Consolidated Edison Rewarding Shareholders with a 3% Raise
I recently discussed how Consolidated Edison (ED) was the first dividend stock we purchased. It was almost 9 years ago when we took a chance and purchased 25 shares of the stock.
Back then, the share price was around $39 per share for a total investment of just under $1,000. There were no zero commission brokers like we have today with LOYAL3 and Robinhood.
So instead of making small and frequent stock purchases like we do today … we invested about $1,000 at a time.
Through dividend reinvestment, we have grown our investment in ED to 37.01 shares and a yield on cost over 10%!
And each of those years, the company rewarded us with an annual raise by consistently increasing their dividend.
Guess what? They recently announced another increase for 2017!
We Got a 3% Raise
Consolidated Edison just announced another dividend increase.
We will receive $0.69 in dividends this coming March (2017) for each share that we own … instead of $0.67 last quarter. It is not the growth that we like to see year to year, but the company still managed to give us a raise.
This latest increase bumps the annual dividend for ED up to $2.76 per share compared to $2.68 last year.
Overall, that is a 2.98% increase in dividend income.
How Much Extra Income?
This latest dividend increase has pushed our 12 month forward dividend income for ED up to $102.16, compared to $99.20 last quarter.
This is another reminder that our dividend income stream is constantly growing without any extra work from us.
For example, earlier this week we discussed how Realty Income Corp (O) gave us a 4% raise. That is on top of the raise the company gave us back in December.
All of these dividend increases (no matter how small) can really add up over the years.
With this latest increase by Consolidated Edison, along with recent stock purchases and dividend reinvestment … our annualized forward dividend income has risen to $2,244.79.
Very Slow Dividend Growth for ED
Getting a raise from Consolidated Edison every single year since 2008 has been great. It is one of the reasons why our yield on the original 25 shares is 10.45%!
Take a look at the annual dividend payments since 2008 (when we purchased our shares) –
- 2008 – $2.34
- 2009 – $2.36
- 2010 – $2.38
- 2011 – $2.40
- 2012 – $2.42
- 2013 – $2.46
- 2014 – $2.52
- 2015 – $2.60
- 2016 – $2.68
- 2017 – $2.76 (projected)
As you can tell from the numbers above, ED dividends have been raised consistently. But unfortunately, the growth of those increases has not been very strong.
Typically, we look for stocks with a 5-year or 10-year dividend growth rate of 6% or higher.
Here are a few average growth rates for shares of Consolidated Edison –
- 1 Year DGR – 2.98% (2016 to 2017)
- 3 Year DGR – 3.08% (2014 to 2017)
- 5 Year DGR – 2.67% (2012 to 2017)
- 9 Year DGR – 1.86% (2008 to 2017)
Note – Since we have owned shares of ED for the past 9 years … I calculated the 9 year DGR instead of using the 10 year.
Overall, the dividend growth of the company has been poor. Over the past couple of years, the growth has been trending a little higher … but is still well below the 6% average growth we look for now.
Consolidated Edison – Buy, Sell, or Hold?
Back in 2008 when we bought our 25 original shares of ED, we didn’t have any stock screen criteria.
We took a chance on the company based on BUY recommendations from other brokers. If we would have used a stock screen back then, we probably would have passed on this company based on slow dividend growth.
Now in 2017, based on a payout ratio above 60% and dividend growth well under 6% … we will continue to HOLD our current shares.
In the event the company would ever cut their dividend, then we would sell all our shares. However, as long as they continue to maintain or raise their annual dividend … we will continue to hold onto our shares.
For now, we also plan to keep our dividend reinvestment plan going. Even with slow dividend growth over 8+ years … we have still added over 12 new shares of the stock from DRiP and want to continue that momentum.
Despite a slow growing dividend, being a patient investor and holding onto our shares for the long term has paid us back with a yield over 10%!
Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – ED, and O. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.