El Erian: Stagflation Is Coming

Two dividend stock ideas offered with this story: $MRK and $AEP

Yahoo Finance/TipRanks headline: Mohamed El-Erian Says Stagflation Is Coming; Here Are 2 ‘Strong Buy’ Dividend Stocks to Protect Your Portfolio

Tue, September 20, 2022 at 9:29 AM


Let’s take a change of pace for the second stock, and shift from biopharma to public utilities. American Electric Power is one of the largest electricity providers in the US, more than 40,000 miles of transmission lines fed by over 26,000 megawatts of generating capacity – a number that includes some 7,100 megawatts worth of capacity from renewable sources, and 5.5 million customers across 11 states. AEP, with its large footprint in an absolutely essential economic niche, is a prime example of a defensive stock, and in fact, utility companies have long had a reputation for being ‘recession proof.’

A look at AEP’s financial results shows that the company has fared well so far this year, even as the first and second quarters both registered GDP declines. AEP saw $4.6 billion in revenue, with non-GAAP operating earnings of $617.7 million. While the top line was relatively flat y/y, earnings were up over 28%. Non-GAAP EPS came in at $1.20, just a shade higher than the year-ago result of $1.18.

In addition to sound results, AEP reiterated its guidance for the full year 2022, with non-GAAP earnings expected in the range of $4.87 to $5.07 per share. The company expects a 6% to 7% long-term growth rate going forward.