Utility stocks are generally popular among investors because they distribute a large share of their profits to shareholders in the form of dividends. For example, in 2016, Southern Company (SO) and Duke Energy (DUK) gave away 86% and 91%, respectively, of their profits as dividends. Such high payout ratios are not unusual in the utility industry (XLU).
It should be noted that peer NextEra Energy’s (NEE) payout ratio is much lower than those of SO and DUK at a mere 55%. And this lower payout ratio could be the reason behind NEE’s lower yield. By comparison, Dominion Resources’ (D) payout ratio was ~81% in 2016.
For further investigation, check out Market Realist’s Which Utility Will Pay Higher Dividends in 2017? Continue to the next and final part of this series for the latest comparison of growth prospects between Southern Company and Duke Energy.