Again this month, all of the Magnificent Seven stocks — including Nvidia (NVDA), Microsoft (MSFT) and Alphabet (GOOGL) — failed to make the list of new buys by the best mutual funds. But Columbus, Ohio-based utility American Electric Power (AEP) powered its way onto the screen. On Monday, AEP stock generated a new breakout and a spot on the IBD Breakout Stocks Index before easing back on Tuesday.
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AEP Stock Powers Ahead In This ‘Electric’ Group
While Nvidia runs into static at its 50-day moving average and Microsoft tries to energize a new base, fellow megacap Google stock remains in need of a charge.
American Electric Power, on the other hand, has sparked a fresh breakout. On Monday, AEP cleared a 104.41 buy point in an early-stage flat base. In a sign of resurging technical strength after a slump in 2022 and most of last year, its 10-week moving average continues a sharp ascent. AEP stock now stands poised to retake the high it hit in September of 2022 as it teases a new buy zone.
As the S&P 500 stumbled Tuesday, AEP slipped back below the initial buy point in light trade.
Earning a 94 Composite Rating, American Electric Power is among the top utilities in the electric power industry group, which ranks No. 9 among the 197 industries IBD tracks. Other leaders include Pampa Energia (PAM), Pinnacle West Capital (PNW) and Portland General Electric (POR).
Alongside American Electric Power, Arizona-based Pinnacle West and Georgia-based Southern (SO) also made the latest list of new buys by the best mutual funds.
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Utilities: AEP Among Top Dividend Stocks
American Electric Power ranks among the best dividend stocks within the utilities group. It currently pays 3.38% on an annualized basis. Pinnacle West, Southern and FirstEnergy (FE) also all pay above 3%, while NextEra Energy (NEE) has a yield of 2.43%.
As is the case for utilities, American Electric Power doesn’t get mistaken for highflying growth stocks like Nvidia and Microsoft.
Nonetheless, growth has been solid and mostly steady. For the second quarter, AEP reported 5% revenue growth to just under $4.8 billion. Earnings grew 11% to $1.25 per share. For the full year, analysts expect 7% earnings growth to $5.62 per share, followed by a 6% gain to $5.98 a share in 2025.
| Company | Symbol | Dividend* | Comp Rating | EPS Rating | SMR Rating |
|---|---|---|---|---|---|
| Pinnacle West Capital | PNW | 3.91% | 97 | 90 | B |
| FirstEnergy | FE | 3.89% | 91 | 72 | B |
| American Electric Power | AEP | 3.38% | 94 | 85 | B |
| Southern | SO | 3.22% | 94 | 91 | C |
| NextEra Energy | NEE | 2.43% | 96 | 85 | B |
*On annualized basis
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American Electric Power Targets Net-Zero Emissions
American Electric Power operates over 40,000 miles of long-distance, high-voltage transmission lines, the nation’s largest electric transmission system. The company has more than 225,000 miles of shorter-distance, lower-voltage distribution lines to deliver power to 5.6 million customers in 11 states. AEP also is one of the nation’s largest electricity producers with nearly 29,000 megawatts of diverse generating capacity, including roughly 6,000 megawatts of renewable energy.
Companies within the American Electric Power group include AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Kentucky Power and more.
As a leading utility, AEP is involved in a wide range of industries, from electric vehicles and aerospace to manufacturing, crypto data mining and data centers.
AEP is investing $43 billion over the next five years to make the electric grid cleaner and more reliable. The utility says it is on track to cut carbon dioxide emissions by 80% from 2005 levels by 2030. On top of that, American Electric Power has set a target of net-zero emissions by 2045.
IBD Breakout Opportunities ETF
The IBD Breakout Opportunities ETF (BOUT) from Innovator Capital Management tracks the IBD Breakout Stocks Index. As with other index ETFs, this fund allows you to invest in the entire index in addition to, or rather than, buying individual stocks. Learn more here about the ETF and Innovator.
Follow Matthew Galgani on X (formerly Twitter) at @IBD_MGalgani.
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