Since yield inversion points to the upcoming recession, the focus could shift to safe-haven utilities (XLU). Utilities’ stable stock price movements and higher dividend paying capabilities haven’t been an effective hedge in tough times. However, utilities have outperformed broader markets over a longer period. We’ll compare Southern Company (SO) and Duke Energy’s (DUK) dividend profiles. We’ll see which company could emerge strong.
Southern Company and Duke Energy are some of the biggest regulated utilities in the country. They generate a large portion of their earnings through regulated operations, which facilitates stable earnings and dividends.
The dividend stability is underlined by the two utilities’ long payment history. Southern Company has paid a cash dividend for 285 consecutive quarters, while Duke Energy has paid dividends for 370 consecutive quarters.
Currently, Southern Company is trading at a yield of 4.7%, while Duke Energy offers a yield of 4.1%—notably higher than utilities at large yielding ~3%. Southern Company’s premium yield shows a spread of ~220 basis points to the ten-year Treasury yields and ~300 basis points to broader markets. Both of the utility stocks’ yields traded higher than the industry average in the last five years.