The AES Corporation AES announced that its board of directors has approved a 5% hike in its first-quarter 2020 common stock quarterly dividend to 14.33 cents, thus taking the annualized payout to 57.32 cents per share. The new quarterly dividend will be paid out on Feb 14, 2020 to its shareholders of record as of Jan 31, 2020. The company’s current annual dividend yield is 3.05% compared with the industry’s 2.94% and Zacks S&P 500 composite’s average yield of 1.82%.
Can AES Corp Sustain Dividend Hikes?
The company has been paying out dividend since 2012 and has increased the same annually. The consistent hike in dividend reflects on the company’s strong performance.
AES Corp is teaming up with other companies to expand its footprint in potential markets. Its joint venture (JV) with Siemens — Fluence — is noteworthy. Besides joint ventures, the company is also focused on streamlining portfolio through asset divestments to exit markets and businesses. During the third quarter, it sold its businesses in Northern Ireland and plans to sell its Jordan-based businesses by the end of the year. The company’s withdrawal of operations from risky markets is a prudent step.
The company is focused on preserving its financial flexibility by reducing costs. These initiatives will include overhead reductions, procurement efficiencies and operational improvements. Since 2012, AES Corp achieved $300 million in cost savings and revenue enhancements. Moreover, it has successfully maintained a flexible liquidity position. It expects to generate $4 billion in discretionary cash for the 2019-2022 period. We believe, the company’s growth strategies along with a strong cash flow will help it generate sufficient funds to meet its financial commitments.
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. We have noticed that other players from the same sector have increased the same in the second half of 2019 to boost shareholders’ value.
In Jul 8, Duke Energy DUK announced that its board of directors has approved 1.85% increase in quarterly dividend rate to 94.5 cents. In Nov 26, The York Water Company’s YORW board of directors announced a hike in the quarterly dividend to 18.02 cents per share, up 4% from the previous rate. In Dec 6, WEC Energy Group’s WEC board of directors announced that it is planning to hike the quarterly dividend to 63.25 cents per share from the present level of 59 cents.
AES Corp’s stock has rallied about 19.4% in the past 12 months compared with the industry’s growth of 7.1%.
AES Corp currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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