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Ameren (AEE) Offers Dividend Hike: Time to Buy the Stock?

Zacks Equity Research
Updated

Ameren Corporation’s AEE board of directors has approved a 3.5% increase in its quarterly dividend rate.

The latest hike marks an increase of 1.5 cents from the last quarterly dividend rate of 42.5 cents per share and reflects management's confidence in the company’s long-term financial strength and performance.

The new annualized dividend amounts to $1.76 per share, up from $1.70 paid earlier, resulting in a dividend yield of 3.66%.The new distribution will be paid on Dec 30, 2016 to shareholders of record as of Dec 7, 2016.

The last dividend hike announced by the company was on Oct 9, 2015, when the quarterly cash dividend as hiked by 3.7%, bringing the annualized payout to $1.70.

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AMEREN CORP Price

AMEREN CORP Price | AMEREN CORP Quote

Growth Initiatives

Ameren makes systematic investments in growth projects and infrastructure upgrades. These investments will ensure assured returns from its regulated assets and will help the company to carry ahead with its shareholders’ friendly initiatives.

The company has made capital investments of almost $650 million in jurisdictions representing almost two-thirds of the year-to-date planned investments. This includes expenditure of approximately $330 million on the Federal Energy Regulatory Commission’s (FERC) regulated transmission projects. The $1.4 billion Illinois Rivers Transmission Project is the largest, whose construction of the project's nine line segments is complete.

For the Mark Twain project, Ameren is obtaining assents from the five counties covered by the project and has begun right-of-way acquisition.

On completion, of these large scale projects it will offer considerable benefits to customers, in addition to improving reliability and access to clean energy, especially wind power.

Furthermore, the company has invested approximately $320 million in the Illinois Electric and natural gas distribution infrastructure projects during the first six months of 2016. These include investments made under the company's modernization action plan, which was facilitated by the state’s Energy Infrastructure Modernization Act.

This February, the company outlined its plan to grow rate base at an approximate 6.5% compound annual rate over the 2015–2020 period, based on a strong pipeline of investments in a bid to benefit customers and improve shareholder wealth.

Dividend Hike by Another Utility

In Sep 2016, OGE Energy Corp. OGE declared a hike in its quarterly dividend. In the fourth quarter of 2016, the company will pay a dividend of 30.25 cents per share, up 10% from the previous dividend of 27.5 cents. This hike brings the company’s annualized dividend to $1.21 per share and results in a dividend yield of 3.49%.

The raised dividend will be given on Oct 28, 2016 to shareholders of record as of Oct 11.

Zacks Rank & Stocks to Consider

Ameren currently has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the utility sector include DTE Energy Company DTE and Entergy Corporation ETR.

DTE Energy has delivered an average positive earnings surprise of 6.9% in the trailing four quarters. The company carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Entergy,another Zacks Rank #2 stock, has delivered an average positive earnings surprise of 54.6% in the trailing four quarters.

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AMEREN CORP (AEE): Free Stock Analysis Report
 
ENTERGY CORP (ETR): Free Stock Analysis Report
 
DTE ENERGY CO (DTE): Free Stock Analysis Report
 
OGE ENERGY CORP (OGE): Free Stock Analysis Report
 
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