UndervaluedJul. 15, 2020 2:56 PM ET|| About: Consolidated Edison, Inc. (ED), Includes: ES, WEC, XELby: Ploutos InvestingPloutos Investing Dividend growth investing, growth at reasonable price, value, long-term horizonSummaryConsolidated Edison delivered a poor Q1 2020 primarily due to unfavorable weather.
The company has $11.7 billion capital projects in the next 3 years to grow its rate base and EPS.
ED has a solid balance sheet to fund its growth projects and currently pays a growing 4.2%-yielding dividend.
Investment Thesis
Consolidated Edison (NYSE: ED) saw its Q1 2020 EPS decline by about 3% due to warmer than expected weather. Looking forward, the company has lowered its 2020 EPS forecast by about $0.15 per share due to the impact of COVID-19. However, we expect this impact to recede in H2 2020 as New York, its primary service territory, has done a good job containing the virus. The company has $11.7 billion of capital projects to grow its rate base in the next 3 years. It also has a solid balance sheet and financing plan to fund these projects. ED appears to be trading at a discount to its peers and pays a growing 4.2%-yielding dividend. Therefore, this is a stock suitable for dividend growth investors.
Data by YCharts
Recent Developments: Q1 2020 Highlights
ED reported a disappointing Q1 2020 with adjusted EPS of $1.35 per share. This was a decline of about 3% from last year's $1.39 per share. The decline was primarily due to warmer than expected weather in Q1 in its steam revenue (about $0.08 in its EPS) and some impact from COVID-19 (about $0.01 in its EPS) as the outbreak only started towards the end of the quarter.
Source: Q1 2020 Presentation
Earnings and Growth Analysis
Three-year $11.7 billion capital projects will help deliver earnings growth
ED plans to invest about $11.7 billion between 2020 and 2022. As can be... Read more