Have you been keeping an eye on The Southern Company’s (NYSE:SO) upcoming dividend of US$0.60 per share payable on the 06 September 2018? Then you only have 2 days left before the stock starts trading ex-dividend on the 17 August 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding Southern can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Does it pay an annual yield higher than 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has it increased its dividend per share amount over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How well does Southern fit our criteria?
Southern has a trailing twelve-month payout ratio of 100.45%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 81.94%, leading to a dividend yield of around 5.35%. Furthermore, EPS should increase to $2.72, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of SO it has increased its DPS from $1.68 to $2.4 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes SO a true dividend rockstar.
Compared to its peers, Southern generates a yield of 5.17%, which is high for Electric Utilities stocks.
Taking into account the dividend metrics, Southern ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SO’s future growth? Take a look at our free research report of analyst consensus for SO’s outlook.
- Valuation: What is SO worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SO is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.