Consolidated Edison (ED) is a Top Dividend Stock Right Now: Should You Buy?

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Based in New York, Consolidated Edison (ED) is in the Utilities sector, and so far this year, shares have seen a price change of 10.63%. The utility is paying out a dividend of $0.89 per share at the moment, with a dividend yield of 3.23% compared to the Utility - Electric Power industry's yield of 2.97% and the S&P 500's yield of 1.46%.

Looking at dividend growth, the company's current annualized dividend of $3.55 is up 4.4% from last year. Over the last 5 years, Consolidated Edison has increased its dividend 5 times on a year-over-year basis for an average annual increase of 2.28%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Con Ed's current payout ratio is 60%, meaning it paid out 60% of its trailing 12-month EPS as dividend.

ED is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $6.05 per share, with earnings expected to increase 6.14% from the year ago period.

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that ED is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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