Southern Company (SO) and Duke Energy (DUK) have been paying steady dividends for the last several years. However, their dividend growth has been below utilities’ (XLU) average. In the past five years, Southern Company and Duke Energy’s dividends rose ~3% each compounded annually. The industry’s average dividend growth was close to 4% compounded annually during the same period.
Their relatively slower earnings growth could be one of the main reasons behind the lower dividend growth. Southern Company and Duke Energy intend to grow their earnings 4%–6% per year for the next few years. Their dividends are also expected to increase close to those levels.
Peers’ dividend growth
In comparison, NextEra Energy’s (NEE) dividends grew 11% compounded annually in the last five years. Dominion Energy’s (D) dividends increased ~8% during this period. NextEra Energy and Dominion Energy will likely continue to see superior dividend growth for the next few years. NextEra Energy’s management expects its dividends to grow 13% per year for the next few years. Dominion Energy’s dividends are expected to increase 10% in 2019. Premium earnings growth is expected to drive the dividend growth.
To learn more about these utilities, read Comparing Utility Giants: NextEra Energy and Dominion Energy