The firm also lowered its price target to $12 from $14 on shares of the Arlington, VA-based power company.
"The reduction reflects more competition from renewable resources globally versus AES' largely fossil generation fleet. This is playing out in Chile where wind generators drove the last auction price to $47.60/Mwhr from the prior price of $79.30/Mwhr," Barclays wrote in an analyst note.
The firm noted that AES has a 3.5% yield with dividend growth of 10% to 2018 and is on track to deliver investment grade credit metrics by 2019 or 2020.
"In general the risk of being a fossil fuel generator is longer-term but 2020 levels of coal produced (53%) and as a portion of revenue (32%) are likely still too high for investors focused on cleaner portfolios," Barclays added.
The company has a portfolio of distribution businesses, and thermal and renewable generation facilities.
Shares of AES closed lower on Monday.
Separately, TheStreet Ratings Team has a "Hold" rating with a score of C on the stock.
The primary factors that have impacted the rating are mixed. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and solid stock price performance.
But the team also finds weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: AES