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Key Factors that Could Drive the Dividend Growth of AES


Mar. 1 2018, Published 12:22 p.m. ET

What is the dividend outlook for AES?

AES Corporation’s (AES) dividend yield of 5.0% is the result of flat growth in its dividend and price loss. Its dividend grew 10.0% and 9.0% in 2016 and 2017, respectively.

The price loss since 2017 enhanced the dividend yield for that timeframe. The company’s dividend is forecast to grow 8.0% in 2018.

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What is the projected dividend payout for AES?

AES Corporation (AES) had a dividend payout of 45.0% in 2016. It has projected dividend payouts of 47.0% in 2017 and 45.0% in 2018, respectively. The company hasn’t been able to generate positive free cash flow balance each time due to higher capital expenditures relative to its operating cash flow.

Higher working capital requirements at the company’s strategic business units (or SBUs) translated into lower operating cash flow in 9M17.

What drove AES’s revenue growth?

AES Corporation’s (AES) revenues shed 4.0% in 2016 before growing 5.0% in 9M17. Lower regulated and non-regulated revenues led to the revenue decrease in 2016 before recovering in 9M17.

Its strategic business units in the US, Brazil, MCAC (Mexico, Central America, and the Caribbean), and Europe drove the decline in 2016. This downward trend was offset by its Andes (Chile, Columbia, and Argentina) and Asia SBUs. Its Andes, Brazil, and MCAC SBUs drove the company’s growth in 9M17, offset by the US and Eurasia.

Dividend ETFs with exposure to AES

The WisdomTree US MidCap Dividend ETF (DON) has a PE (price-to-earnings) ratio of 23.6x and a dividend yield of 5.4%. The WisdomTree US High Dividend ETF (DHS) has a PE ratio of 21.0x and a dividend yield of 3.1%.

We’ll discuss the company’s EPS (earnings per share) performance and its future revenue and EPS drivers in the next part of this series.


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