You would think Yahoo could somehow stop these annoying advertisements disguising themselves as AEE messages.
But anyways, any ideas why AEE is performing so poorly? Other utilities i follow have been up of late, not but a month ago ED was trading 38 it is now over 43. AEE has done the exact opposite the same time period 42 down to 38+. Yet the AEE dividend yield is over 6.5% compared to ED's 5.9%.
You would think in this environment, a recession on the horizon a utility offering a 6.5% yield would bring in some buyers, not be falling like a rock.
Could it be AEE has some exposure to one of these fallen Financials? Or they can't service their debt at a reasonable rate. I saw Illinois recently approved the rate hike.
I just don't get it, i would understand if other utilities were acting the same. Pull up a chart of AEE compare it to nearly any other utility over a five year period. AEE is performing absolutely pathetic, it is ridiculous how poorly. Other Utilities have had stellar gains, AEE stellar losses.
You would think stockholders would hear something from upper mgt, an apology, a resignation, something?
I can't figure out either what is wrong with AEE. I bought this stock in 1990 when it was at $32.00 and it has been a great dividend stock at that price. But the downslide is really a mystery to me.
Can anyone else come in with even a guess as to why it is down so much.
Typically the cycle of the economy works like this..the economy overheats, grows too fast, demand outpaces supplies, therefore we see inflation, rising interest rates, the fed hikes to slow growth.
In the above environment Utilities normally underperform, because the rates being offered by treasuries and other debt instruments offers a more attractive return than the Utility dividend.
But the present environment is a slowing economy, Fed is lowering rates, treasuries returns falling like a rock. The 5 year treasury is now yielding 2.65% compared to AEE's dividend yield of 6.6%. Typically this is the time you buy utilities.
But in this crazy economy, nothing makes sense anymore. Here are some possible reasons for AEE's decline:
1)Although treasuries are yielding nothing, other more risky debt instruments are yielding quite a bit more because of the credit crisis. So there is competion for AEE as far as high yield.
2)AEE finances its growth, operations, through debt. If GE is having to pay 10% to find capital, you know the cost of doing business (in a financing sense) for AEE is going up.
3)From what i read AEE charges much less for it services than the majority of utilities, 40% less in some cases. Good for consumers bad for AEE. As the economy falls into recession it will be difficult for AEE to pursuade the govt to increase rates, increases that are necessary to make up for the short fall.
4)It looks like this is shaping up to an ugly recession, therefore less usage of electricity, natural gas, more people not paying their electric bill et cetera. Not good for profits.
5)Although coal, natural gas, oil, are going down in price, which is a good thing for AEE because that lowers their cost to produce electricity, AEE might of hedged that benefit out of the equation. They probably made the assumption prices would remain high and positioned themselves accordingly.
I guess we will have to wait till CEO Rainmaker, or whatever" gets a big raise in his package, then he can go out, with his wife getting benefits also.
Pathetic is not the word. I think they have gotten too big for their boots with all the aqusitions they have made.
Stockholders should fire this phony. What has he done for the co. and stockholders to earn his money?????????
"You would think Yahoo could somehow stop these annoying advertisements disguising themselves as AEE messages."
If 3 people would take the time to rate the advertisements with a 1 star rating .Well they will go away.
As for AEE going down.Well the whole market has been going down.I hope it's panic and/or people selling to buy into better dividends.
I held onto all of my dividend paying stocks .Then placed 1/2 of my holdings into the reinvestment plan.If they don't come back in the long run,well I've lost a lot of money.
Well best of luck to all.
The old UE was very conservative and an excellent income stock. The new AEE bought a few very poor plants in IL that have required big $$ to turn around. The two executives responsible retired (left) this summer. The new man in charge of the East side CAN get it done. Dereg plan in IL has been a disaster. AEE has been very generous in compromise. Ameren owns 8 of the cleanest emission coal-fired plants in the US. They are spending big $$ to make their few cyclone coal-fired plants the as clean as possible. MO has and continues to hold them hostage over the Taum Sauk failure. A stupid blunder, but there has to be an end to the legalized extortion. I have never been able to understand why the market doesn't like AEE. They might need to increase the dividend to get back in favor.
Thanks for the post Dan, very informative. Read up on the Taum Sauk fiasco, unbelievable the series of mistakes that were made. But one would think that mess has already been factored into the stock price.
AEE is trading very close to book value but so are a number of other utilities, historically that is unusual. These depressed valuations are certainly being driven by the ongoing credit crisis.
Although treasuries yields are extremely low financing corporate debt remains elevated, which is not good for utilities since they finance a good deal of their operations through the debt markets.
AEE's debt level has grown the past couple years most likely to finance the projects you referred to in your post, so maybe one of the reasons it is underperforming.
Also AEE has hedged the majority of its fuel costs into 2010. Unfortunately this can work against them if coal, natural gas, oil, drops in price as it has of late.
AEE definitely seems ahead of the curve as far as producing clean energy which will work in their favor once this credit mess gets resolved.
A slowing economy will slow demand for electricity and increase defaults in payments which will negatively effect earnings, but it will also help in peak demand regards.
I think the biggest blunder by AEE mgt is their handling of rate increases. I have read AEE rates are discounted nearly 40% compared to other utilities. But now that the economy is falling out of bed, it will be difficult for AEE to play catch up and pass the necessary increases to make up for the short fall.
What AEE has going for it, it continues to be a monopoly, and electricity is something most cannot go without. And AEE has grown into quite the juggernaut as far as the area it covers, and the amount of electricity it can produce.
I think the trump card for all utilities in the future is the electric car which should push demand significantly higher. And cars will be recharged at night so it won't be an additional burden on peak demand.
I tend to agree with you that the marketplace is undervaluing AEE, hopefully that will change soon. In the meantime enjoy the 7% dividend.