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AES Rewards Shareholders With a 5% Hike in Quarterly Dividend

The AES Corporation AES recently announced that its board of directors approved a hike in its quarterly dividend to 16.59 cents per share from 15.80 cents, reflecting an increase of 5% from the prior payout.

With the current hike, the company will now pay an annual dividend of 66.36 cents per share. This represents an annual dividend yield of 2.3% based on its share price worth as of Dec 2, 2022.

The annual dividend yield is more than the industry’s yield of 3.13% but lower than the Zacks S&P 500 composite’s yield of 1.53%.

Will AES Sustain Dividend Hikes?

AES Corporation has been consistently paying out dividends to its shareholders, buoyed by its ability to generate cash flow and a disciplined and balanced capital allocation strategy. In the first nine months of 2022, the company paid out a total dividend of $316 million compared with $301 million in the nine months of 2021. This reflects its focus on increasing shareholder worth.

Moreover, such a distribution strategy is backed by its ability to generate strong free cash flow and earnings from its operations. In this regard, the company expects a 7% to 9% annualized growth target for the adjusted EPS and free cash flow through 2025.

Further, the strong backlog of 11,230 megawatts should assist the company in attaining a steady inflow of cash in the business to support shareholders’ return. AES Corp. is also working to expand its operation in the liquefied natural gas market. This will allow the company to generate strong income in the long term.

AES targets to have $6.3 billion in discretionary cash through 2022-2025, out of which the company strives to distribute $2.03 billion in dividends, reflecting its solid capital allocation and distribution strategy. The solid cash flow position will allow the company to hike dividends in the long haul.

Peer Moves

A company’s ability to return excess cash to shareholders reflects financial strength in the business and an effective capital deployment strategy. In this context, apart from AES Corporation, utilities that have rewarded shareholders with dividends are as follows:

In October 2022, American Electric Power Company AEP increased its dividend by 5 cents per share to 83 cents per share. The increase is in line with the company’s 6% to 7% operating earnings growth range.

AEP’s long-term (three to five years) earnings growth rate is 6.2%. Shares of AEP have returned 13.9% in the past year.

In July 2022, Duke Energy DUK increased its quarterly dividend by 2 cents per share to $1 per share. Duke Energy has paid out a cash dividend on its common stock for 96 consecutive years.

Duke Energy boasts a long-term earnings growth rate of 5.5%. Its shares have increased 7.9% in the past month.

In July 2022, CenterPoint Energy CNP increased its quarterly dividend by 1 cent per share to 18 cents per share. This aligns with an 8% annual dividend growth rate compared to 2021.

CenterPoint’s long-term earnings growth rate is 3.5%. Its shares have risen 10.6% in the past year.

Price Movement

In the past year, shares of AES Corporation have rallied 17.7% compared with the industry’s growth of 0.1%.

Zacks Investment Research
Zacks Investment Research

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Zacks Rank

AES Corporation currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Duke Energy Corporation (DUK) : Free Stock Analysis Report

American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report

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The AES Corporation (AES) : Free Stock Analysis Report

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