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AES Corporation's Dividend Soars 5% Despite Slowdown

AES Corporation (AES) is one of the world’s largest power companies with operations in 14 countries around the world. Through its 30.5 megawatt portfolio, the company served 2.5 million customers through six utility companies and generated $10.2 billion in 2019 revenue.

The company’s power generation was split between coal (34%), renewables (32%) and natural gas (31%) in 2019. In addition to reducing coal power generation to less than 30% in 2020, the company aims to further reduce its reliance to less than 10% by 2030.

In terms of its geographic footprint, the company generates 38% of its operating margin from South America, 33% from the U.S. and utilities, 21% from Mexico, Central America and the Caribbean and 8% from Europe and Asia.

Slower Demand, Steady Dividend

AES reported revenue that fell 3.4% to $2.54 billion during the third quarter, missing consensus estimates by $190 million, along with non-GAAP earnings of $0.42 that missed consensus estimates by one cent per share. However, management reaffirmed its 2020 adjusted EPS guidance in the range of $1.32 to $1.42 and expects to be near the top of the range.

Despite the slower performance, the company secured a second investment grade rating and continues to focus on returning value to shareholders. The company’s 2019 free cash flow came in at $726 million, which provides ample security for its growing dividend yield.

The company raised its quarterly dividend by 5% to $0.1505 per share, which represents a 2.89% forward yield. The dividend is payable on February 12, 2021 to shareholders on record as of January 29, 2021.

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