Exploring the Sustainability and Growth of Southern Co's Dividends
Southern Co (SO, Financial) recently announced a dividend of $0.72 per share, payable on 2024-06-06, with the ex-dividend date set for 2024-05-17. 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?
Southern Co is one of the largest utilities in the U.S., serving 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. Its subsidiary, Southern Power, owns 13 gigawatts of natural gas generation and renewable energy across the U.S., selling 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 has increased its dividend each year since 1986, earning it the status of a dividend aristocrat—a title reserved for companies that have increased their dividend annually for at least the past 38 years.
Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Southern Co's Dividend Yield and Growth
Southern Co currently has a 12-month trailing dividend yield of 3.52% and a 12-month forward dividend yield of 3.62%, indicating an expectation of increased dividend payments over the next 12 months. The company's annual dividend growth rates over the past three, five, and ten years have been 3.10%, 3.20%, and 3.30%, respectively. Based on Southern Co's dividend yield and five-year growth rate, the 5-year yield on cost of Southern Co stock as of today is approximately 4.12%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio, currently at 0.77, suggests that Southern Co retains a significant part of its earnings, which supports future growth and stability. Southern Co's profitability rank of 7 out of 10, combined with consistent positive net income over the past decade, underscores its strong profitability.
Growth Metrics: The Future Outlook
Ensuring the sustainability of dividends requires robust growth metrics. Southern Co's growth rank of 7 out of 10 indicates a solid growth trajectory. The company's revenue has grown by approximately 6.30% per year on average, although this rate underperforms about 61.9% of global competitors. Its 3-year EPS growth rate and 5-year EBITDA growth rate also reflect a strong capability to sustain dividends long-term.
Conclusion
Considering Southern Co's consistent dividend payments, growth in dividend rates, and a solid payout ratio coupled with high profitability and growth metrics, the company presents a compelling case for dividend investors. Southern Co's strategic initiatives and financial health suggest a sustainable dividend policy that could appeal to value investors focused on steady income streams. For those interested in exploring further, GuruFocus Premium provides tools like the High Dividend Yield Screener to discover high-yield investment opportunities.
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.
