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Is Consolidated Edison A Good Income Investment With Its Underperforming Total Return?

Summary Consolidated Edison’s dividend is high at 4.1% and has been increased each year over the last 41 years making Consolidated Edison a dividend aristocrat. Consolidated Edison’s total return underperforms over the last 35.8 month test period but its cash flow is good to make the dividend safe that will most likely be increased in. Consolidated Edison’s revenue growth is not great at 2% going forward but is very stable and the company business is defensive. This article is about Consolidated Edison Inc. (NYSE: ED ) and why it’s an income company that’s being looked at in The Good Business Portfolio. Consolidated Edison is a holding company with its business being an electric and gas utility in the North East United States. The Good Business Portfolio Guidelines, total return, earnings and company business will be looked at. Good Business Portfolio Guidelines. Consolidated Edison passes 7 of 10 Good Business Portfolio Guidelines. These guidelines are only used to filter companies to be considered in the portfolio. There are many good business companies that don’t break many of these guidelines but will still not be considered for the portfolio at this time. For a complete set of the guidelines, please see my article ” The Good Business Portfolio: All 24 Positions .” These guidelines provide me with a balanced portfolio of income, defensive and growing companies that keeps me ahead of the Dow average. Consolidated Edison is a large-cap company with a capitalization of $17.829 billion. The Company operates through its subsidiaries, which include Consolidated Edison Company of New York, Inc. (CECONY), Orange and Rockland Utilities, Inc. (O&R) and the Competitive Energy Businesses. Consolidated Edison has a dividend yield of 4.1% that has been increased each year for 41 years. The dividend grows slowly but is extremely safe. Consolidated Edison therefore is a income story. The average payout ratio is 67% over the past five years which leaves plenty of cash remaining for investment after paying its high dividend Consolidated Edison’s cash flow is good at $1.2 Billion which leaves it with plenty of cash allowing it to pay its high dividend and have cash left over for company equipment modernization. I also require the CAGR going forward to be able to cover my yearly expenses. My dividends provide 3.1% of the portfolio as income and I need 1.9% capital gain in addition for a yearly distribution of 5%. Consolidated Edison has a three-year CAGR of 2% not meeting my overall requirement. Looking back five years $10,000 invested five years ago would now be worth over $15,379 today (from S&P IQ). This makes Consolidated Edison a good investment for the income investor with its steady slow growing 4.1% dividend that has been raised for over the last 41 years each year but does not meet the 5% CAGR growth I require. Consolidated Edison’s S&P Capital IQ has a two-star rating or sell with a price target of $59.0. This makes Consolidated Edison slightly over priced at present but a good choice for the income investor that does not need much capital gains growth and wants a safe income stream. Total Return and Yearly Dividend The Good Business Portfolio Guidelines are just a screen to start with and not absolute rules. When I look at a company, the total return is a key parameter to see if it fits the objective of the Good Business Portfolio. Consolidated Edison did worst than the Dow baseline in my 35.8 month test compared to the Dow average but does have a positive total return of 24.54% over the test period of 35.8 months.. I chose the 35.8 month test period (starting January 1, 2013) because it includes the great year of 2013, the moderate year of 2014 and the losing year of 2015 YTD. I have had comments about why I do not compare the total return to the S&P 500 average. I use the Dow average because the Good Business Portfolio has six Dow companies in it and is weighted more to the Dow average than the S&P 500. Modeling the Dow average is not an objective of the portfolio but just happened by using the 10 guidelines as a filter for company selection. This total return makes Consolidated Edison appropriate for the income investor with the steady slow growing dividend of 4.1%, but the aggressive investor should look for companies with more growth potential. It is expected that the dividend will be increased from its present $0.65/Qtr. to $0.67/Qtr. in January of 2016. DOW’s 35.8-month total return baseline is 30.71% Company Name 35.8 Month total return Difference from DOW baseline Yearly Dividend percentage Consolidated Edison Inc. 24.54% -6.17% 4.3% Last Quarter’s Earnings For the last quarter Consolidated Edison reported earnings on November 5, 2015 that missed expected at $1.44 compared to last year at $1.48 and expected at $1.48. They reaffirmed yearly earnings of $3.90 – $4.05. This was a fair to weak report. Earnings for the next quarter are expected to be at $0.52 compared to the last year at $0.58. The steady slow growth in Consolidated Edison over long periods of time should provide a company that will continue to have slightly below average total return but provide steady income for the income investor. Business Overview Consolidated Edison, Inc. (Con Edison) is a holding company. The Company operates through its subsidiaries, which include Consolidated Edison Company of New York, Inc. (CECONY), Orange and Rockland Utilities, Inc. (O&R) and the Competitive Energy Businesses. CECONY delivers electricity, natural gas and steam to customers in New York City and Westchester County. Orange and Rockland Utilities Inc. (O&R) delivers electricity and natural gas to customers located in south-eastern New York, northern New Jersey and north-eastern Pennsylvania. O&R’s utility subsidiaries include Rockland Electric Company and Pike County Light & Power Company. Competitive energy businesses provide retail and wholesale electricity supply and energy services. The Competitive Energy Businesses include three subsidiaries: Consolidated Edison Solutions, Inc. (Con Edison Solutions); Consolidated Edison Energy, Inc. (Con Edison Energy), and Consolidated Edison Development, Inc. (Con Edison Development). The good cash flow of Consolidated Edison, Inc. allows the company to expand its business slowly and modernize its equipment as the population of its service area increases over time. Takeaways and Recent Portfolio Changes Consolidated Edison Inc. is an income company choice considering its steady slow growth and its total return underperforming the Dow average. Consolidated Edison is a buy for the income investor that is willing to have underperformance of total return but have a steady increasing income and have safety of a defensive company business. Consolidated Edison is not being added to The Good Business Portfolio right now since there are no open slots in the portfolio and the total return underperforms the DOW average for the 35.8 month test period. Bought Eaton Vance Enhanced Income Equity Fund II (NYSE: EOS ) to bring it up to 6.5% of the portfolio. Great income fund that beats the DOW average. Trimmed Cabela’s (NYSE: CAB ) to 4.6% of the portfolio, want to take a little off the table while its up due to the buyout possibilities. The Good Business Portfolio generally trims a position when it gets above 8% of the portfolio. Home Depot (NYSE: HD ) is 8.3% of portfolio, Walt Disney (NYSE: DIS ) is 7.5% of the portfolio and Boeing (NYSE: BA ) is 8.9% of the Portfolio therefore BA and HD and now in trim position with DIS getting close. I have written individual articles on EOS, CAB and HD, if you have an interest please look for them in my list of previous articles. Of course this is not a recommendation to buy or sell and you should always do your own research and talk to your financial advisor before any purchase or sale. This is how I manage my IRA retirement account and the opinions on the companies are my own.

Follow T. Rowe Price With These Stocks And ETFs

With the Fed turning hawkish, several industry experts predicting 2016 as a down year for stocks, overvaluation concerns looming large and growth worries still brewing abroad, investors must be looking for the right pick in the markets. The broader U.S. market has lost over 1.2% so far this year (as of December 15, 2015) as denoted by Vanguard Total Stock Market ETF (NYSEARCA: VTI ) while global stocks are off about 4% as depicted by iShares MSCI ACWI (NASDAQ: ACWI ). At home, only tech stocks held their head high as indicated by tech-laden Nasdaq ETF’s (NASDAQ: QQQ ) 8.8% return. In such a situation, while several experts are coming up with varying views, investors can follow the American publicly owned investment firm T Rowe Price’s tech stock selections for 2016. Investors should note that none of the picks is Buy-rated as per Zacks (at the time of writing); in fact, some of these have a ‘Sell’ rating. So, if you follow T. Rowe Price’s picks, bets could be contrarian in nature. However, investors can go against the crowd via the ETF approach as it covers up one component’s weakness with another component’s strength and runs lesser risk. Below we highlight tech stock selections of T. Rowe Price and the ETFs having considerable exposure to those stocks. JD. Com (NASDAQ: JD ) – WisdomTree China ex-State-Owned Entpr ETF (NASDAQ: CXSE ) Beijing-based e-commerce company reported wider-than-expected loss in Q3 reported in November, but provided a better-than-expected fourth-quarter revenue guidance. The company’s revenues of RMB44.1 billion (US$6.9 billion) also represented a year-over-year jump of 52% in Q3. T. Rowe Price finds its valuation ‘very attractive’. The stock gained 9.6% in the last one month and is up 36.5% so far this year (as of December 15, 2015). However, the stock has a Zacks Rank #4 (Sell) as there were no upward estimate revisions by analysts in the last 7, 30 and 60 days for any of the quarters, at the time of writing. Thus, investors seeking to follow T. Rowe Price but with lower risks might opt for a basket or ETF approach. The stock has a top spot in WisdomTree China ex-State-Owned Enterprises ETF with 9.48% exposure. As the name suggests, the fund does not consider Chinese state-owned entities. Though CSXE also has a Zacks ETF Rank #4, the fund is up 0.6% in the last one month. Tesla (NASDAQ: TSLA ) – First Trust NASDAQ Clean Edge Green Energy ETF (NASDAQ: QCLN ) Electric vehicles maker Tesla has always been a hot stock, thanks to its relentless initiatives. Though its headline Q3 numbers were not very enthusiastic, Tesla is steady on deliveries of new automobiles. Also, the unveiling of Tesla’s new, more affordable Model 3 car in March 2016, may lead investors to place big bets on the stock. T. Rowe Price expects the usage of electric car to be common in 2016 and 2017. TSLA has a Zacks Rank #3 (Hold) and hails from an industry which is in the top 26% of the Zacks universe, at the time of writing. Tesla was up 3.2% in the last one month (as of December 15, 2015) but is off 0.6% year to date. The stock has 7.11% weight in the clean energy ETF QCLN. The fund has a Zacks ETF Rank #3 and was up 5.6% in the last one month but is down 12.4% year to date. In any case, the sailing should be smooth for clean energy ETFs ahead following the Paris climate summit wherein efforts to limit greenhouse emissions were widespread. Alphabet (NASDAQ: GOOGL ) (NASDAQ: GOOG ) – iShares U.S. Technology ETF (NYSEARCA: IYW ) As per T. Rowe Price, Alphabet – the publicly traded firm formerly known as Google – is gaining traction from mobile phones and the demand for YouTube. Solid revenues, stock repurchase plans and “very attractive valuation” makes Alphabet shares lucrative. This Zacks Rank #3 stock has a Growth score of ‘B’ and a Momentum score of ‘C’. GOOGL is up over 43% this year. The stock has 6.2% weight in the Zacks Rank #2 (Buy) ETF IYW. The fund is up over 3.5% so far this year (as of December 15, 2015). Applied Materials (NASDAQ: AMAT ) – Market Vectors Wide Moat Research ETF (NYSEARCA: MOAT ) Applied Materials is one of the world’s largest suppliers of fabrication equipment to semiconductor, LCD and solar PV cell manufacturers. The rise of mobile devices, better utilization of resources and the recently-announced merger with Tokyo Electron are the positives. AMAT was up over 14% in the last three months (as of December 15, 2015). This Zacks Rank #3 has a Value and Growth score of ‘B’. The stock has a 5.66% weight in the fund MOAT which is intended to offer exposure to the 20 most attractively priced companies with continued competitive advantages according to Morningstar’s equity research team. MOAT is up 1.1% in the last three months. NXP Semiconductors (NASDAQ: NXPI ) – Nasdaq CEA Cybersecurity ETF (NASDAQ: CIBR ) As per T. Rowe Price, this semiconductor company benefits big time from industrial and auto end markets. Its acquisition of Freescale Semiconductor also bodes well for the fund. The fund has a Zacks Rank #4 and a Growth score of ‘B’ and Value score of ‘C’. NXPI retreated 7.7% in the last three months. Apart from semiconductor ETFs, the stock has 5.9% weight in the cyber security ETF CIBR. The fund added over 0.1% in the last three months. Original Post

WisdomTree Going Beyond Hedged International ETFs

WisdomTree Investments (NASDAQ: WETF ), the industry’s fifth largest ETF provider, has a long list of successful products, be it currency hedged, pure domestic or international equity funds. In fact, WisdomTree has been the king in the currency hedged ETF world with blockbuster funds – Europe Hedged Equity Fund (NYSEARCA: HEDJ ) and Japan Hedged Equity Fund (NYSEARCA: DXJ ) – having AUM of $19.4 billion and $16.2 billion, respectively. Encouraged by the incredible success of these two funds, WisdomTree now plans for their unhedged versions. These ETFs will simply provide exposure to the export-oriented dividend-paying European and Japanese stocks excluding the currency derivatives, making them WisdomTree’s first unhedged international ETFs. While a great deal of the key information – such as expense ratio or ticker symbol – was not available in the initial release, other important points were released in the filing. We have highlighted those below for investors, who may be looking for a new income play targeting Europe and Japan from WisdomTree should it pass regulatory hurdles: WisdomTree Europe Equity Fund in Focus The proposed ETF looks to offer exposure to European equity securities, particularly shares of European exporters, which tend to benefit from the falling euro. This could easily be done by the WisdomTree Europe Equity Index, which consists of dividend-paying companies that derive at least 50% of their revenue from countries outside of Europe and have at least $1 billion in market capitalization. Though this planned fund will likely get first mover advantage due to the inclusion of export-oriented, dividend paying companies, it will face stiff competition from FTSE Europe ETF (NYSEARCA: VGK ) and First Trust STOXX European Select Dividend Index Fund (NYSEARCA: FDD ) . VGK is the most popular and liquid ETF in the European space with AUM of over $14.9 billion and tracks the FTSE Developed Europe Index. It charges 12 bps in fees per year from investors. On the other hand, FDD follows the STOXX Europe Select Dividend 30 Index, providing exposure to high-dividend yielding companies across 18 European countries that have a positive five-year dividend-per-share growth rate and a dividend to earnings-per-share ratio of 60% or less. It has amassed $158.7 million in its asset base and has an expense ratio of 0.60%. Further, the success of the proposed ETF depends on European economic prospects, which look bright at present. This is especially true as the economy is on the mend with the rounds of monetary easing. The European Central Bank (ECB) is pumping trillions of euros into the sagging Eurozone economy, courtesy its QE program that began in March and will run through September 2016. Additionally, cheap oil, higher exports, and weak euro are providing a further boost to the region. If the current trends continue, the WisdomTree proposed fund, if approved, will not find it difficult to attract investor attention. WisdomTree Japan Equity Fund in Focus This proposed ETF looks to target export-oriented, dividend-paying Japanese equity securities by tracking the WisdomTree Japan Equity Index. The Index consists of dividend-paying companies incorporated in Japan and traded on the Tokyo Stock Exchange that derive less than 80% of their revenue in Japan. Similar to its Europe counterpart, this fund will also get first mover advantage but iShares MSCI Japan ETF (NYSEARCA: EWJ ) could pose a major threat. EWJ is an ultra-popular fund targeting the Japanese economy with an AUM of over $19.9 billion and charging 48 bps in fees per year. Currently, the Japanese economy is experiencing a slowdown despite the slew of monetary easing measures and the Prime Minister Shinzo Abe’s reform policy popularly referred to as Abenomics. However, earnings of Japanese companies have improved since the launch of Abenomics and a weaker currency is making its exports more competitive leading to higher exports. This lethal combination will drive stock prices higher for exporters, making the proposed ETF a compelling choice, once approved. Original Post