Market value: $44.2 billion
Dividend yield: 5.3%
Southern Company’s (SO, $43.81) last few years have been a relatively wild ride for a regulated utility. Several multibillion-dollar construction projects have blown through their initial budgets and faced delays, creating a good deal of regulatory uncertainty and financial constrain.
So why is Southern Company on this list of safe, high-yielding dividend stocks to consider?
Simply put, the worst seems to be behind the company, improving Southern’s dividend safety and long-term growth outlook.
Specifically, in December 2017, Georgia regulators approved Southern’s proposal to continue the construction of its nuclear reactors, as well as its updated cost and delivery schedule.
Morningstar analyst Charles Fishman, CFA, commented in February that the firm is “confident that the company can get back to its 4%-6% long-term EPS growth target. We believe the company can exceed 6% growth in the next decade if the new nuclear units at Vogtle come in on schedule and on budget.” Fishman noted that the project is eight months ahead of the revised schedule that regulators approved, so the outlook could indeed finally be brightening.
Project issues aside, Southern Company has paid uninterrupted dividends since 1948, driven largely by the predictable nature of its earnings, almost all of which are generated from regulated activities.
As management (finally) delivers on the nuclear projects that have weighed on the firm in recent years, SO should continue offering income investors a nice blend of generous yield and moderate payout growth.
