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American Electric Power: A Top US Electric Utility Company

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Nov. 30 2015, Published 11:16 a.m. ET

Introduction: American Electric Power

American Electric Power (AEP) is one of the top electric utility companies in the United States, serving more than 5.4 million customers located in 11 states. AEP is America’s largest generator of electricity.

AEP owns and operates 60 superior fleets of power plants with a capacity of nearly 32,000 megawatts. It has the largest electricity transmission network in the United States at more than 40,000 miles.

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History

Headquartered in Columbus, Ohio, American Electric Power was incorporated in December 1906. The company started its operations in 1907 by acquiring utility properties. These properties initially offered electric, gas, water, transit, and ice services in communities in New Jersey, New York, Pennsylvania, West Virginia, Ohio, Indiana, and Illinois.

The company became American Electric Power in 1958 and merged with Central and Southwest Corporation in 2000.

Market performance

Utility shares (IDU) are considered comparatively safe because of their stable business models and high dividend yields. In 2014, the dividend payout ratio for American Electric Power was 61%.

This year, prices of utility stocks have been under pressure due to an expected interest rate hike. AEP shares have seen a fall of 6% year-to-date. AEP’s peer PG&E (PCG) saw a 2% return on its shares in the year, while its large-cap peer Duke Energy (DUK) saw a 15% correction in the same period.

These three stocks form a significant portion of the Utilities Select Sector SPDR ETF (XLU). Duke Energy accounts for 8.2% of XLU, while American Electric Power accounts for 5.3%. XLU has returned -2.5% in the last year.

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