Consolidated Edison Is A Buy For Dividend Portfolios
The insider activity in Consolidated Edison (NYSE: ED) is mixed to be sure but, in our view, heavily tilted in favor of shareholders. While the net of activity is overwhelmingly bearish that is due to a single transaction. Director John McAvoy sold $6.327 million worth of the shares back in February but this is not the detail we are focused on. The remainder of transactions over the past 12 months, made by 10 insiders via many dozens of transactions, are all buys. The insiders only hold about 0.13% of the company which isn’t much, we know, but the buying says it all in our book. Insiders want to hold this 3.25% yielding stock and there are other bullish factors driving the market.
On the institutional side, the institutions have been buying as well and their activity is far more substantial. The institutions have been net buyers for the last 7 consecutive quarters and acquired a dollar amount of shares worth 7.3% of the current market cap. This has the institutional holdings up to 66% and growing. Based on the economic outlook, we think this trend will continue over the next few quarters at least while investors seek yield in safe-haven assets like the Utilities Sector.
Analysts Sentiment Trails Consolidated Edison Share Price
The price action in Consolidated Edison has been bullish and gaining momentum since it hit bottom in 2021. The action is supported by the analysts who have been steadily raising their price targets during that time. The current market consensus price target is $85.45 which is up in the 12, 3, and 1-month comparisons but still trailing the market by 13%. The 4 most recent price targets have the stock trading in the range of $80 to $100 including the two most recent targets which were set following the last earnings report. This activity may cap price gains in the near term but will set up another buying opportunity down the road. Price action is still well above the 150-day EMA which is itself above a key target for resistance. Assuming price action confirms support at this level we would view it as a trend-following entry signal.
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The analysts are expecting Consolidated Edison to post both revenue and earnings growth in Q2 despite uncertainty over utility rates in New York. The takeaway from a recent court decision put the floor for rates well above the market expectation according to Guggenheim analysts. The takeaway for us is that this year’s consensus for EPS is in-line with the dividend outlook which is in favor of reliable payments and distribution growth. The company has been increasing the dividend for the last 48 consecutive years and should be able to sustain that trend for the next few years at least. The only downside is that the payout ratio is high at 70% and the distribution CAGR is low at 2.85%.
The Technical Outlook: Consolidated Edison Is At A Peak
Price action in Consolidated Edison recently broke out to a new high but it looks like a peak is in place. The price action is pulling back from the high with divergent indicators that suggest consolidation is in play. Our targets for support are at $96 and $92, either of which could produce a bounce when tested. If those levels don’t hold a move to the high $80s is possible without breaking the trend. If price action falls below the mid-80s region we see it pulling back all the way to $80 or lower.
Companies in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|Consolidated Edison (ED)||$92.41||-0.6%||3.51%||13.16||Hold||$91.42|