Based on the likely sustainability of Edison International's dividend, Guggenheim Securities LLC raised its investment opinion on the company to "buy" from "neutral" Feb. 23.
"[W]ith the dividend declaration last month, which passed a thorough review of potential scenarios around [Edison International]'s potential liabilities by the Board of Directors, we are comfortable with the dividend which remains a key driver of any utility's investment proposition," Guggenheim Analyst Shahriar Pourreza wrote in an investor note.
Edison International's dividend yield stands at 4.1%, which is below FirstEnergy Corp.'s 4.4% and above American Electric Power Co. Inc.'s 3.8%, according to S&P Capital IQ data. Fellow California utility PG&E Corp. announced in December 2017 that it is suspending its dividend payments due to possible exposure to potential liabilities related to wildfires in the northern part of the state.
Although Guggenheim analysts called California a "relative mess" on legal, regulatory and legislative matters related to wildfires but said these have been reflected in Edison International's valuation.
Pourreza said it is "hard for us to imagine potential liabilities in the [California] fires will breach the [$7 billion] being erased from [Edison International] market cap since the start of the events — in short, [Edison International's] underperformance likely overly reflects the overhangs at this juncture."
Guggenheim raised its price target on the company to $71 from $68. Edison International shares closed at $59.74 on Feb. 22.
The firm also lowered its EPS estimates on Edison International to $3.88 from $4.30 for 2018, to $4.60 from $4.68 for 2019, to $5.03 from $5.06 for 2020, and to $5.32 from $5.35 for 2021.