Monday, August 8, 2011

Consolidated Edison, symbol ED, dividend machine for August 8, 2011

Con Edison plant on the East River at 15th Str...Image via Wikipedia

Income investors have to both hate and like the recent action of the stock market.  We are partially immune from the price gyrations but not totally.  After all, we do not have ice in our veins; we just have investments that deposit money in our checking account with little worry.  But it is difficult to see the value of an investment decrease.  My advice is the same as always.  Try not to worry as much about your portfolio value and more about the income it creates.

With that concept in mind, and with the market down some 1,000 points lately, we have more and more opportunities to invest for income.  Income investments are on sale.  Like all sales items, they could get cheaper but we cannot time the market so we let the fundamentals guide us.  We stick to our discipline and keep our investing for income as simple as possible.

This week’s dividend machine pick is Consolidated Edison, symbol ED.  This week we have many choices but I selected a “widows and orphans” stock that has paid dividends every year since 1885.  You know the market has had many ups and downs during that period.  Moreover, ED has increased the dividend every year for 36 consecutive years.  We income investors know that ever year things cost more even if the government tries to convince us there is no inflation.  

Most of us are debt free so we do not need to worry about rising interest rates affecting our mortgage or school loans or even credit cards, but we do need to worry about rising property taxes, sewer fees, homeowner fees, service fees and maintenance costs.  This is why we must invest in a company that will provide reliable income; ever-increasing income and income that is competitive with a 5 – 10 year US treasury. 

ED will pay you $.60 per share on September 15, 2011 if you own it by August 15, 2011.  The annual dividend yield based on Friday’s closing price of $53.27 is 4.51%.   With that kind of yield, we have no trouble beating the 10-year US treasury yield. Earnings are $3.64 per year.  Debt to equity ratio is .97 which meets our criteria of less than one and is very acceptable for a utility.

ED is a good example of how to use my simple income investing technique.  Consider this company or one like it for the income-producing portion of your portfolio.

Very Truly Yours,
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