American Electric Power Co Inc's Dividend Analysis
Assessing the Sustainability and Growth of AEP's Dividend Payments
American Electric Power Co Inc (NASDAQ:AEP) recently announced a dividend of $0.88 per share, payable on 2023-12-08, with the ex-dividend date set for 2023-11-08. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's delve into AEP's dividend performance and assess its sustainability.
What Does American Electric Power Co Inc Do?
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American Electric Power is one of the largest regulated utilities in the United States, providing electricity generation, transmission, and distribution to over 5 million customers in 11 states. The company's capacity is primarily coal-based (41%), with the remainder from a mix of natural gas (27%), renewable energy and hydro (23%), nuclear (7%), and demand response (2%). Its vertically integrated utilities, transmission and distribution, and generation and marketing support earnings.
A Glimpse at American Electric Power Co Inc's Dividend History
Since 1986, AEP has maintained a consistent dividend payment record, currently distributed on a quarterly basis. The company has increased its dividend each year since 2004, earning it the status of a dividend achiever, an honor given to companies that have increased their dividend each year for at least the past 19 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down American Electric Power Co Inc's Dividend Yield and Growth
As of today, AEP currently has a 12-month trailing dividend yield of 4.23% and a 12-month forward dividend yield of 4.47%, suggesting an expectation of increased dividend payments over the next 12 months. Over the past three years, AEP's annual dividend growth rate was 5.40%, increasing to 5.80% per year over a five-year horizon. Over the past decade, AEP's annual dividends per share growth rate stands at 5.50%. Based on AEP's dividend yield and five-year growth rate, the 5-year yield on cost of AEP stock as of today is approximately 5.61%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. AEP's dividend payout ratio as of 2023-09-30 is 0.76, which may suggest that the company's dividend may not be sustainable. However, AEP's profitability rank of 7 out of 10 as of 2023-09-30 suggests good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
AEP's growth rank of 7 out of 10 suggests a good growth trajectory relative to its competitors. The company's revenue per share and 3-year revenue growth rate indicate a strong revenue model, with revenue increasing by approximately 6.80% per year on average. AEP's 3-year EPS growth rate of 7.60% showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. Lastly, the company's 5-year EBITDA growth rate of 6.60% further supports its growth prospects.
Next Steps
Considering AEP's consistent dividend payments, impressive growth rate, and robust profitability, it presents an attractive investment for those seeking steady income. However, its relatively high payout ratio may raise concerns about the sustainability of future dividends. Therefore, investors should closely monitor these metrics and the company's future earnings reports. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
