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AES Management Rewards Shareholders With 5% Dividend Hike

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·4 min read
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The AES Corporation’s AES board of directors has approved a 5% hike in its first-quarter 2022 common stock quarterly dividend to 15.80 cents. This hike thereby makes the company’s new annualized payout 63.20 cents per share.

The new quarterly dividend will be paid out on Feb 15, 2022, to its shareholders of record as of Feb 1, 2022.

The company’s current annual dividend yield is 2.53% compared with the industry's 3.41% and the Zacks S&P 500 composite’s average yield of 3.29%. The company has been paying out dividends since 2012 and has increased the same every year. The consistent hike in dividends reflects AES Corp.’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.

Such efforts of the company are duly reflected in its balance sheet. Its cash and cash equivalents worth $1.41 billion at the end of third-quarter 2021 indicate a solid 30% improvement from the end of 2020. Such a significant cash balance enables AES Corp. to reward its shareholders with solid dividend hikes like the latest one.

In the third quarter of 2021, the company purchased its remaining 49.9% stake in AES Colon, thereby increasing its ownership to 100% for this LNG plant. This is likely to boost the company’s future revenues and earnings, which, in turn, would enable it to continue with its steady dividend hike spree.

Further, the company recently expanded its partnership with Google through the Nest Renew product that will allow utility customers to benefit from cost-savings and energy efficiency features, thereby enabling AES Corp. to carry on its annual 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.

Earlier this month, WEC Energy Group WEC announced that it is planning to raise the first-quarter 2022 dividend to 72.75 cents per share, marking a hike of 7.4%. The annual dividend is $2.91 per share. Concurrent to the dividend hike, WEC Energy initiated the 2022 earnings guidance in the range of $4.29-$4.33 per share.

WEC Energy has been consistently investing in cost-effective zero-carbon generation and plans to spend $17.7 billion in the 2022-2026 time frame. This systematic investment to strengthen operations and rate revision will provide enough funds to sustain its dividend payment routine.

In October 2021, CenterPoint Energy’s CNP board of directors approved a hike in its quarterly dividend to 17 cents per share, reflecting an increase of 6.3% from the prior payout. With the current hike, the company will now pay an annual dividend of 68 cents per share, effective from December 2021.

CenterPoint Energy has increased its planned investment in growth projects from $16 billion to $18 billion for 2021-2025. It expects to generate a CAGR of 10% from its planned investment. An additional $40 billion capital investment was announced by the company for a 10-year period. Such initiatives will result in a steady performance and enable CenterPoint Energy’s management to continue with regular dividend hikes.

In July 2021, Duke Energy’s DUK board of directors approved a quarterly cash dividend on its common stock of 98.5 cents, marking an increase of 2.1%. The company’s new annualized dividend rate thus stands at $3.94 per share.

Duke Energy plans to invest $59 billion between 2021 and 2025 to expand its scale of operations and implement modern technologies at its facilities to serve its customers efficiently. This lower risk regulated investment will help Duke Energy to generate enough cash flow over the long term that will encourage management to continue with its shareholder-friendly initiatives.

Zacks Rank & Price Performance

AES 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 13.8% compared with the industry's 3.4% rise.

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