Close on the heels of Ameren Corporation (NYSE: AEE) boosting its quarterly dividend by 3.5 percent on October 14, Argus doesn't see any other catalyst to change its rating on the stock. The firm reiterated its Hold rating citing valuation.
Analyst Gary Hovis said shares are trading at 17.2 times to his SEPS estimate for 2017. This is at the top end of the PE range for fully regulated electric utilities. He indicated he was not excised by the potentials for the total return in the next 12-month period despite expanding rate base of AEE and the positive relations enjoyed by it with the regulators.
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In a note, the brokerage said, "At the same time, we are maintaining our long-term BUY rating. Management believes that the company has adequate liquidity through its current cash balances, cash from operations, and credit facility to meet all anticipated cash requirements through 2018."
Argus expects Ameren to gain from its diversified geographic and increased customer base. These factors would translate to an annual return of 5–6 percent in the next four or five years.
Hovis added, "The company has a growing network of transmission assets, which have the potential to earn a higher return on equity than utilities with generation and distribution assets, and its operating utilities, Ameren Missouri and Ameren Illinois, are well managed with growing cash flow."
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