Let’s take a look now at American Electric Power’s (AEP) current payout ratio and how it compares to its peers. A company’s payout ratio shows how much of its profit is distributed to shareholders as dividends. In 2018, AEP’s payout ratio was 65%, while its five-year historical average ratio was 72%.
Utilities usually pay a large portion of their earnings in the form of dividends. So, the higher payout ratios are not rare for utilities. US utilities’ average payout ratio has been around 70% in the recent past.
Exelon’s (EXC) payout ratio was 67% in 2018 against its five-year average of 57%. Consolidated Edison’s (ED) payout ratio was 59% for the last fiscal year, and its five-year average payout ratio is close to 34%.
Utilities (XLU) are up more than 10% so far this year, marginally underperforming broader markets. To learn about how they fared recently and how they are placed for the future, read Market Realist’s weekly review series Utilities: Valuation, Charts, and Price Targets Last Week.