Shares of U.S. utility giant American Electric Power (NASDAQ:AEP) rose a little more than 13% in March according to data from S&P Global Market Intelligence. That's a pretty good month for a utility, but it has to be put into a broader context, since the average utility, using Vanguard Utilities ETF as a proxy, was up 9.5%.
Clearly investors took a more positive view of utilities in general during the month of March and that helped to lift American Electric Power's stock. With the rollout of vaccines across the country, investors have become increasingly confident that the world will eventually learn to deal with the coronavirus. That, in turn, should be a positive for utilities as people go back to work (in an office) and businesses start to reopen more fully. In other words, assuming that the economy starts to rebound, electricity demand should pick up.
However, it's also important to look just a few days further back. American Electric Power reported full-year 2020 earnings a day before February trading came to a close. The news was very good reading, with operating earnings up nearly 5%. The company also provided operating earnings guidance of $4.55 to $4.75 per share for 2021, which could mean as much as a 7% bottom-line increase for the year. It also reaffirmed that 5% to 7% growth over the foreseeable future is still the company's long-term expectation. These are solid numbers for a utility, noting that dividend growth is likely to trail along with earnings growth. So it isn't surprising that investors would give American Electric Power a little extra boost in a month when the broader utility space did well.
Despite the big price gain in March, American Electric Power isn't really an exciting company -- it's a boring utility. But with a solid growth outlook, that could be pretty enticing for a dividend investor looking for a steady dividend payer with solid dividend growth potential. On that score, American Electric Power is probably worth a deep dive. Just go in knowing that investors appear well aware of how well it is doing right now.