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American Electric's (AEP) Board Approves 5.4% Dividend Hike
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American Electric Power (AEP - Free Report) announced that the board of directors has approved a 5.4% increase in the quarterly dividend rate. The revised quarterly dividend will be 78 cents, up from the previous rate of 74 cents. The company’s new annualized dividend rate is $3.12 and the current dividend yield is 3.7%, better than the industry average of 3.2%.
American Electric Power’s management has been annually raising the dividend rate and it belongs to an exclusive group of companies that have raised the dividend rate every year since 2009. The board of directors approved a dividend increase this month, leading to a 68.7% total increase in annualized dividend over the last decade.
The revised quarterly dividend will be payable on Dec 10, 2021, to shareholders on record on Nov 10, 2021. Its targeted dividend payout is in the range of 60-70% of its operating earnings.
Can the Company Continue Dividend Hikes?
American Electric makes steady investments to increase the reliability of operations and serve customers efficiently. American Electric’s investment strategy also includes incremental investments in renewable generation projects across the United States. The new renewable projects that will come online will ensure a steady flow of income for the company.
American Electric has a stable earnings base of nearly 5.5 million customers across more than 11 states. This provides stability to the company’s revenue stream and insulates it from lower sales in any particular service area. The company’s 5-7% long-term earnings growth is based on regulated rate base growth of 7.4%.
It has a well-chalked-out plan to invest $37.3 billion in the 2021-2025 time period. American Electric, through its reduced lag mechanism, will recover more than 70% of planned investment, which will ensure steady earnings. The company has identified 16 gigawatts (GW) of new renewable opportunity by 2030, out of which 2 GW is already incorporated in the 2021-2025 capital plan.
Courtesy of stable performance and improving demand, the company’s cash from operations is expected to improve from $3.8 billion in 2021 to $6 billion in 2022 and $6.4 billion in 2023. Ongoing improvement in cash flows will also allow it to pay and hike dividends.
Utilities’ History of Dividend Payment
The companies that are involved in utility services generally have stable operations and earnings. Consistent performance and the ability to generate cash flows allow utilities to reward shareholders with regular dividend payments. American Electric Power has been paying dividends for 110 consecutive years.
It is not the only company with a track record of more than 100 years of consistent dividend payment. Utilities like National Fuel Gas (NFG - Free Report) , Consolidated Edison, Inc. (ED - Free Report) and Edison International (EIX - Free Report) have also been rewarding shareholders with dividend payments for more than 100 years without fail.
Price Movement
In the year-to-date period, American Electric Power has outperformed the industry it belongs to.
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American Electric's (AEP) Board Approves 5.4% Dividend Hike
American Electric Power (AEP - Free Report) announced that the board of directors has approved a 5.4% increase in the quarterly dividend rate. The revised quarterly dividend will be 78 cents, up from the previous rate of 74 cents. The company’s new annualized dividend rate is $3.12 and the current dividend yield is 3.7%, better than the industry average of 3.2%.
American Electric Power’s management has been annually raising the dividend rate and it belongs to an exclusive group of companies that have raised the dividend rate every year since 2009. The board of directors approved a dividend increase this month, leading to a 68.7% total increase in annualized dividend over the last decade.
The revised quarterly dividend will be payable on Dec 10, 2021, to shareholders on record on Nov 10, 2021. Its targeted dividend payout is in the range of 60-70% of its operating earnings.
Can the Company Continue Dividend Hikes?
American Electric makes steady investments to increase the reliability of operations and serve customers efficiently. American Electric’s investment strategy also includes incremental investments in renewable generation projects across the United States. The new renewable projects that will come online will ensure a steady flow of income for the company.
American Electric has a stable earnings base of nearly 5.5 million customers across more than 11 states. This provides stability to the company’s revenue stream and insulates it from lower sales in any particular service area. The company’s 5-7% long-term earnings growth is based on regulated rate base growth of 7.4%.
It has a well-chalked-out plan to invest $37.3 billion in the 2021-2025 time period. American Electric, through its reduced lag mechanism, will recover more than 70% of planned investment, which will ensure steady earnings. The company has identified 16 gigawatts (GW) of new renewable opportunity by 2030, out of which 2 GW is already incorporated in the 2021-2025 capital plan.
Courtesy of stable performance and improving demand, the company’s cash from operations is expected to improve from $3.8 billion in 2021 to $6 billion in 2022 and $6.4 billion in 2023. Ongoing improvement in cash flows will also allow it to pay and hike dividends.
Utilities’ History of Dividend Payment
The companies that are involved in utility services generally have stable operations and earnings. Consistent performance and the ability to generate cash flows allow utilities to reward shareholders with regular dividend payments. American Electric Power has been paying dividends for 110 consecutive years.
It is not the only company with a track record of more than 100 years of consistent dividend payment. Utilities like National Fuel Gas (NFG - Free Report) , Consolidated Edison, Inc. (ED - Free Report) and Edison International (EIX - Free Report) have also been rewarding shareholders with dividend payments for more than 100 years without fail.
Price Movement
In the year-to-date period, American Electric Power has outperformed the industry it belongs to.
Zacks Rank
American Electric Power currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.