AEP slashes dividend by 42 per cent

24 April 2003 – The board of US power generator American Electric Power Co. Inc. (AEP) on Wednesday approved a 42 per cent cut in its quarterly common stock dividend to 35 cents a share.

AEP warned in January that it would have to reduce its dividend as part of a package of measures to reduce costs and strengthen its balance sheet. At the time, the company said the cuts would save about $340m annually.

A number of other US power companies, including Dynegy Inc. and CMS Energy Corp have cut or suspended their dividends in the wake of significant reversals in fortunes and resultant credit downgrading.

Stock dividends have always been crucial to utilities since regulators cap how much the companies can make from selling power. The promise of a stable, and often high, dividend is a prime way for companies to lure investors.