May 05, 2025 a 03:31 am
AEP: Dividend Analysis - American Electric Power Company, Inc.
American Electric Power Company, Inc. (AEP) demonstrates a consistent commitment to dividend distribution, making it an attractive option for income-focused investors. With a respectable dividend yield and a longstanding history of unbroken dividend payments, AEP shows stability and reliability. However, attention should be given to its negative free cash flow yield, potentially affecting future payout sustainability.
Overview 📊
AEP operates within the Utilities sector, offering essential services that underscore its vital role in the economy. The company's dividend profile includes:
| Metric | Value |
|---|---|
| Sector | Utilities |
| Dividend yield | 3.41% |
| Current dividend per share | 3.59 USD |
| Dividend history | 56 years |
| Last cut or suspension | None |
Dividend History 🗣️
AEP's robust dividend history over 56 years indicates reliability, fostering confidence among investors. This long-standing commitment is crucial for projecting the company's fiscal health and investor trust.
| Year | Dividend per Share (USD) |
|---|---|
| 2025 | 1.86 |
| 2024 | 3.57 |
| 2023 | 3.37 |
| 2022 | 3.17 |
| 2021 | 3.00 |
Dividend Growth 📈
The analysis of dividend growth offers insights into AEP's potential for increasing shareholder value through payouts. It provides evidence of the company's commitment to rewarding shareholders with growing dividends.
| Time | Growth |
|---|---|
| 3 years | 5.97% |
| 5 years | 5.67% |
The average dividend growth is 5.67% over 5 years. This shows moderate but steady dividend growth.
Payout Ratio 🏦
The payout ratio highlights the proportion of earnings and cash flow dedicated to dividends, reflecting the sustainability of AEP's dividend policy.
| Key figure | Ratio |
|---|---|
| EPS-based | 64.17% |
| Free cash flow-based | -206.86% |
With an EPS-based payout ratio of 64.17%, AEP maintains a healthy balance. However, a negative FCF payout ratio indicates potential cash flow strains affecting dividend funding sustainability.
Cashflow & Capital Efficiency 💰
Cash flow and capital efficiency are essential for understanding AEP's operational efficiency and ability to fund dividends and growth investments.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Free Cash Flow Yield | 13.63% | -5.92% | -3.05% |
| Earnings Yield | 6.07% | 5.24% | 4.75% |
| CAPEX to Operating Cash Flow | 2.06% | 149.76% | 128.07% |
| Stock-based Compensation to Revenue | 0% | 0% | 0.32% |
| Free Cash Flow / Operating Cash Flow Ratio | 97.94% | -49.76% | -28.07% |
Despite fluctuations, AEP's capital efficiency reveals its operational capabilities but highlights potential cash flow challenges crucial for meeting future dividend payouts.
Balance Sheet & Leverage Analysis 📉
Balance sheet strength and leverage ratios offer insights into AEP's financial stability and risk profile under varying economic conditions.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Debt-to-Equity | 1.70 | 1.73 | 1.69 |
| Debt-to-Assets | 43.28% | 45.10% | 43.22% |
| Debt-to-Capital | 62.94% | 63.33% | 62.84% |
| Net Debt to EBITDA | 5.63 | 6.01 | 5.62 |
| Current Ratio | 0.44 | NA | NA |
| Quick Ratio | 31.31% | 36.28% | 55.71% |
| Financial Leverage | 3.92 | 3.83 | 3.91 |
AEP showcases manageable leverage ratios, indicating cautious financial management, though its current ratio suggests less liquid assets are available for immediate obligations.
Fundamental Strength & Profitability ✅
A comprehensive view of AEP's fundamental metrics, indicating profitability and operational efficiency, is critical for understanding the underlying financial health.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Return on Equity | 11.01% | 8.75% | 9.65% |
| Return on Assets | 2.81% | 2.28% | 2.47% |
| Margins: Net | 15.05% | 11.63% | 11.75% |
| EBIT | 23.86% | 21.15% | 19.43% |
| EBITDA | 41.06% | 37.94% | 36.16% |
| Gross | 63.18% | 58.62% | 57.50% |
| Research & Development to Revenue | 0% | 0% | 0% |
AEP displays stable profitability with a reasonable return on equity and satisfactory margins, although its research investment remains minimal.
Price Development 📈
Dividend Scoring System ⚠️
| Criteria | Score | Score Bar |
|---|---|---|
| Dividend yield | 4 | |
| Dividend Stability | 5 | |
| Dividend growth | 3 | |
| Payout ratio | 3 | |
| Financial stability | 4 | |
| Dividend continuity | 5 | |
| Cashflow Coverage | 2 | |
| Balance Sheet Quality | 3 |
Total Score: 29/40
Rating & Recommendation 📣
AEP presents as a formidable dividend player with stable payouts and strong historical performance. While cash flow challenges persist, affecting the potential for aggressive growth, the company remains a reliable income option for investors seeking steady dividends. The recommendation is to retain current holdings, with the possibility of addition on market weakness for long-term income applicant portfolios.