There isn’t much I like in this troubled market. However, I found one pick I’m still comfortable recommending despite the market’s challenges: AES Corp. (AES), asserts Mike Larson, editor of Safe Money Report.
AES is a company that truly has been to financial hell and back again. Swept up in the merchant power/global expansion trend that roared through the utility industry in the late 1990s, its shares surged from less than $5 to just above $72.
Then they crashed and burned when Enron and others of its ilk imploded. In fact, AES traded for less than a buck in the 2000-’02 bear market, and less than $5 again at the depths of the 2007-’09 bear market. But a funny thing has happened since then.
The Arlington, Va.-based company has slowly and steadily risen from the grave thanks to a series of prudent restructurings and reorganizations.
As of mid-2018, AES had shrunk its geographic footprint to 15 countries from 28, slashed costs and overhead, and sold billions of dollars in assets. It also shifted its focus toward generating power from renewable sources of energy rather than coal, and expanded its battery-based energy-storage business.
Unlike many corporations that have been loading up with debt, AES has also been doing the opposite. It freed up enough money through various measures to shrink parent company debt by $1.2 billion (23%) between Q3 2016 and Q3 2018. Result: The company says it’s on track to achieve an investment-grade debt rating by as early as next year.
AES also identified measures that are helping it save around $100 million annually in costs. That’s helping boost cash flow and earnings, giving the company the confidence to forecast adjusted EPS growth of 8% to 10% per year through 2020. Throw in the stock’s 3.6% indicated dividend yield, and AES looks like a decent risk/reward play.
