First look at American Electric Power (AEP).

I read some article on high dividend stocks and it mentioned American Electric Power (AEP).  That made me curious because I hadn’t examined this company yet.  This is what I found.

American Electric Power is one of the largest regulated utilities in the U.S. AEP’s electric utility operating companies provide generation, transmission, and distribution services to more than 5 million retail customers in 11 states.  About 80% of AEP’s power is generated using coal. Approximately 55% of AEP’s revenue comes from operations in Ohio, Texas, and Virginia.

American Electric Power (AEP)

Market price: $37.43

Shares: 481.79 million

Link to 3 year chart: http://bit.ly/AEP3yrChart

Dividend record: (strong dividend growth)

Dividend: $0.46 quarterly

Dividend yield: 4.92%

EPS: $2.61

Dividend payout ratio: 70% ($1.84 dividend/$2.61EPS)

This stock will become a high dividend stock (yielding 6%) at a price of $30.66 per share

Earning power: $2.50 average for five years @ 481.79 million shares

(Earning adjusted for changes in capitalization)

            EPS       Net inc.             Adj. EPS

2006     $2.53    $1,002 M           $2.08

2007     $2.72    $1,086 M           $2.25

2008     $3.42    $1,380 M           $2.86

2009     $2.96    $1,357 M           $2.82

2010     $2.53    $1,211 M           $2.51

Five year average earnings $2.50

Value price territory at 12 times average earnings begins below $30.00 per share

Market price at 14.97 times average earnings

Speculative price territory at 20 times average earnings begins above $50.00 per share

Balance sheet: Looks okay to me.  The current ratio and quick ratio have me a little concerned.

Image003

Book value: $28.69

Price to book value: 1.30 (good)

Current ratio: 0.80 (over 2.0 is good)

Quick ratio: 0.51 (over 1.0 is good)

Conclusion: Add to watch list with alert set to $30.00 per share.  Start deep analysis when price approaches $30.00.  Sell above $50.00.

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Published in: on June 29, 2011 at 12:16 pm  Leave a Comment  

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