Our top pick for more conservative income investors in 2014 is a utility firm that responded to a near-death experience early in the 2000s, by reorienting its business away from wholesale generation, and toward regulated operations, cutting debt, and increasing scale, explains David Dittman, editor of Utility Forecaster.

In November 2013, management at AES Corp. (AES) announced a 25% increase in its quarterly dividend rate to $0.05 per share, validating its efforts to turn the company around. But the work is far from over.

In fact, AES has boosted its target for sustainable annual cost reductions to $200 million by 2015, from $145 million by 2014, after getting to 93% of the latter in 2013.

Since September 2011, AES has closed, or sold, 21 businesses for proceeds of $1.4 billion, on track for more than $2 billion by 2015. AES is now operating in 20 countries versus 28 a little more than two years ago.

And the company has reduced debt by nearly 15%. At the same time, AES is on track to complete 2,231 megawatts of capacity under construction by 2016.

Management has reaffirmed its 2013 adjusted EPS forecast of $1.24 to $1.32, guiding to the high-end of a parent free cash flow range of $400 million to $500 million.

The new dividend rate is about 30% of sustainable parent free cash flow, up from 24% and in line with the 30% to 40% target announced in May 2013.

Management expects free cash flow growth to exceed earnings growth over the next couple years, on contributions from new businesses, lower operating costs, and reduced leverage, driving investment as well as dividend growth. AES Corp. is a buy for long-term growth under $17.

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