Yahoo Finance American Electric Power Company (NASDAQ:AEP) Is Increasing Its Dividend To $0.83
The board of American Electric Power Company, Inc. (NASDAQ:AEP) has announced that it will be increasing its dividend by 6.4% on the 9th of December to $0.83, up from last year's comparable payment of $0.78. This makes the dividend yield about the same as the industry average at 3.6%.
See our latest analysis for American Electric Power Company
American Electric Power Company's Earnings Easily Cover The Distributions
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, American Electric Power Company's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Looking forward, earnings per share is forecast to rise by 14.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 59%, which is in the range that makes us comfortable with the sustainability of the dividend.
American Electric Power Company Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.88 in 2012 to the most recent total annual payment of $3.12. This means that it has been growing its distributions at 5.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that American Electric Power Company has grown earnings per share at 34% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that American Electric Power Company could prove to be a strong dividend payer.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think American Electric Power Company's payments are rock solid. While American Electric Power Company is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for American Electric Power Company (of which 1 is potentially serious!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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