Investors looking to build a retirement portfolio during their working years may not be interested in utility stocks. They just don't dish out that much growth.

Investors who have already built a sizable nest egg and now need to protect it while they're living off of it, however, may want to consider American Electric Power Company (NASDAQ:AEP). It's a near-perfect name that offers a balance of safety, growth, and inflation-beating dividend increases.

A retired couple sitting at a table reviewing their stock portfolio.

Image source: Getty Images.

En route to becoming dividend royalty

For the unfamiliar, American Electric Power is the name behind AEP Ohio, Kentucky Power, Public Service Company of Oklahoma, Indiana Michigan Power, and a handful of other more local utility providers. With 5.4 million customers it's not only among the nation's biggest utility companies, it's also one of the best utility investments for retirees.

Income is one component of that argument. The company boasts 11 consecutive years of annual dividend growth. That's hardly on par with the market's so-called Dividend Aristocrat companies, which have upped their yearly dividend payouts for at least 25 years in a row. Fellow utility company Consolidated Edison has raised its dividend for 45 consecutive years. But here's an important nuance in American Electric Power's dividend history that merits highlighting. It's paid a dividend in every quarter since 1910, and has steadily increased its payout since 2005.

These haven't been mere courtesy increases, either. They've averaged out to be nearly a 5% increase on the prior year's payout. And were it not for 2002's big loss linked to the implosion of the country's energy-wholesaling industry (and the company's subsequent regrouping in 2003), AEP's dividend profile would sport an even longer-lived pedigree of stability.

Whatever the case, American Electric Power appears intent on earning its way to Dividend Aristocrat status. In the meantime, today's buyers will be stepping into the stock while its dividend yield is a respectable 3.6%.

American Electric Power's revenue earnings have been growing, and should continue to do so.

Data source: Thomson Reuters Eikon. Chart by author.

Catching a tailwind

Perhaps the bigger, better bullish argument for owning a piece of American Electric Power is the fact that it's adapting to the utility industry's inevitable future. These changes will allow the company to remain relevant -- and profitable -- over the course of a retirement that could last 30 years or more.

Yes, this change is primarily the shift away from fossil fuels and toward renewables.

It's a big project to be sure. Despite successful efforts to lower this figure since the turn of the century, 45% of the power produced by AEP comes from coal-burning power plants. Conversely, only 17% is produced by alternative sources such as wind and solar.

The company is still highly motivated to continue this transition, though. In late October, American Electric Power Company signed a letter of intent to purchase 50 megawatts' worth of electricity from a solar panel power farm in Columbus, Ohio. Early this month the company announced it would be decommissioning 1633 megawatts' worth of coal-powered electricity generating capacity by 2028. The very next day AEP publicly affirmed its commitment to renewable energy, yet still suggests the coming year's earnings growth for the coming year will be between 5% and 7% better than this year's.

This all sounds very expensive, and it is. This shift isn't as expensive as it may have been just a few years ago, however. Broadly speaking, the cost to produce one kilowatt of solar power is on par with the cost of fossil fuel-based power production in most of the U.S. Logistical matters like storage and transmission still need to be hammered out for these investments to fully pan out -- and pay off -- for AEP, but that end zone is in sight.

In the meantime, though politician's promises of government infrastructure spending rarely come to fruition, likely President-elect Joe Biden has indicated he'd like to spend $2 trillion on clean energy infrastructure investments within his first four years in office. While investors can't necessarily count on that money being deployed as hoped, it at least indicates Biden's support for such a shift.

Bottom line

No one's ever going to become dramatically richer just by owning American Electric Power Company, even if its dividends are consistently reinvested in more shares. Like any other established utility name, it's just not that kind of stock.

But it is the kind of investment that can help protect your existing wealth regardless of changes in the economic environment, just by dishing out dividends that grow faster than inflation does. A retiree's only task is to resist cashing in on the principal investment in the stock, and instead limit spending to its payouts.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.