The second problem is Consolidated Edison, Inc. (NYSE:ED)’s yield is second from the bottom. Exelon Corporation (NYSE:EXC)currently yields about 4%, and Consolidated Edison yields just 4.35%. Compared to the roughly 4.6% yields available at both Duke Energy Corp (NYSE:DUK) and The Southern Company (NYSE:SO), anything less automatically is an inferior investment.
The third issue with Consolidated Edison is their balance sheet ranks second to the bottom as well. The only company with a weaker debt-to-equity ratio is Southern Co at 1.07, but Consolidated Edison, Inc. (NYSE:ED) isn’t far behind at 0.89. Even after Duke’s merger with Progress, their debt-to-equity is at 0.86, and Exelon Corporation (NYSE:EXC)’s ratio is 0.77.
Maybe It’s Time For A Change?
If you are looking for a safe investment one thing you don’t want to see is a decline in cash flow. This is particularly true when talking about utilities that already pay out a high amount of their cash flow in dividends. Unfortunately, Consolidated Edison ranks dead last by this measure.
In the current quarter, the company’s core operating cash flow (net income + depreciation) declined by 13.65% versus last year. While Exelon Corporation (NYSE:EXC)’s core operating cash flow growth wasn’t great at 4.3%, it at least was positive. Relatively speaking, The Southern Company (NYSE:SO) and Duke’s cash flow growth destroyed their peers at 33.7% and 25.11% respectively.
Over time, Consolidated Edison, Inc. (NYSE:ED) may turn out to be an okay investment, the problem is, there appear to be better opportunities in the same sector. While I would avoid Exelon Corporation (NYSE:EXC) because of their negative growth, lower yield, and troubled finances, I don’t have the same reservations about Duke or The Southern Company (NYSE:SO).
Given the choice between Duke and Southern Co, the numbers speak for themselves. Southern Co has a higher yield, better growth rate, better cash flow growth, and trades for almost the same P/E as Duke. If you own Consolidated Edison, Inc. (NYSE:ED) and have a profit, now might be the time to make a switch to Southern C. as the superior investment.
Chad Henage has no position in any stocks mentioned. The Motley Fool recommends Exelon Corporation (NYSE:EXC) and The Southern Company (NYSE:SO).
The article There Are 4 Reasons to Avoid This Stock originally appeared on Fool.com.
Chad is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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