Is Consolidated Edison a dividend aristocrat with feet of clay?

Consolidated Edison posts its 51st consecutive year of dividend growth.

After a long stretch of treading water, the utility company that supplies New York City with electricity, gas and steam has seen its market capitalisation triple since 2010 and the end of the subprime crisis. A full cycle of rock-bottom interest rates has, of course, played a significant part in that development.

In terms of earnings, it is not so much revenue growth that stands out, as it remains below inflation. Between 2010 and 2025, ConEd's revenues increased only very modestly, from $13bn to $16bn.

In fact, the main driver of margin expansion was the long period of deeply depressed natural gas prices - following the production glut emerging from Texas's Permian Basin, beginning precisely in 2010 - along with a tax rate that eased substantially over the period.

Despite these tailwinds, the utility still had to carry out a series of capital increases, with its shares outstanding rising from 286 million to 355 million over fifteen years, while its net debt was multiplied by two and a half times.

That is because year after year ConEd operates with negative cash flows, and therefore with significant external funding needs. Moreover, its capex has also been multiplied by two and a half since 2010, from $2bn to almost $5bn a year.

This is without counting provisions for the decommissioning of a nuclear fleet that ConEd does not own, but from which it buys power...

In this respect, one has to place blind faith in the group's reported results: it pays a steadily rising dividend, as noted, but one that remains modest - $2.4 per share in 2010, versus $3.4 per share expected this year.

That is exactly the impact of inflation over the period - according to the official statistics of the US Department of Labor. In constant dollars, dividend growth is therefore precisely zero.

ConEd now carries very substantial debt, equivalent to seven times its operating profit after depreciation and amortisation. For shareholders, it offers only a 3.4% dividend yield, versus a 10-year US Treasury bond paying a 4.3% coupon.

Which suggests investors may be placing perhaps overly blind confidence in the New York utility - which does, it is true, enjoy a strategic position in a structurally privileged market.