Investors who want to cash in on The Southern Company’s (NYSE:SO) upcoming dividend of $0.6 per share have only 8 days left to buy the shares before its ex-dividend date, 18 May 2018, in time for dividends payable on the 06 June 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Southern’s most recent financial data to examine its dividend characteristics in more detail. View our latest analysis for Southern
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Does it pay an annual yield higher than 75% of dividend payers?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has the amount of dividend per share grown over the past?
Does earnings amply cover its dividend payments?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Southern fare?
The company currently pays out more than double of its earnings as a dividend, according to its trailing trailing twelve-month data, meaning that the dividend is predominantly funded by retained earnings. In the near future, analysts are predicting a more sensible payout ratio of 80.73%, leading to a dividend yield of 5.60%. Moreover, EPS should increase to $2.92, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. 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 has a yield of 5.44%, which is high for Electric Utilities stocks.
With these dividend metrics in mind, I definitely rank Southern as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three pertinent 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 pass 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.