We recently compiled a list of the 10 Undervalued Dividend Aristocrats To Buy According to Hedge Funds. In this article, we are going to take a look at where Consolidated Edison, Inc. (NYSE:ED) stands against the other undervalued dividend aristocrats to buy according to hedge funds.
A dividend aristocrat is an S&P 500 company that not only maintains regular dividend payments to shareholders but also increases its payouts annually. To qualify as a dividend aristocrat, a company must raise its dividends consistently for at least 25 consecutive years.
Michael Clarfeld, Portfolio Manager at ClearBridge, recently talked about why companies that consistently grow their dividends are well-positioned to handle the challenges of 2025. With rising costs, tighter margins, higher interest rates, and inflation on the horizon, Clarfeld is still optimistic about the economy. He pointed to strong employment numbers, upbeat consumer sentiment, and confident businesses, especially after the election. Pro-business policies under the Trump administration could drive investments and growth, which sounds great, but there’s a catch. For instance, bringing manufacturing back to the US would create jobs and boost wages, but it could also increase business costs. After two strong years, Clarfeld doesn’t see much room for big capital gains in 2025. Plus, with inflation sticking around, the Federal Reserve is likely to take a more cautious approach. That said, he sees opportunities in sectors like European and global consumer staples and US energy infrastructure.
Clarfeld is a big fan of dividend growth stocks, calling them a timeless investment. They can act as a safety net during volatile markets and provide steady income, which is especially useful when capital appreciation feels out of reach. He also highlighted how dividends help protect your purchasing power by keeping up with inflation. In his view, dividend growth is a smart and reliable strategy for navigating a potentially bumpy 2025.
Paul Baiocchi of SS&C ALPS Advisors sees dividend investing as a smart move, expecting the Fed to ease rates. According to Baiocchi, investors are shifting from money markets and fixed income to dividend-paying stocks, especially companies with leverage that could benefit from lower interest rates. Similarly, Mike Akins of ETF Action also sees dividend ETFs as a defensive play, highlighting that the companies included typically have strong balance sheets. He notes the growing popularity of dividend-focused ETFs, suggesting that consistent dividends give investors confidence in a company’s stability and financial health. Both experts agree that dividends offer a sense of durability and drawdown protection in uncertain markets.
Aerial view of transmission and distribution substations providing electricity to residential and commercial customers.
Our Methodology
In this article, we selected stocks from the Dividend Aristocrats List that had a P/E ratio below 20 as of December 23. Our focus was on identifying stocks with the strongest hedge fund sentiment in Q3 2024 among the 66 Dividend Aristocrats that also met our P/E criteria. The stocks are ranked below in ascending order based on the number of hedge fund holders for each company.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Consolidated Edison, Inc. (NYSE:ED)
Dividend Yield as of December 23: 3.69%
Number of Hedge Fund Holders: 29
P/E Ratio: 16.92
Consolidated Edison, Inc. (NYSE:ED) is an American utility company providing regulated electric, gas, and steam delivery services. Consolidated Edison, Inc. (NYSE:ED) operates extensive infrastructure, including transmission lines, substations, transformers, and distribution networks for both electricity and natural gas. Established in 1823 and headquartered in New York City, the company caters to residential, commercial, industrial, and government clients.
Consolidated Edison, Inc. (NYSE:ED) reported a third-quarter net income for 2024 of $588 million, or $1.70 per share, compared to $526 million, or $1.53 per share, in the same period last year. Adjusted earnings for Q3 2024 were $583 million, or $1.68 per share, up from $561 million, or $1.62 per share, in Q3 2023. These figures exclude the impact related to the sale of Con Edison’s former subsidiary, Con Edison Clean Energy Businesses. For the full year 2024, Con Edison expects adjusted earnings per share to range from $5.30 to $5.40, slightly raised from the previous forecast of $5.20 to $5.40 per share.
Consolidated Edison, Inc. (NYSE:ED) has proudly increased its dividend for 50 straight years, with an impressive annual growth rate of 5.65%. The company aims to pay out 55% to 65% of its adjusted earnings in dividends. This is why the company holds a strong position on our list of the best dividend aristocrat stocks. For 2024, Con Edison plans to issue up to $3.25 billion in long-term debt for its utilities but does not expect to issue common equity, except for what is required under its dividend reinvestment, employee stock purchase, and long-term incentive programs.
According to Insider Monkey’s Q3 2024 database, 29 hedge funds held stakes in Consolidated Edison, Inc. (NYSE:ED) worth nearly $602 million.
Overall, ED ranks 7th on our list of the undervalued dividend aristocrats to buy according to hedge funds. While we acknowledge the potential of ED to grow, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ED but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.