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AES Has Paid Attractive Dividends: Can It Continue?

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Nov. 20 2020, Updated 3:49 p.m. ET

Dividend profile

At $7.0 billion, AES (AES) is one of the smallest utilities among the S&P 500 Utilities (XLU). Its dividend growth in the last few years has been remarkable. It has been higher than giants like Southern Company (SO) and Duke Energy (DUK). AES paid annualized dividends of $0.48 per share. Notably, AES’s annualized per share dividends grew ~35% compounded annually in the last three years. AES started paying dividends in 2012. Utilities’ average dividend growth was ~4%–6% during this period.

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Dividend yield

Currently, AES is trading at a dividend yield of 4.6%—one of the highest among the S&P 500 Utilities. In comparison, the Utilities Select Sector SPDR ETF (XLU) offers a dividend yield of 3.5%.

AES’s peer, Exelon (EXC) is trading at a yield of 3.2%, while FirstEnergy (FE) is trading at a yield of ~4.4%. Regulated utility giant Southern Company is trading at a dividend yield of 4.5%, while Duke Energy offers a yield of 4.0%.

AES’s annual per share dividend growth target of 8%–10% through 2020 falls approximately in line with NextEra Energy (NEE) and Dominion Resources’ (D) dividend growth expectations.

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