Assessing the Upcoming Dividend and the Company's Financial Health
American Electric Power Co Inc (AEP, Financial) recently announced a dividend of $0.88 per share, payable on 2024-03-08, with the ex-dividend date set for 2024-02-08. 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 look into American Electric Power Co Inc's dividend performance and assess its sustainability.
What Does American Electric Power Co Inc Do?
American Electric Power is one of the largest regulated utilities in the United States, providing electricity generation, transmission, and distribution to more than 5 million customers in 11 states. About 42% of AEP's capacity is coal, with the remainder from a mix of natural gas (27%), renewable energy and hydro (21%), nuclear (8%), and demand response (2%). Vertically integrated utilities, transmission and distribution, and generation and marketing support earnings.
A Glimpse at American Electric Power Co Inc's Dividend History
American Electric Power Co Inc has maintained a consistent dividend payment record since 1986, with dividends currently distributed on a quarterly basis. Furthermore, American Electric Power Co Inc has increased its dividend each year since 2004, earning it the title of a dividend achiever—a distinction reserved for companies with at least two decades of consecutive annual dividend increases. Below is a chart showing annual Dividends Per Share to track historical trends.
Breaking Down American Electric Power Co Inc's Dividend Yield and Growth
As of today, American Electric Power Co Inc boasts a 12-month trailing dividend yield of 4.35% and a forward dividend yield of 4.54%, indicating anticipated dividend increases over the next year. Over the past three years, the company's annual dividend growth rate was 5.40%, which extended to a five-year horizon, increases to 5.80% per year. Over the past decade, American Electric Power Co Inc's annual dividends per share growth rate stands at 5.50%.
Considering American Electric Power Co Inc's dividend yield and five-year growth rate, the 5-year yield on cost for the stock is approximately 5.77% as of today.
The Sustainability Question: Payout Ratio and Profitability
To gauge the sustainability of its dividends, it's crucial to examine American Electric Power Co Inc's payout ratio. A payout ratio reflects the proportion of earnings allocated to dividends, with a lower ratio indicating more earnings retained for future growth and stability. As of 2023-09-30, American Electric Power Co Inc's dividend payout ratio is 0.74, which may raise concerns about the sustainability of the company's dividends.
Additionally, American Electric Power Co Inc's profitability rank stands at 7 out of 10 as of 2023-09-30, signaling robust profitability relative to peers. The company has also consistently reported positive net income each year over the past decade, reinforcing its strong financial position.
Growth Metrics: The Future Outlook
American Electric Power Co Inc's growth rank of 7 out of 10 suggests a favorable growth trajectory when compared to competitors. The company's revenue per share and 3-year revenue growth rate of 6.80% per year, however, underperform approximately 55.07% of global competitors.
The company's 3-year EPS growth rate of 7.60% per year also underperforms approximately 41.24% of global competitors. Lastly, American Electric Power Co Inc's 5-year EBITDA growth rate of 6.60% underperforms approximately 44.73% of global competitors, indicating mixed performance in growth metrics.
Concluding Thoughts on American Electric Power Co Inc's Dividends
In conclusion, while American Electric Power Co Inc's dividend history and growth rates are commendable, the payout ratio and mixed growth metrics warrant careful consideration by investors. The company's strong profitability rank and consistent net income are positive signs, but the sustainability of dividend payments remains a point for investor vigilance. As value investors ponder the future of American Electric Power Co Inc's dividend payments, it is advisable to consider both the quantitative data and the qualitative aspects of the company's operations and industry position.
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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.
