AILIO - Ameren Corporation: The Real Rewards Are In The High-Yield Preferred Shares
2024-01-27 07:20:01 ET
Summary
- Ameren is one of the largest US gas and electric utilities, a component of the S&P 500 operating in Illinois and Missouri, with over 3 million customers.
- Earnings have been stable, predictable and growing at 6.0-8.0% per year, but future growth may be limited by the current difficult Illinois regulatory environment and its focus on affordable rates.
- Common shares are slightly undervalued and pay a modest 3.63% dividend. This is easily eclipsed by the yield on the preferred shares; while thinly traded, many series offer over 6.0%.
Ameren Corporation (AEE) is a utility holding company with 2.4 million electric customers and 900,000 gas customers. It operates four businesses in two states: Ameren Missouri (electric and gas), Ameren Illinois Electric, Ameren Illinois Natural Gas, and Ameren Transmission (a Midwest electric distributor). I believe this is a utility that is trying to reward investors with share price appreciation more than dividend yield. Ameren Missouri is the largest business segment and produces the majority of the revenue. Standard & Poor's rates Ameren Corporation as BBB+ or medium investment grade. It is a component of the S&P 500 , and per the Edison Electric Institute, the 16th largest investor owned utility in the US by market cap, currently $18.1 billion. It is just slightly smaller than Entergy Corporation (ETR). Ameren has a total generating capacity of 10,200 megawatts and about 10.0% of this comes from its Callaway Nuclear Plant in Missouri....
Ameren Corporation: The Real Rewards Are In The High-Yield Preferred Shares