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The AES Corporation AES recently announced that its board of directors has approved a 5% hike in its first-quarter 2021 common stock quarterly dividend to 14.05 cents, thus taking the annualized payout to 60.20 cents per share. The new quarterly dividend will be paid out on Feb 12, 2021 to its shareholders of record as of Jan 29, 2021.
The company’s current annual dividend yield is 2.88% compared with the industry’s 3.30% and the Zacks S&P 500 composite’s average yield of 1.48%. Notably, the company has been paying out dividend since 2012 and has increased the same annually. The consistent hike in dividend reflects the company’s strong performance.
Can AES Corp. Sustain Dividend Hikes?
With the utility industry's transition to clean energy, AES Corp. is taking advantage of favorable trends in clean power generation, transmission and distribution, and LNG infrastructure to boost profitability. Moreover, the company is focused on preserving its financial flexibility by reducing costs through initiatives like overhead reductions, procurement efficiencies and operational improvements. Since 2012, AES Corp. achieved $300 million in cost savings and revenue enhancements.
Such efforts of the company are duly reflected in its balance sheet. Notably, its cash and cash equivalent worth $1.5 billion at the end of third-quarter 2020 indicates a solid 46% improvement from what it generated at the end of 2019. Such significant cash balance enables the company to reward its shareholders with solid dividend hikes like the latest one.
Going ahead, the company is currently executing its target of additional annual cost savings worth $100 million by 2022. Such cost-saving initiatives along with the company’s latest partnerships with industry leaders like the 10-year alliance that AES Corp. formed with Google in 2019 for expansion of clean energy projects should enable the company to carry on dividend hikes.
Dividend Hikes in the Utilities Sector
The Utilities sector provides basic services like electric, water and gas. Consistent demand for these services has enabled companies to maintain steady earnings and cash flow. This helps the companies to reward shareholders with regular dividend payouts. AES Corp. is not the only company to reward its shareholders with dividend hikes this year. We have noticed that other players from the sector have increased the same to boost shareholders’ value.
In December 2020, PNM Resources PNM raised its annual dividend by 8 cents per share, marking a 6.5% hike. In October, American Electric Power Company AEP announced a hike of 4 cents per share or 5.7% in its quarterly cash dividend, bringing it to 74 cents. In October, Essential Utilities WTRG raised its quarterly dividend by 7% to 25.07 cents per share.
Zacks Rank & Price Performance
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past year, shares of the company have gained 11.1% against the industry's 7% decline.
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American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report
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Essential Utilities Inc. (WTRG) : Free Stock Analysis Report
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