A stock that's safer than a T-bill
This power company's shares are backed by the full faith and credit of people who don't want their lights turned off. Meanwhile, Treasurys are riskier than ever.
We all know that stocks aren't bonds. Stocks give you an ownership stake in a company and entitle you to some of the profits of that company. Bonds are loans to companies, senior loans, and even if a business turns down, taking its stock with it, the bond bills have to be paid. That's why people regard bonds as being safer than stocks.
The safest of all pieces of paper are Treasury bonds because they are backed by the full faith and credit of the United States, which is why they are called risk-free securities.
But right now we are seeing a bizarre moment that has stood the difference between a stock and a bond on its head.
Right now bonds, particularly Treasury bonds, may be risk-free as far as being backed by the full faith and credit of the United States government, but that income stream that they have to pay you has never been lower. In history. Even as our finances as a nation have, arguably, never been worse, except for perhaps during the Civil War. So we have this bizarre anomaly in which a paper that is guaranteed by the full faith and credit of the nation can't be considered as risk-free as it once was. So you are being paid the least amount of money ever for a security that is the riskiest it has ever been.
Now consider Con Edison (ED). Here's a company with one of the greatest dividend records in history. It is a company that has a fabulous balance sheet, arguably much better than that of the United States, and it is backed up by the full faith and credit of people who don't want their lights turned off. Those are some motivated people, especially in an era when almost everything we own of any value needs to get charged.
If you own Con Edison's stock, it gives you a revenue stream that is more than 2 1/2 times that of a 10-year Treasury and, unlike with Treasurys, you can expect that revenue stream to be increased, not kept at the same level. Most importantly, Con Edison actually has some upside because it provides power to one of the fastest-growing areas in the United States and it also can supplant expensive oil provided by others with cheaper natural gas. And, yes, it provides no power to Europe, where the lights are actually about to go dark in at least one country: Greece. I kid you not. The power companies can't pay their bills, because the people aren't paying theirs.
Now I ask you which is safer: Con Ed or Treasurys? Which has more value? Which is better for you?
Right now, I think the answer is clear: Con Ed gives you all the benefits of a good bond without any of the liabilities. Treasurys? They remind me of a stock that can only go lower and pays you no dividend.
Yep, if you like bonds, you will love Con Ed. And if you hate them, then you'll love U.S. Treasurys. Enjoy the irony, but take the stock, not the bond.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in the stocks mentioned.
More from TheStreet.com
These comments make me laugh. Whether you are for/against Cramer is meaningless, do you honestly expect *good* advice for free? These guys (financial writers) as a whole get paid to spout the same drivel every day 24/7 365. Would you go to a used car lot to listen to the same sales pitch every morning? No.
Wall Street has never, will never be about normal people making money. It's made for big money, the system is set up to give all the advantages to the ultra rich and hedge fund managers. If you want some good advice here it is:
Get a good personal finance manager and pay them to manage your assets. If you don't have the means to do it then you shouldn't be picking stocks and should be looking at building up your net worth through other avenues. That's the best free advice you're every likely to get. You're welcome.
don't misunderstand people on this site ALERTING you to the cramer scam....
we are warning you about this shyster hack who knows nothing about the market but
everything about pumping and dumping stock while selling his hack newsletter to gullible
keep following the news on chesapeake..........cramericans have been losing on this cramer favorite
since 35 dollars per share...now 15....a LONG way to get back to even on this pump and dump
beauty............pay particular attention to all the bad LEVERAGED bets mclendon made
yet cramer kept having him on his show pumping the stock
PUT THIS CON MAN IN JAIL
I like Duke Energy (DUK) better than ConEd, personally. To the naysayers, look at what utility stocks have done in the last few weeks while the indexes have fallen.
The U.S. isn't Greece. We're still the largest single economy in terms of GDP.
The way I interpret this article is: a desperate search by a seasoned Wall Street professional for one stock that is a better investment than the worst T-Bill market ever. What a choice we’re being handed by this glorious, all knowing, all powerful financial industry. Is this really the best we investors can hope for in the future of financial advice? The truth is, it’s probably never really been any better than this.
And Facebook is going to spark the next tech rally. How are HP and Dell Doing lately Jimmy boy. Hit your bells and whistles on your TV show all you want. They are nothing but noise-just like you.
I doubt this post will even make it since you have had me blocked from posting on your articles.
Con Ed? Answer this Cramer. Did ConEd cut its dividend in half in the 90's like ALL utility stocks did?
Did the price drop by 50%? De-regulation brought the consumer an increase in bills because Newt and company wanted to privatize it. That effort was to lower your monthly utility bills! You expect me to follow your advice after experiencing that hit? Cramer, get real. Your advice is not timely, your advice is based on poor research. Did you even look at the history of this stock???????? Nope, you sure didn't.
long term treasurys are up 30+% yr/date.
When you're talking about such low rates, 30% isn't that much. Would you rather get 4.5% in dividends in very low beta stocks, or 1.3% on treasuries? Goin from 1% to 1.3% is a 30% gain, but is 1.3% a rate to get excited about?
AEP is a much better choice in this arena of power generation / transmission.
Superior numbers and a whole point more in dividend income.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The push is on for undervalued, cash-rich technology companies to return more money to investors. And there's still room for dividend growth.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.