Tags: American | Electric | growth | AEP

American Electric Power: Stable, Slow Growth

By    |   Monday, 31 Oct 2011 12:35 PM

Regulated utility holding company American Electric Power (AEP) provides the traditional utility stock attributes: steady returns and an attractive dividend. For a safe option in a turbulent market, this stock may be an attractive choice for stable but slow growth. For long or short term capital growth, not so much.

American Electric Power is a holding company which owns approximately 10 public utilities in a territory ranging from Michigan to Texas. The owned utilities providing the largest contribution to earnings are Ohio Power, Columbus Southern Power and Appalachian Power. These three account for about 60 percent of earnings.

For the third quarter of 2011, the company GAAP earnings of $1.93 cents per share. In the same quarter in 2010, earnings were $1.16. The company attributed the jump to a Texas court ruling that resulting in a $425 million net-of-tax favorable adjustment.

In the earnings release, management set full year guidance of between $3.07 and $3.17 per share.

Steady dividend

American Electric Power has paid a quarterly dividend for more than a century. The company policy is to pay out between 50 percent and 60 percent of net income as dividends. The annual dividend rate has increased each year to $1.84 per year, up from $1.40 in 2004.

The board boosted the dividend significantly in 2010. The first quarter dividend of 41 cents increased to 46 cents by the fourth quarter. The 4.8 percent dividend yield on the current share price is in line with other major regulated utility companies.

With the latest earnings report, the dividend is now 47 cents per share.

Barclays Capital analysts have an overweight rating on AEP. On the other end of the ratings spectrum, the analysts at RBC Capital initiated coverage in the summer with a underperform rating.

The company reports next on Jan. 30.

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Regulated utility holding company American Electric Power (AEP) provides the traditional utility stock attributes: steady returns and an attractive dividend. For a safe option in a turbulent market, this stock may be an attractive choice for stable but slow growth. For long...
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Monday, 31 Oct 2011 12:35 PM
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