PPL vs. AEE: Which Dividend-Paying Utility Looks More Attractive?

The Zacks Utility -Electric Power industry offers a compelling long-term investment case due to its capital-intensive, domestically focused and highly regulated business model. These characteristics provide steady revenue visibility, predictable earnings and a supportive framework for ongoing infrastructure upgrades. Utilities continue to modernize grids, enhance reliability and invest heavily in rate-based growth projects that regulators typically allow to be recovered through customer rates, reinforcing stable cash flows.The industry is accelerating its transition toward cleaner energy sources as demand for 24X7 clean energy is rising from AI-based data centers, the reshoring of industries and higher usage of electric vehicles. Companies are retiring older fossil-fuel units, expanding renewables and deploying technologies that lower emissions while maintaining system reliability. Strong capital-return programs make utilities attractive for income-focused investors. As decarbonization reshapes the energy landscape, utilities remain well-positioned to deliver durable, long-term value. Amid such a backdrop, let us focus on PPL Corporation PPL and Ameren Corporation AEE, which have prominent regulated electric utilities operating in the Midwest and Eastern regions. PPL Corporation is a fully regulated utility focused on upgrading its infrastructure and expanding clean energy resources, generating stable cash flows and reliable dividends.The company’s regulated operations provide predictable revenues, strengthening financial stability and supporting consistent capital returns to its shareholders. Backed by a healthy balance sheet and favorable regulatory frameworks, PPL continues to invest in grid modernization, renewable energy and decarbonization efforts. These strategic initiatives position the company for steady earnings growth and durable long-term value.Ameren Corporation operates as a regulated electric and natural gas utility across Missouri and Illinois, providing consistent cash flows and a reliable dividend profile. Benefiting from a supportive regulatory environment and a comprehensive long-term capital strategy, the company is prioritizing grid upgrades and driving forward its clean energy transition. Its prudent financial approach, strong credit standing and well-defined capital investment outlook position Ameren Corporation as an appealing option for investors looking for stability and sustainable growth.PPL Corporation and Ameren Corporation are both strong, reliable performers in the utility space. Evaluating their key fundamentals more closely will provide insight into how they compare and which one may represent the more attractive investment prospect for investors.PPL & AEE’s Earnings EstimatesThe Zacks Consensus Estimate for PPL’s earnings per share in 2025 and 2026 has remained unchanged in the past 60 days. Long-term (three to five years) earnings growth per share is pegged at 7.34%.Image Source: Zacks Investment ResearchThe same for AEE’s earnings per share in 2025 and 2026 has moved up 0.60% and 0.56%, respectively, in the past 60 days. Long-term earnings growth per share is pegged at 8.52%.Image Source: Zacks Investment ResearchPPL & AEE’s Sales EstimateThe Zacks Consensus Estimate for PPL’s sales in 2025 and 2026 has moved up 2.42% and 4.37% year over year, respectively.The same for AEE’s sales in 2025 and 2026 has moved up 16.15% and 5.78% year over year, respectively.Return on EquityReturn on Equity (“ROE”) is an essential financial indicator that evaluates a company’s efficiency in generating profits from the equity invested by its shareholders. It demonstrates how well management is utilizing the capital provided to increase earnings and deliver value. PPL’s current ROE is 9.08% compared with AEE’s 10.92%. AEE also outperforms the industry’s ROE of 9.64%.Image Source: Zacks Investment ResearchPPL & AEE’s Capital Return ProgramDividends are recurring payments made by companies to their shareholders, offering a direct source of investment returns. These payouts typically indicate solid financial performance, marked by stable earnings and healthy cash flow. Utility companies are especially known for their dependable and consistent dividend distributions.Currently, the dividend yield for PPL Corporation is 2.99%, while the same for Ameren Corporation is 2.71%. The dividend yield of both companies is presently better than the S&P 500 composite’s yield of 1.49%.ValuationPPL Corporation currently appears to be a tad cheaper compared with Ameren Corporation on a Price/Earnings Forward 12-month basis. (P/E- F12M).AEE is currently trading at 19.78X, while PPL is trading at 18.7X compared with the industry’s 15.28X.Image Source: Zacks Investment ResearchDebt to Capital and TIE RatioThe Zacks Utilities sector is a capital-intensive one and huge investments are required at regular intervals to upgrade, maintain and expand operations. The usage of new evolving technology also requires investments. So, the utilities borrow from the market and add it to their internal cash generation to fund long-term investments.PPL’s debt-to-capital currently stands at 56.85% compared with AEE’s 59.8%. The Times Interest Earned Ratio (“TIE”) of PPL and AEE at the end of the previous reported quarter was 2.7 and 3, respectively, which indicates both have enough financial capacity to meet their interest obligation without any difficulties.Capital Expenditure PlansCapital investment is essential for the utility industry, enabling infrastructure upgrades, reliable operations and sustained growth. To address growing demand, expand renewable energy integration and adhere to shifting regulatory standards, utilities must make ongoing investments in power generation facilities and in their transmission and distribution systems. A decline in interest rate to the range of 3.75-4% will be beneficial for the capital-intensive industries.PPL Corporation plans to invest nearly $20 billion in the 2025-2028 period to strengthen its infrastructure and add more clean electricity generation assets. Ameren Corporation plans to invest $68 billion in the 2025-2029 period to strengthen its electric transmission, distribution and generation infrastructure.Price PerformanceIn the past six months, AEE’s shares have gained 9.7% compared with PPL’s rise of 5.4%.Price Performance (Six Months)Image Source: Zacks Investment ResearchSummingPPL and AEE are investing steadily to strengthen their infrastructure and continue to provide reliable services to their expanding customer base.Based on the above discussion, we can conclude that Ameren Corporation currently has a marginal edge over PPL Corporation despite having a premium valuation. Ameren Corporation’s rising earnings and sales estimates, better ROE, more extensive capital expenditure plan and better share price return make it more attractive at present.Ameren Corporation currently holds a Zacks Rank #2 (Buy), while PPL has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Quantum Computing Stocks Set To SoarArtificial intelligence has already reshaped the investment landscape, and its convergence with quantum computing could lead to the most significant wealth-building opportunities of our time.Today, you have a chance to position your portfolio at the forefront of this technological revolution. In our urgent special report, Beyond AI: The Quantum Leap in Computing Power, you'll discover the little-known stocks we believe will win the quantum computing race and deliver massive gains to early investors.Access the Report Free Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PPL Corporation (PPL): Free Stock Analysis Report Ameren Corporation (AEE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks