AES Corp (AES) $16.85 (Utility, decent dividend yield) Can buy on declines or accumulate don’t expect more than 7%-8% per year, though datacenter operations could be a nice surprise.
Flat for a long time – 10 years the stock returned just 12%, it is down 12% in the past year. Revenues and operating earnings also went nowhere during the same time, selling some legacy coal, and switching to renewable energy,
Earnings growth for the next three years is estimated at 8%, revenue at 4%.
The 4% dividend yield is interesting
BBB debt rated – middle of the pack, most utility dividend investors would prefer at least BBB+.
Core player in the renewable sector, with a growing 25-30 GW portfolio of solar power until 2027 – The trend towards renewable energy helps them.
Expected demand from Datacenters- Some of the company’s major customers include Amazon, Microsoft and Google, major IT businesses, all of whom have Co2-neutral commitments to their operations by 2030 or earlier – and the company’s backlog is over 40% with customers that are large tech companies.
- Transitioning from coal and gas-fired power plants to renewables and storage and still has impairment losses due to the coal exit.
- Low margins – not efficient, compared to its competitor Brookfield Renewables, AES has a lower dividend yield and a lower EBITDA margin.
- These are still high debt levels. $26.5B net debt equals more than two times the current market cap, about eight times the adjusted 2023 EBITDA, and about 26 times the 2023 free cash flow. Three peers BEP, AY and TEC have lower debt ration – some at slightly higher rates but this will improve once rates go down.