Why AES’s Dividend Profile Looks Attractive



Dividend yield

AES’s (AES) dividend yield is 3.0%, its lowest in the last few years. Its yield has fallen in the last few quarters due to its stock rallying. This year, AES’s annualized dividend is expected to rise ~5% year-over-year to $0.55. On average, utilities (XLU) yield 3.0%. In comparison, utility bigwigs Duke Energy (DUK) and Dominion Energy (D) offer dividend yields of 4.0% and 4.8%, respectively.

AES yld

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Dividend growth

AES has raised its dividends per share by 26% compounded annually in the last five years. It started paying dividends to shareholders in 2012. On average, utilities’ dividends have risen ~4% in the same period.

Last year, AES’s payout ratio was 35%, significantly lower than the industry average. Payout ratios represent the portion of profits distributed by a company among shareholders in the form of dividends.

US utilities, on average, distribute 65%–75% of their earnings as dividends. Top utility giants Duke Energy (DUK) and Dominion Energy (D) had payout ratios of ~95% and ~88%, respectively, last year. AES’s lower payout ratio suggests its dividends could increase if its earnings continue to stabilize. Next, we’ll compare AES’s valuation with peers’.


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