Consolidated Edison, Inc. (Con Edison or the company) is a publicly-owned utility holding company, engaged in providing energy related products and services through its regulated and unregulated utility subsidiaries. The company operates in the US. It is headquartered in New York City, New York.
In our opinion ED’s economic moat comes from its stable, difficult-to-replicate wires-and-pipes monopoly in New York. In exchange for its service territory monopoly, the company's returns are set by state regulators.
Consolidated Edison Company of New York (CECONY) is seeking a rate hike of $368 million (7.2%), based on a return of 10% on a common-equity ratio of 48%. The utility is also asking for a higher allowed ROE. The board of directors has raised the dividend. The quarterly increase was $0.02 a share (3.2%). ConEd is targeting a payout ratio of 60%-70%. The dividend yield is slightly above the utility mean. However, we believe with the recent price rise puts the stock near fair value.
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Diversified customer base
Strong transmission and distribution facilities
Dependence on wholesale energy markets to meet supply needs
Dependence on subsidiaries
Volatile markets of electricity and natural gas
Agreements to develop solar energy
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