American Electric Power Co Inc
🇺🇸 AEP · NYSE/NASDAQ · US0255371017
Utilities
USD 125.15 price at analysis
Scores
Key Metrics
Powered by EODHDP/E (TTM)
18.2
P/E (Price-to-Earnings)Shows how much investors pay for each $1 of profit. We display the TTM P/E (Trailing Twelve Months) which uses actual earnings from the last 4 quarters. This is more reliable than Forward P/E which uses analyst estimates.
Calculation: 125.15 ÷ 6.88 = 18.2
TTM period through: 2025-12-31
Forward P/E (estimated): 20.4
Based on analyst estimates
Reference: Provider P/E (Trailing): 19.0
Yield (Fwd)
3.04%
Dividend YieldThe Forward yield (Fwd) shows the next announced annual dividend / current price — what you'd earn going forward. The Trailing yield (TTM) in the tooltip shows dividends actually paid in the last 12 months. Forward is shown as primary because it reflects the company's current commitment to shareholders.
Trailing Yield (TTM): 2.94%
Div. Growth (5Y CAGR)
6.1%
Growth Streak
9 yrs
Consecutive years of increase
Net Debt/EBITDA (TTM)
5.7x
Latest quarter: 24.1x
Net Debt / EBITDAA leverage ratio showing how many years of EBITDA (earnings before interest, taxes, depreciation, and amortization) it would take to repay net debt. EBITDA approximates operating cash generation. Lower ratios (e.g., <3x) are generally safer; higher (e.g., >5x) may indicate more financial risk.
TTM through: 2025-12-31
Latest quarter (2026-03-31): 24.1x
The quarterly value can spike when quarterly EBITDA is very low (e.g., one-time charges).
Quick guide: <2x manageable, >4x can be risky (sector-dependent).
Payout (Fwd)
55.2%
Payout RatioDividends as a percentage of earnings. The Forward payout (Fwd) uses the announced dividend divided by actual past earnings (TTM) — it tells you if the company can afford what it promised. Very high payouts can be risky, especially if profits fall.
Announced dividend / actual earnings (TTM)
Payout (TTM): 56.1%
Cash Flow Payout (TTM): 28.9%
FCF Coverage (TTM): 3.39x
ROE
12.6%
ROE (Return on Equity)A profitability measure: how much profit is generated from shareholders’ equity. Higher isn’t always better if it comes from high debt.
EV/EBITDA
13.0x
EV/EBITDAA valuation ratio that compares total business value (including debt) to EBITDA. Lower can mean cheaper, but context matters.
📊 What Changed From Last Analysis?
Moved from WATCH to OPTIMAL: Recent market pullback on inflation/rate fears compressed the valuation, bringing P/FFO down to a highly attractive 10.35x and pushing the forward dividend yield above the 3% target, creating an actionable entry point.
Summary
American Electric Power is a premier regulated utility benefiting from a durable natural monopoly and long-term tailwinds from electrification and surging data center demand. The recent market pullback on inflation fears has created a compelling temporary opportunity to acquire premium utility assets at a discount. AEP currently trades at $125.15, well below our fair value P/FFO estimate of $145-217, presenting an attractive entry point for dividend investors seeking highly secure infrastructure exposure. Worth considering for new positions at current levels, offering an excellent combination of fundamental quality and valuation margin of safety.
Sector Context
American Electric Power is one of the largest regulated utilities in the US, generating, transmitting, and distributing electricity to millions of customers. In the dividend value strategy, regulated utilities represent ideal natural monopolies with predictable, recession-resistant cash flows. They naturally carry higher debt loads (Net Debt/EBITDA around 5-6x is standard) due to vast infrastructure investments, making them temporarily sensitive to interest rate fears but reliable long-term income generators.
Temporary Opportunity Identified
Broad market retreat and utility sector selloff driven by higher-than-expected CPI data and persistent interest rate fears, which temporarily pressures capital-intensive dividend stocks without impairing their long-term fundamentals.
📊 Strategy Analysis
- • Trading at $125.15, well below the fair value P/FFO range of $145-217, offering substantial upside to fair value.
- • Highly attractive P/FFO of 10.35x highlights deep undervaluation relative to the company's true cash flow generation, mitigating the elevated trailing P/E of 18.19.
- • Operates a strong natural monopoly with predictable cash flows and massive structural growth tailwinds from electrification and data center power demand.
- • Exceptional dividend sustainability with a 10-year track record of zero cuts, a healthy 62.4% TTM payout ratio, and robust free cash flow dividend coverage of 3.39x.
⚠ What to Watch
- • Trailing dividend yield of 2.94% sits just below the strict 3% strategy minimum, though the forward yield of 3.04% crosses the threshold.
- • Net Debt/EBITDA of 5.69x, while customary for regulated utilities, maintains the company's sensitivity to the current higher-for-longer interest rate environment.
📊 Historical Trends (10 Years)
Powered by EODHDThese charts show how key metrics have evolved over the past decade, helping you identify if the company is improving or deteriorating.
Debt Evolution (Net Debt / EBITDA)
Lower values are better. A declining trend indicates the company is reducing its debt (deleveraging).
Revenue & Earnings Growth
Consistent growth in revenueRevenue
The money a company brings in from selling its products or services. It’s the top line before costs. (blue) and earningsEarnings (Profit)
What’s left after expenses. Positive earnings mean the business made a profit; negative means a loss. (green) indicates a healthy business. Look for upward trends and recoveries after temporary dips.
Dividend Sustainability (FCF vs Dividends Paid)
Free cash flowFree Cash Flow
Cash left after the company pays for running the business and maintaining it. Often used to fund dividends, pay debt, or buy back shares. (FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., blue) should cover dividends paidDividends Paid
Cash the company paid out to shareholders. It’s not guaranteed and can change over time. (green). If dividends consistently exceed FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., the dividend may be at risk.
Analysis date: 2026-05-16
Disclaimer: This information is for educational purposes only. Not financial advice.