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5-Star AES Plugs Into Renewable Energy Growth

The global power company's dividend is yielding above 4%.


AES (AES) trades at a wide discount to our $20 fair value estimate and has a dividend that yields 4.1%, creating a buying opportunity for growth and income investors, in our view. Public policy and corporate demand continue to support renewable energy growth. We expect U.S. renewable energy generation to grow 8% annually during the next decade. Also, AES’ Green Blend and Extend strategy gives us confidence that renewable energy growth in South America will accelerate after the economic impact of the coronavirus fades. Our confidence in the post-pandemic growth potential of the South American renewable energy market mirrors our U.S. renewable energy growth outlook.

AES reinstated its dividend in the fourth quarter of 2012 after not paying one for 20 years. In January 2015, the board doubled the dividend to an annual rate of $0.40 per share and increased it 8%-10% annually through 2018. The increase slowed to 5% in 2019 and was also 5% in 2020’s first quarter.

Charles Fishman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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