Southern Co's Dividend Analysis
Exploring the Sustainability of Southern Co's Dividend
Southern Co (NYSE:SO) recently announced a dividend of $0.7 per share, payable on 2023-12-06, with the ex-dividend date set for 2023-11-17. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Southern Co's dividend performance and assess its sustainability.
What Does Southern Co Do?
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Southern is one of the largest utilities in the U.S. The company serves 9 million customers with vertically integrated electric utilities in three states and natural gas distribution utilities in four states. It owns 50 gigawatts of rate-regulated generating capacity, primarily for serving customers in Georgia, Alabama, and Mississippi. Subsidiary Southern Power owns 13 gigawatts of natural gas generation and renewable energy across the U.S. and sells the electricity primarily under long-term contracts.
A Glimpse at Southern Co's Dividend History
Southern Co has maintained a consistent dividend payment record since 1986, distributing dividends on a quarterly basis. The company is recognized as a dividend aristocrat for increasing its dividend annually since 1986, a testament to its commitment to providing shareholder value. Below is a chart showing the annual Dividends Per Share to track historical trends.
Breaking Down Southern Co's Dividend Yield and Growth
As of today, Southern Co currently has a 12-month trailing dividend yield of 4.01% and a 12-month forward dividend yield of 4.04%, indicating an expectation of increased dividend payments over the next 12 months. Over the past three years, Southern Co's annual dividend growth rate was 3.20%, extending to 3.30% per year over a five-year horizon, and a 3.40% growth rate over the past decade. The 5-year yield on cost of Southern Co stock is approximately 4.72%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. Southern Co's dividend payout ratio is currently 1.01 as of 2023-09-30, which may raise concerns about sustainability. However, Southern Co's profitability rank of 7 out of 10 suggests good profitability prospects. The company has reported positive net income for each year over the past decade, reinforcing its high profitability.
Growth Metrics: The Future Outlook
Southern Co's growth rank of 7 out of 10 suggests a favorable growth trajectory relative to competitors. The company's revenue, revenue growth, and earnings growth metrics all indicate a strong financial foundation. Southern Co's revenue has grown by approximately 10.00% per year on average, outperforming about 59.34% of global competitors. Its 3-year EPS growth rate of 5.50% per year also outperforms approximately 51.36% of global competitors. Moreover, the company's 5-year EBITDA growth rate of 25.20% outperforms about 85.71% of global competitors.
Next Steps
In conclusion, Southern Co's consistent dividend history, respectable yield, and growth rates present a compelling case for investors seeking stable income. While the payout ratio may appear high, the company's solid profitability and growth metrics provide a counterbalance, suggesting that dividends may continue to be a priority for management. As Southern Co navigates the complexities of the utility sector, its financial health and strategic positioning will be key factors in maintaining dividend payments. Investors should consider these aspects when evaluating Southern Co as a potential addition to their portfolios. For further research, GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
