American Electric Power Company Inc. (AEP, Financial) (2.1%) (AEP – $56.86 – NYSE) is one of the nation’s largest electric utilities. It serves more than 5.4 million retail customers in eleven states (Ohio and Texas are the largest), owns approximately 32,000 MW of generating capacity, 40,000 miles of transmission lines (the nation’s largest), and 221,000 miles of distribution lines. AEP is focused on becoming a premier regulated utility, and it plans to invest $12 billion over the 2015-2017 time period in regulated assets, driving 7.5% CAGR in net regulated plant. Management expects 4% - 6% annual earnings growth, driven by a recovering economy, cost controls, and rate recovery of capital investment. Some of the growth will come from AEP Transco, a transmission development subsidiary that contributed $0.31 per AEP share in 2014, which plans to grow its total capital investment to $6.4 billion-$8.2 billion and generate $0.67-$0.81 per share by 2018. AEP also currently pays roughly 60% of earnings to shareholders in the form of dividends, and expects to increase the payout to 60%-70%.
From Mario Gabelli (Trades, Portfolio)'s Gabelli Industrials Fund shareholder commentary for third quarter 2015.
