Dividend Farming Head-to-Head: Southern Company v Consolidated Edison

In previous scorecards I primarily reviewed one firm at a time.  However, when I have money to invest I’m normally checking out multiple firms at once.  This means the final decision boils down to selecting company A or company B.  As a result, I find a head-to-head (H2H) comparison helpful in making the final buy decision.

It would be nice to say the process is objective and scientific, but there is a degree of art involved.  Since good information leads to good decisions (mostly) I try to follow the facts on the ground as much as possible when deciding where to park my cash.  With that in mind, I built a Dividend Farming Scorecard H2H for Southern Company (SO) and Consolidated Edison (ED). 

	Benchmark	SO	ED	Advantage
CCC	Champion	Contender	Champion	ED
Yield	4.0%	4.07%	3.2%	SO
Sector		Utilities	Utilities	N/A
Leadership Source: Statista	Top 10	#4	#9	SO
Market Cap	$10 B+	63.66 B	30.35 B	SO
Current Ratio	>1	0.75	0.61	SO
P/E (TTM)	< 20	14.37	21.71	SO
P/B	< 2	2.46	1.74	ED
Tot. Debt / Equity (TTM)	< 1	1.8	1.2	ED
Dividend History	25 Years	19	45	ED
TTM Price Range	Lower Half	Top	Top Quartile	ED
Payout Ratio	< 75%	58.49%	70.31	SO
DATES		10.30.19	10.30.19	SO

CCC references the list of Champions, Contenders, and Challengers published by dripinvesting.org.  This is also the source for the Dividend History in many cases. 

The balance of vital statistics are sourced from Fidelity’s News & Research.

The Benchmark column lists the target metric I’m seeking for each factor.  The metrics have been culled mostly from reading Ben Graham’s work (Intelligent Investor and Security Analysis).

It’s apparent SO and ED meet most of my investment criteria but fall short in five or six areas each which shown in red text. 

SO misses the mark for:

• CCC
• Current Ratio
• Price-to-Book (P/B)
• Debt / Equity on a Trailing Twelve-Month (TTM) basis
• Dividend history
• Price is at the top of its TTM price range

In contrast, ED falls short on:

• Dividend Yield
• Current Ratio
• Price-to-Earnings (P/E) on a Trailing Twelve-Month (TTM) basis
• Debt-to-Equity (D/E)
• Price which is near the top of its TTM range as well

The Advantage column is used to show the relative benefit of one firm or the other for each item.  Looked at this way, SO shows a small lead over ED since it’s superior on 6 points while ED is a winner on 5.

The data point toward ED relative to my benchmarks, but the decision is close because SO has H2H advantage.  At this juncture subjectivity (art?) enters the mix.  If a company has a significant advantage in one or two areas important to me, it may be enough to move the purchase needle in that direction. 

For instance, I may decide the CCC ranking carries more weight than other factors.  If so, I could preference ED over SO because ED is a Champion while SO is a Contender.  However, if SO were superior to ED on 8 or 9 metrics, weighting one factor more than others isn’t likely to sway the data-driven purchase decision.  Clear as mud, right?

The SO v ED case is close, but given the number of criteria failing to meet the benchmark in both cases, I might look elsewhere for opportunity.

The thoughts expressed here are those of the author, who is not a financial professional.  Opinions should not be considered investment advice.  They are presented for discussion and information purposes only.  For specific investment advice or assistance, please contact a registered investment advisor, licensed broker, or other financial professional.