Southern Company: Premium Dividend Yield and Average Growth
Southern Company raised dividends
Southern Company (SO), one of the largest regulated utilities in the US, declared quarterly dividends of $0.58 per share on April 17, 2017. Southern Company’s ex-dividend date is May 11, and its dividend will be paid on June 6, 2017. This dividend implies a rise of 3.5% compared to Southern Company’s dividends in the prior quarter. The $50 billion utility has increased dividends to its common shareholders for the last 16 consecutive years.
Southern Company is one of the highest yielding utilities in the US. Currently, it’s trading at a dividend yield of 4.6%, while utilities’ (XLU) average yield stands near 3.3%. Very few utilities are trading at such a premium yield. Peer Duke Energy (DUK) is trading at a yield of 4.2%. Currently, the SPDR S&P 500 ETF (SPY) (SPX-INDEX) yields ~2%.
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Premium yield, poor dividend growth
Southern Company has largely traded above a dividend yield of 4%. Its yield hasn’t fallen below 4% in the last 12 years.
Although Southern Company’s yield is one of the highest, its dividend growth rate was mostly on the lower side of the industry average. In the past five years, the company increased its dividends 3.6% compounded annually. Southern Company’s peer NextEra Energy (NEE) raised its dividends ~10% during the same period. Dominion Resources’ (D) dividend growth rate in the last five years stayed above 7%.
Southern Company’s regulated operations most likely account for its stable yield. However, its relatively low expected dividend growth rate limits appreciation in its stock price.
Next, let’s see where Southern Company’s dividend statistics stand in comparison to peers.