- On Monday, April 21, Southern Company announced that it was increasing its quarterly dividend by 3.45%, or $0.0175/share.
- Southern Company currently trades at just under 16x forward earnings, and offers shareholders a yield of 4.66%.
- Recent trend behavior signals a buying mode for most long-term investors, and that trend behavior could continue, especially if Southern Company posts strong Q1 results.
As a dividend-driven investor, dividend-related events (such as the increase or decrease of a company's quarterly payout) are always something I tend to pay close attention to, since they have a tendency to influence my decision in terms which stocks I should keep on my radar. With that said, and in the wake of its latest dividend increase, I wanted to highlight a number of reasons why I continue to stay bullish on shares of Southern Company (NYSE:SO).
Southern Company Increases Its Quarterly Dividend 3.45%
On Monday, April 21, Southern Company announced a quarterly dividend increase of $0.0175/share, which brings its upcoming dividend payout to $0.525/share. It should be noted that the increase will be paid on June 6 for shareholders on May 5. Not only does this boost represent a 3.45% increase from its prior dividend of $0.5075/share (paid on March 6), it was also in line with its previous increase of $0.0175/share that was announced on April 15, 2013.
Recent Performance & Trend Behavior Should Indicate A Continued Uptrend
On Monday, shares of SO, which currently possess a market cap of $40.26 billion, a forward P/E ratio of 15.77, and a dividend yield of 4.66% ($2.10), settled at a price of $45.16/share.
Based on their closing price of $46.16/share, shares of SO are trading 2.61% above their 20-day simple moving average, 5.10% above their 50-day simple moving average, and 8.62% above their 200-day simple moving average. It should be noted that these numbers indicate a short-term and mid-to-long term uptrend for the stock, which generally translates into a buying mode for most near-term traders and many long-term investors.
Comparative Forward P/E Ratios Set Southern Company Apart From Its Peers
Although the above referenced numbers indicate a long-term uptrend for the company's stock, I actually think its share price of $46.16/share offers investors a considerable point of entry. Why? Well, I think that when shares are trading at a much better forward P/E ratio than a number of their sector-based peers, a great buying opportunity is created for most long-term investors.
As of Monday's close, Southern Company's forward P/E ratio of 15.77 was much lower than the forward P/E ratio of both Sempra Energy (NYSE:SRE) (forward P/E ratio of 20.01 as of 4/21) and NiSource (NYSE:NI) (forward P/E ratio of 19.97 as of 4/21), which signals a greater level of affordability for those who may be looking to establish a position in Southern Company, especially when compared to a number of its peers.
A Look Ahead To Southern Company's Upcoming Earnings
When it comes to the company's upcoming earnings, there are a number of things potential investors should consider. For example, analysts are currently calling for SO to earn $0.53/share in terms of EPS for its Q1 earnings that are due out on April 30 (which is $0.05/share higher than what the company had reported during Q4 2013, and $0.04/share higher than the company had reported during the year-ago period).
In order to meet and/or exceed its quarterly EPS estimates, I'd like to see an increase in the company's operating revenues (within the range of at least 2.25%+ on the low side and 4.5%+ or more on the high side), a fair increase in the company's kilowatt-hour sales to its customers (within the range of 0.4% on the low side and 1.4% or more on the high side), and lastly, an increase in the company's total energy sales (in this instance, I'm looking for at least a 0.3% on the low side and a 1.5% or more increase on the high side). If the above mentioned criteria are met and or exceeded, there's a very good chance that current EPS estimates could be surpassed.
Costs Related To The Kemper Clean-Coal Project Could Continue To Rise
One of the things both potential investors and existing shareholders should note is the fact that Southern Company's costs surrounding Mississippi Power's Kemper Clean-Coal Project could see its costs rise by an additional $177 million, due in large part to a combination of harsh weather, labor turnover, and a number of inefficiencies related to its installation. I strongly believe that if these particular hurdles continue to hinder the Kemper project over the next 6-12 months, additional costs may very well exceed $300 million and quarterly results could be adversely affected.
For those of you who may be considering a position in the Southern Company, I strongly recommend keeping a close eye on the company's recent trend performance, its ability to continue to maintain its dividend, as has been the case over the past 13 years, and its ability to continue to enhance shareholder value over the next 12-24 months, as each of these factors could play a role in the company's long-term growth.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SO over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.