Edison International’s 6.19% yield looks like a gift until you dig into the wildfire liability, the debt load, and what the CEO said about one more credit rating cut.
Edison International (NYSE:EIX | EIX Price Prediction) now yields 6.19%. For a regulated electric utility, that number is a warning sign. Shares trade at $56.62, down 0.39% year to date, even though earnings keep beating estimates. The market is pricing in the Eaton Fire.
Earnings Cover the Payout With Room to Spare
The quarterly dividend is $0.8775, or $3.51 annualized. At the midpoint of 2026 core EPS guidance of $5.90-$6.20, the payout ratio comes to roughly 58%. That sits slightly above the 45-55% target, which management measures against SCE core earnings. Q2 core EPS of $1.54 beat the $1.21 consensus, the company’s fourth straight beat.
On the July call, CEO Pedro Pizarro said:
“With this strong start to the first half of the year, we are confident in reaffirming our 2026 core EPS guidance and other financial targets, including our 5% to 7% core EPS growth over the long term.”
The payout history backs up the 2025 release’s claim of a “22nd consecutive year of dividend growth”. The quarterly rate has risen every year since $0.20 in 2004.
Cash Flow Tells a Thinner Story
In 2025, operating cash flow was $5.8 billion, and capex was $6.515 billion. That left free cash flow at-$715 million before $1.378 billion in dividends. The first half of 2026 ran a $688 million deficit. Many utilities borrow to pay dividends while they build out their grids, but Edison carries $43.54 billion in total debt and only $242 million in cash. The ~$2.0 billion Woolsey securitization helps. So does the plan to issue no equity through 2030.
Management says Eaton Fire liability is probable but cannot yet be estimated. SCE has extended more than 2,200 offers worth over $775 million, and more than 30,000 claims are in litigation. Pizarro was blunt about credit risk:
“If you look at just the S&P ratings, it’s triple B minus for the utility, so there’s nowhere to go in investment grade, right? The next step is non-investment grade, which adds a lot of cost.”
He also said, “The clarity and quality of the legislative outcome will influence the cost of capital available to support future investment.”
How the California Peers Compare
PG&E (NYSE:PCG) faces the same wildfire regime but has set a much lower bar: a 20% payout ratio by 2028, backed by 9%+ annual EPS growth guidance. Sempra (NYSE:SRE) pays $2.63 annualized, about 52% of its 2026 adjusted EPS midpoint, and Oncor’s Texas growth dilutes its California exposure. Edison pays out more than either peer, and its growth depends far more on Sacramento’s decisions.
Verdict: Safe Today, Slower Tomorrow
The dividend looks safe for now. Core earnings cover it comfortably, regulators approved 91% of SCE’s capital request, and management has reaffirmed guidance every quarter. A cut would likely require a junk downgrade combined with an Eaton settlement far larger than current offers suggest. The bigger danger is a smaller raise. The 2026 rate has been flat for four payments, so the December declaration’s size will show how much confidence the board has.
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Source: 247wallst.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
