When deciding in which companies to invest, it is important to take a close look at the company. This includes analyzing the company’s history in term of profits and dividend payouts and also looking at the current situation. Furthermore, you should look at expert predictions about the future of the company, which is especially important if you want to add a dividend stock to your portfolio that will remain solid in the long-term. One option that you may wish to consider is The Southern Company (NYSE:SO), and here is an overview of this company and why it is a top dividend stock pick to add to your portfolio.
What You Need to Know
The Southern Company is an electric, gas, and utility holding company that is headquartered in Atlanta, Georgia. In terms of its customer base, it is the second-largest utility company in the United States as it serves nine million electric and gas utility customers across nine states of the United States. However, their total operations span 18 states. The company was founded in 1945, so it is a well-established company with a long history in the utilities industry. According to NASDAQ, it is the type of industry that makes The Southern Company a safe bet for investment. They say that utilities are one of the safest industries in which to invest due to their domestic focus and the regulated assets. NASDAQ also points out that the demand for utilities remains steady regardless of fluctuations in the economy. This means that well-established companies in the utilities sector will remain steady. Another factor that NASDAQ believes makes The Southern Company a good investment is the divestment deals it made in 2018. Some of these divestment deals were with NEE, Global Atlantic Financial Group, and NextEra Energy, Inc. These deals have helped The Southern Company to streamline its portfolio, pay for new reactors for its Vogtle Project, and raise cash for debt repayments.
The fact that The Southern Company has diversified into natural gas is another factor in its favor, says The Motley fool. In the past, the focus of The Southern Company has been on electricity distribution and power generation. In recent years, they have invested in natural gas resources. Natural gas is important for energy security in the United States, so it is significant that The Southern Company has got involved with this sector of the utilities industry. It also adds another element of security to investing in this company. The natural gas segment of the company was created following a merger with AGL Resources in 2016. Between then and 2017, the sector had 19 percent year-over-year growth. It is expected that investors will see similar growth over the coming years. The long-term growth is being supported by a $6 billion investment into The Southern Company’s state-regulated gas portfolio across the period between now and 2022.
The Motley Fool also compares The Southern Company to other leaders in the utilities sector; Duke Energy and Dominion Energy. Of the three companies, The Southern Company has both the highest dividend yield and the most attractive forward earnings rate. In terms of the power generation mix of the companies, and the future potential of the different sectors of the company. The Southern Company has less of a focus on coal and nuclear power than the other two companies and a greater focus on the use of natural gas. This is good because the focus on natural gas mitigates the risk of relying on revenue from coal and nuclear power sources. The most important questions for many investors are whether a company has a high yield and if a company has a strong history in terms of dividend payouts. Seeking Alpha answers these questions with information about both the current yield and the history of dividend payouts. They also look to the future of dividend payouts from The Southern Company.
They say that The Southern Company stock is well-known for having a high yield, which is currently around 5.5 percent. While this high yield is tempting to some investors, others have questioned whether the high yield could impact on future dividend payouts. However, the company has a long history of dividend payouts dating back to 1948. The fact that the company has such a long and strong history is a reason to invest. In fact, investors have seen dividend increases consistently for the last 16 years, and it is expected that dividends will continue to rise over the coming years. This makes it a strong contender for those who want a stable dividend stock that will continue to pay out in the mid to long-term. Another point worthy of note in relation to the strength and stability of this company is its recession-proof business model. As it stands, The Southern Company’s business model allows the company to earn high returns, and this is evident when you look at its impressive earnings history. For the last eight trailing quarters, The Southern Company has exceeded the Zacks Consensus Estimates. Furthermore, analysts are now revising estimates of the company’s earnings to reflect their actual earnings increases. This is working in favor of The Southern Company stock.
Finally, there has been a drop in the share price of The Southern Company recently. This reflects the failed attempt to venture into the clean coal sector. However, this failed venture will not have a long-term impact on the company or the dividend yields. Therefore, the lower stock price is possibly the ideal opportunity to invest in this company.
Overall, the future looks good for The Southern Company. The expected continued trend of high yields and increased dividend payouts over the next decade make it a sound dividend stock to consider adding to your portfolio. The company should remain strong due to its high earnings, regulated assets, and continuous demand. The divestment deals and the greater focus on natural gas have also strengthened the position of this company in the long-term.