Providing investors with a relatively high-yield dividend, American Electric Power (AEP 1.26%) is an attractive option for those looking to bolster their passive income streams.
However, smart investors know the importance of thoroughly investigating higher-yielding dividend stocks since the high payouts may actually be imperiling the company's financial health. Let's take a closer look at what electric utility American Electric Power has in store with its dividend in 2024.
NASDAQ: AEP
Key Data Points
The details on the dividend
While American Electric Power has made quarterly dividend payments for 113 consecutive years, there have been periods where the dividend remained static from one year to the next. Since 2010, however, the company has transitioned toward consistently lifting its dividend higher each year. From 2010, when it paid $1.71 per share for the full year, through 2023, when its annual payout totaled $3.37 per share, American Electric Power has increased its dividend at a compound annual growth rate (CAGR) of 5.3%.
In each of the first two quarters of 2024, American Electric Power has paid dividends of $0.88 per share, and it projects making a combined $1.82 per share in dividend payments in the third and fourth quarters of the year. If American Electric Power achieves this target, it will mean that the company will return about $1.9 billion in dividends to shareholders in 2024. For some context, the company paid dividends totaling $1.76 billion and $1.65 billion to shareholders in 2023 and 2022, respectively.
Why income investors are charged up about American Electric Power
For conservative investors interested in generating steady passive income, utility stocks are a frequent consideration. Because they largely operate in regulated markets, utility stocks like American Electric Power are assured certain levels of revenue, providing them with clear foresight into future cash flows. This is evident in American Electric Power's expectation that it will pay dividends of $2.1 billion in 2025 and $2.2 billion in 2026, growing them further to $2.4 billion and $2.6 billion in 2027 and 2028, respectively.
