The AES Corporation (AES - Free Report) announced that its board of directors has approved a 5% hike in its first-quarter 2019 common stock quarterly dividend to 13.65 cents, thus taking the annualized payout to 54.60 cents per share.
Details of the Hike
The new quarterly dividend of 13.65 cents per share is up by 0.65 cents from the earlier quarterly payout. The raised dividend is payable Feb 15, 2019 to shareholders of record at the close of business on Feb 1, 2019. This dividend increase by the company’s board members has been for the sixth time in a row. We note that yearly payout growth is becoming quite consistent for this utility major.
The current annualized dividend yield is 3.46% compared with the industry average of 2.97%. This rise in distributable income vouches for the company’s strong balance sheet and a steady cash flow position, which provides it with financial flexibility and a cushion for incremental dividend.
Can AES Corp. Sustain Dividend Increases?
The company is teaming up with other companies to expand its operation. To this end, AES Corp.’s joint venture (JV) with Siemens — Fluence — is essential to mention. Also, in August 2018, AES Corp. inaugurated AES Colon, a combined cycle power plant with 381-megawatt (MW) capacity and its first liquified natural gas (LNG) terminal in Central America. Currently, the company has a total of 3.9 GW under construction and expects worth a capacity of 2.8 GW to be commissioned by this year-end.
AES Corp. has successfully maintained a flexible liquidity position. It hopes to generate $4.2 billion in discretionary cash for the period of 2018-2020. As of Sep 30, 2018, the company’s cash and cash equivalents summed $1,187 million and it generated cash from operating activities of $767 million. Currently, the company continues to estimate average annual growth in proportional and parent free cash flow of at least 8-10% through 2020.
We believe, the company’s growth strategies along with a strong cash flow will help it generate sufficient funds to meet its financial commitments.
Dividend Hikes in the Utility Sector
AES Corp. is not the only company to reward its shareholders with increased dividends. There are some other players as well in the same sector to add shareholder value.
For instance, Ameren Corporation (AEE - Free Report) has approved a 3.8% quarterly cash dividend raise on its common stock of 47.5 cents per share on Oct 12, 2018. Also, on Oct 23, 2018, American Electric Power Company, Inc.’s (AEP - Free Report) board of directors declared a regular quarterly cash dividend of 67 cents per share on the company's common stock, reflecting an 8.1% increase from the previous payout of 62 cents. Again, Atmos Energy Corporation (ATO - Free Report) announced a hike in the company’s quarterly dividend to 52.5 cents per share, which annually stands at $2.10 per share on Nov 7, 2018.
AES Corp.’s stock has surged about 45.3% in the past 12 months compared with the industry’s growth of 1.1%.
AES Corp. currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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