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Topic: Growth Stocks

AMEREN CORP. $28 – New York symbol AEE

AMEREN CORP. $28 (New York symbol AEE; Income Portfolio, Utilities sector; Shares outstanding: 236.9 million; Market cap: $6.6 billion; Price-to-sales ratio: 0.8; Dividend yield: 5.5%; WSSF Rating: Average) sells electricity and natural gas to 3.4 million customers in Illinois and Missouri.

In the third quarter of 2009, Ameren’s earnings rose 3.7%, to $255 million from $246 million a year earlier. However, earnings per share fell 0.9%, to $1.16 from $1.17, on more shares outstanding. These figures exclude several non-recurring charges, including the costs to close two generating units at one of its power plants. Revenue fell 11.9%, to $1.8 billion from $2.0 billion. Electricity sales to consumers fell 10%, as cool summer weather cut air-conditioner use. Sales to industrial customers fell 3%.

Ameren is seeking approval to raise its power and gas rates. This would add $621 million to its annual revenue. Regulators will likely grant Ameren’s requests, because it needs the funds to cover higher operating and interest costs.

Ameren uses coal to generate 85% of its power, so higher rates will also help it comply with new mandates to get more of its electricity from renewable sources.

The company will probably earn $2.72 a share in 2009. The stock trades at 10.3 times that figure. That should let it maintain its $1.54 dividend, which yields 5.5%.

Ameren is a hold.

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