Southern CompanySO

Morningstar Rating

Stock Research and Analysis

by Mark Barnett

We think this well-positioned juggernaut from the Deep South could be an attractive investment for investors seeking dividends and capital preservation. Enviable regulatory relationships and rate structures, along with a commitment to the pure-play Read more

Bulls Say

Southern operates in the business-friendly Southeast, where its traditionally low power prices and sterling reputation help to foster a constructive and stable regulatory atmosphere.

The company has paid a stable or increasing dividend for 242 consecutive quarters, yields 4.8% at our fair value estimate, and could raise the dividend 4.0% annually.

Population growth in Southern's service territories has continued despite the economic slowdown. New customers are a cheap and easy way for a regulated utility to grow.

The company's in-house engineering and construction expertise allows it to build more-efficient plants more cheaply than its peers and lowers maintenance and environmental compliance costs.

With an average contract duration exceeding 11 years, Southern's merchant segment, Southern Power, has lower remarketing risk than most merchant power suppliers. Read more

Bears Say

Much of Southern's generating fleet burns coal, so any carbon dioxide legislation could require expensive compliance that could lead to higher power prices and potentially discourage usage.

Utilities tend to suffer in times of inflation and rising interest rates. Inflation erodes the value of the existing rate base on which a utility's allowed returns are calculated.

Declining industrial and commercial usage as a result of reduced economic activity will flow through to Southern's bottom line until its next round of rate cases.

If the Georgia Power rate case produces an unfavorable decision, Southern could feel the drag for a while, especially if the three-year cycle remains in place. Read more

Strategy

Southern is in the process of a major environmental compliance push, with projects in place to upgrade more than 19,000 megawatts of generating plants. Most of these project costs are already included Read more

Management

Southern's management team has historically comprised a highly capable and conservative group of individuals. The best compliment to its industry-leading management depth is the large number of high-level executives running other utilities who trace Read more

Profile

Southern generates and distributes electricity to more than 4.3 million customers in the Southeast. It owns four electric utilities in Alabama, Georgia, Florida, and Mississippi Read more

First Name

Last Name

Email Address

Zip Code

Create Password

Verify Password

(6-15 characters; case sensitive)

What is your occupation or job title?

Select...

Your registration indicates agreement to the terms of use.

What's Next for Dividends
Watch more