On May 14, 2025, KeyBanc Capital Markets lowered its rating on Consolidated Edison from “Sector Weight” to “Underweight,” setting a price target of \$90.
🔍 The downgrade reflects growing concerns over regulatory risks, particularly stemming from potential impacts of tariffs and legislative changes like the Inflation Reduction Act. These could squeeze margins and create headwinds for future earnings stability, especially as Con Ed navigates the evolving energy landscape. While demand from large-load customers remains stable, the regulatory backdrop introduces enough uncertainty to prompt a reassessment.
📉 Another major factor is valuation. With the stock recently hovering around \$100, KeyBanc sees limited upside. At current levels, Con Ed is trading at a premium compared to historical averages, leaving little room for expansion without a major catalyst.
💰 Con Edison remains a strong dividend payer, continuing its streak of over five decades of increases. However, dividend fundamentals are flashing some caution signals:
📌 Dividend Yield: Approximately 3.28%
📌 Payout Ratio: 62.57% of earnings
📌 Free Cash Flow Payout Ratio: 100%
While the earnings payout ratio is healthy, the fact that all free cash flow is going toward dividends raises sustainability questions if operating conditions worsen.
Con Ed’s defensive nature and dividend track record still make it a go-to utility for income investors, but with regulatory pressure and valuation stretch, KeyBanc is urging a more cautious stance.