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American Electric's (AEP) Shareholders Get 5.7% Dividend Hike

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American Electric Power Company, Inc. (AEP - Free Report) announced a hike of 4 cents per share or 5.7% in its quarterly cash dividend, bringing it to 74 cents. The dividend is payable Dec 10 to its shareholders of record as of Nov 10.

This increase is on par with the company’s 5-7% operating earnings growth projection and the payout will mark its 442nd consecutive quarterly cash dividend.

The new dividend yield of the utility is 3.26%, comparing favorably with the S&P's figure of 1.55%. American Electric has been consistently increasing its dividend since 2005 to boost shareholder value.

Can This Dividend be Sustained?

Cash flow from operations was $1,746.2 million at the end of second-quarter 2020 compared with $1,800.8 million at the end of second-quarter 2019. Also, long-term debt was $26.64 billion as of Jun 30, 2020 compared with $25.13 billion as of Dec 31, 2019. While these parameters did not show any improvement, cash and cash equivalents as of Jun 30 were $348.8 million, up from $246.8 million as of Dec 31, 2019.

American Electric's strategy including incremental investments in renewable generation projects throughout the United States is likely to boost its performance and cash flow. The company has a stable earnings base of 5.5 million customers spread across 11 states. This provides strength to the company’s revenue stream and insulates it from lower sales in any particular service area. The company owns nearly 40,000 miles of electricity transmission lines and more than 221,000 miles of distribution lines.

Also, its geographically-diversified operations allow it to avail of transmission opportunities with better returns compared with its single-state utility peers. Backed by these positives, its consistent dividend payment seems sustainable.

Other Utilities Hiking Dividend

Apart from American Electric, other utility companies are rewarding its shareholders with dividend hikes despite the ongoing pandemic. Some are American Water Works Co. Inc. (AWK - Free Report) , Chesapeake Utilities Corporation (CPK - Free Report) and Essential Utilities Inc (WTRG - Free Report) .

American Water Works increased its dividend payout by 10% to 55 cents per share while Chesapeake Utilities hiked dividends by 8.6% to 44 cents. Also, Essential Utilities raised its quarterly dividend by 7% to 25.07 cents per share.

Zacks Rank & Price Performance

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past six months, shares of the company have gained 8.5%, outperforming the industry’s 4.9% growth.

 

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