AEP - American Electric Power: Buy This Dividend Stock On Sale

2024-03-19 07:30:00 ET

Summary

• I believe high-quality utilities are well-positioned to deliver alpha within the next few years.
• American Electric Power narrowly missed the analyst consensus for operating revenue and operating EPS but remains fundamentally solid.
• The company's credit rating was recently downgraded but remains investment-grade.
• Shares of AEP could be priced at an 11% discount to fair value.
• The electric utility could deliver compelling total returns through 2026 and may top the S&P in the coming 10 years.

The higher-for-longer narrative playing out over this interest-rate hiking cycle in the last couple of years has claimed many victims in the stock market.

For many companies that got complacent and addicted to debt, gone are the days of zero interest rate policy. Inherently indebted sectors such as utilities have suffered a double whammy from these high interest rates....

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