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American Electric Power’s Dividend Yield Compared to Peers

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AEP declares dividend

American Electric Power (AEP), one of the largest utilities in the country, has declared a dividend of $0.59 per share for the third quarter of 2017. The ex-dividend date for AEP’s quarterly dividend is August 8, 2017, and the dividend will be paid on September 8, 2017.

AEP generally raises its per share dividend in the fourth quarter of the year, which means we might expect a dividend raise next quarter. As a dividend giant, American Electric Power has been paying dividends for more than 400 consecutive quarters.

AEP yld

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Dividend yield

AEP is currently trading at a dividend yield of 3.4%, which is marginally lower than the industry (XLU) average yield of 3.5%. Exelon (EXC), a leading US hybrid utility company, yields around 3.5%. Dominion Energy is currently offering a yield of 4.0%.

Regulated utilities such as Duke Energy (DUK) and Southern Company (SO) are presently offering much higher yields of 4.2% and 4.7%, respectively. Southern Company stock has corrected significantly in the last few months, which could be one of the main reasons behind its attractive yield. Both these industry leaders derive a major portion of their earnings from regulated operations, so their earnings are more stable, ultimately facilitating smoother dividends.

In comparison, American Electric Power derives nearly 75.0% of its consolidated earnings from regulated operations, while the rest comes from competitive operations. Earnings from competitive operations are usually volatile. Consequently, volatile earnings cause dividend growth to be volatile.

American Electric Power reported its second quarter financial results on July 27, 2017. Its revenue fell from $3.9 billion in 2Q16 to $3.6 billion in 2Q17. Its earnings also fell from $0.95 per share in 2Q16 to $0.75 per share in 2Q17. AEP serves nearly 5.4 million customers in 11 states, including Ohio, Michigan, Arkansas, Indiana, Kentucky, and Texas.

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