Edison Will Reinstate Dividend Halted in 2000
Edison International directors voted Thursday to reinstate the common stock dividend axed three years ago, a milestone in its long, slow crawl back from the financial disaster brought on by California’s energy crisis.
The quarterly payout of 20 cents a share Jan. 31 will be the first common stock dividend footed by Edison since October 2000, when the payout was 28 cents.
“This really is the culmination of what has been a long road,” Edison International Chief Executive John E. Bryson said after Thursday’s vote. “We still have a ways to go to get as strong as we think we need to be.”
Edison’s stock moved higher after the announcement and ended the day at $21.25, up 18 cents, or nearly 1%, on the New York Stock Exchange.
The Rosemead company’s main subsidiary, Southern California Edison Co., ran up huge power debts and Edison saw its credit rating cut to “junk” status during the crisis of 2000-01 because SCE couldn’t pass along high wholesale electricity prices to customers.
The return of the dividend gives the company greater flexibility to turn to equity markets for financing, said Ellen Lapson, managing director of global power for Fitch Ratings.
“The fact that their credit is in a strong enough place to pay a dividend is a positive,” Lapson said.
In addition, she noted, dividends reduce the pressure to produce fast earnings growth. “It was the demand for high growth in earnings that prompted companies like Edison International to try to emulate Enron and go down riskier paths.”
The quarterly common stock dividend will be payable to shareholders of record Jan. 6. Directors of SCE declared a quarterly dividend of $1.81 a share on the 7.23% series of $100 cumulative preferred stock payable Jan. 31 to shareholders of record Jan. 5. Those types of dividends were paid throughout the crisis.
Edison’s recovery began when it cut a deal with the California Public Utilities Commission in 2001 that kept electricity rates high enough to pay off $3.6 billion in energy crisis power debts. That process was completed last summer, and rates declined by $1.25 billion Aug. 1.
The major credit-rating firms recently deemed SCE’s debt to be investment grade, which cleared the way for the utility to pay a dividend to its parent company. Edison itself on Dec. 1 restored distributions on its quarterly income preferred securities, which were deferred during the energy crisis. That was a necessary step before Edison could reinstate the common stock dividend.
Another Edison subsidiary, Edison Mission Energy, which builds and operates power plants, has been hobbled by low power prices and high debt. On Thursday, Edison Mission closed a loan for $800 million, which allowed it to avoid a bankruptcy filing.
