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- Remains good defensive utility stock and retains attraction for income-seeking investors with yield of 4.50%.
- Industrial sales likely to stay strong and offset weak commercial and residential sales.
- Kemper County IGCC faced several write-downs and delays in 2013 and 2014, and there is risk of further project slippage.
- Strong stock price performance in recent months limits valuation expansion and upside.
- One of my holdings returned 18% over the past 12 months.
- Aside from being a utility, this fact alone isn’t particularly impressive.
- What’s interesting is viewing this return in context and coming to the idea that an arbitrary mark isn’t particularly important.
For Equity Income Investors, Southern Company Has The Best WACC Of Its Peers
- With WACC of 3.8%, Southern Company's lower cost in this capital-intensive sector is a strong advantage for shareholders.
- The firm's debt profile offers lower interest cost than many of its peers and its regulatory environment offers one of the best in the country.
- Southern Company has interesting high-tech coal-power generating licensing potential and initial plans for distributed generation.
Southern Company Is The Most Attractive High-Yield American Utilities Stock
- This article compares four large-cap, high-yield electric utilities stocks from the United States.
- While utilities stocks offer fairly high levels of income relative to government bonds, investors must still be somewhat cautious after dividend cuts by FirstEnergy and Exelon over the last year.
- Southern Company offers a 4.8% dividend yield, has grown its dividend consistently in the past and has the future growth potential necessary to maintain this dividend growth.
- Relative to the other stocks in this comparison, Southern Company appears to be the most attractive investment for individuals seeking to generate income from their portfolio.
- We think a focus on both the valuation opportunity and dividend strength is key.
- We like that more than 90% of Southern's earnings are from regulated subsidiaries. Management is targeting earnings per share in the ranges of $2.80-$2.91 and $2.89-$3.03 for 2015 and 2016,.
- Southern Company registers a ~0 on the Dividend Cushion measure because it pays out a significant amount of earnings as dividends and has a large debt load.
- Still, we expect the company to raise its dividend by 7 cents per annum on the basis of management's near-term expectations.
- On a cash-flow basis, we value Southern Company at $41 per share. The company registers a 6 on the Valuentum Buying Index.
- Southern Company is an electricity producer and supplier that operates in a stable industry and can ensure stable revenues in the future.
- Moreover, Southern Company is well known for its attractive dividend yield of nearly 4.9%. It has maintained a tradition of paying regular dividends for more than 65 years.
- The company is clearly performing well as the recent quarterly results surpassed analysts’ expectations; the company reported an EPS of 68 cents compared to the original estimate of 67 cents.
- The economy is in the company’s favor as oil, a major resource used to produce electricity, is expected to witness a decline in its prices in the near future.
- The number of housing starts continues to increase in the United States, creating a huge demand for the Southern Company’s electricity services.
- Company likely to benefit from impressive capital spending outlook and increase in regulated operations.
- This will provide cash flow and earnings stability.
- Financial performance stays strong and construction of ongoing projects is proceeding well.
- Risk of projects cost overruns and delays remains concern for investors and overhang on stock price.
Why Investors Should Continue Holding Southern Company For The Long Run
- Southern Company has an attractive valuation, impressive growth estimates, and a strong dividend.
- Southern Company's Plant Ratcliffe project can be a long-term catalyst.
- Southern's focus on renewable energy is a move in the right direction considering the potential of the solar market.
A Few Reasons Why Southern Company Is A Good Investment
- Southern Company is expanding capacity to address an expected increase in demand for electricity.
- Southern Company is making moves in the solar market, which will enable it to profit from a fast-growing market.
- Improving economic indicators suggest Southern Company's prospects are strong.
- Southern has a handsome dividend yield which it should be able to sustain due to improvements in the business.
- Reduction in Cap Ex budgets will improve the current negative Free Cash Flow Minus Dividends spread.
- Southern Company’s stock price is fairly valued.
- Dividend should continue to grow at a 4% annual rate.
Southern Company: What A High-Quality Utility Stock Can Do For You Now
- The stock market has been exceptionally volatile lately.
- In this environment, stability becomes extremely valuable.
- Southern Company's stable business and rock-solid dividend are excellent margins of safety.
Southern Company: A Good Option For Long Term Dividend Investors
- Company faces risks of an increase in treasury yields and rotation out of defensive sectors.
- SO offers a high dividend yield of 4.70% backed by solid cash flows.
- Investors should keep a check on estimated costs and timeline of two power projects.
- Capital investment initiatives to optimize generating fleets will strengthen business operations in long term.
- Risk of project delays and cost overruns remain concerns for investors in short run.
- Planned investments will help utility companies further increase regulated operations.
Why Investors Should Buy Southern Company Instead Of Duke Energy
- Southern Company's performance this year has been way better than Duke Energy's and the trend could continue.
- Southern has better profit margins, a better payout ratio, a better dividend yield, and a better valuation than Duke.
- Southern is making good progress in the business, and its various projects should continue adding to shareholders' returns in the long run.
- Southern Company has put in a strong performance this year on the back of improving results, and has hiked its dividend for 13 consecutive years.
- Southern is investing aggressively in improving its capacity in order to satisfy an expected increase in demand, which is expected as a result of improving economic conditions.
- Southern's focus on solar projects, along with robust demand and capacity upgrades, should help it sustain its terrific financial performance and dividend growth.
Southern Company Is Still Better Than Duke Energy Corporation: Here's Why
- Southern's dividend yield has gone up to 4.84% in the past 12 months, while Duke's yield has dropped.
- Duke's long term debt is quite high, at 1.59 times this year's expected revenue.
- Both companies are trading at similar forward price to earnings ratios.
- Company remains a defensive utility stock.
- Has the financial base to tackle cost overruns.
- Future earnings remain sensitive to allowed return of equity and recovery of incurred CAPEX.
- Company unlikely to trade at premium valuation due to issues related to projects under construction.
Southern Company: 3 Different Insiders Have Sold Shares During The Last 30 Days
- 3 insiders sold Southern Company's stock within one month.
- The stock was not purchased by any insiders in the month of intensive selling.
- All 3 of these insiders decreased their holdings by more than 10%.
Southern Company - Another Dividend Hike, But Is There Really Much Appeal Besides Dividends?
- Regulated utility company operating in the South of the US.
- Investors have pushed up the stock in recent weeks as Treasury yield declines.
- Combined with a recent dividend hike this has pushed up the differential between the dividend yield and risk-free rate.
Thu, Nov. 13, 2:55 PM
- Chief execs of the top U.S. coal-burning utilities predict blackouts and rising power bills if they are not given more time to achieve greenhouse gas emission cuts described in the new climate agreement with China.
- A proposed timeline for cutting pollution from power plants threatens to shutter coal-fired plants before enough new generation can be built to replace lost supplies, say CEOs of Southern Co. (NYSE:SO) and American Electric Power (NYSE:AEP).
- The challenges go beyond the cost and time it would take to build new plants to replace coal units forced into retirement, Southern's Thomas Fanning and AEP's Nick Akins say; there’s not enough pipeline capacity to carry the natural gas that would be needed by all the newly built gas-fired power plants spawned by the EPA's proposals.
- Southern would have to retire more than 9K mw of coal-fueled generators and add ~5,400 mw of natural gas plants by 2020 under plans envisioned by EPA, Fanning says.
- ETFs: XLU, IDU, VPU, RYU, UPW, FUTY, PUI, FXU
Wed, Nov. 12, 2:14 PM
- Utility stocks, among the year’s top performing sectors in the market, are sharply lower today - a bad sign, says Weeden & Co. head researcher Michael Purves, who believes now is the time to reduce or hedge utility holdings such as the Utilities Select Sector SPDR Fund (XLU -1.9%).
- Ultra-low bond yields have made utility stock payouts look good by comparison., but valuations have been moving up; Purves says the rally has put XLU’s P/E ratio for the next 12 months at 17.4x, near a 10-year high.
- Investors ought to “start to take profits, given the run was getting long in the teeth,” Purves writes.
- The top 10 XLU holdings are all lower today: DUK -2.5%, NEE -1.7%, D -1.9%, SO -1.4%, EXC -2.8%, AEP -2%, SRE -1.7%, PPL -1.8%, PCG -1%, PEG -2.8%.
- Other ETFs: IDU, VPU, UPW, RYU, FUTY, FXU, PUI, SDP
Wed, Oct. 29, 7:32 AM
Tue, Oct. 28, 7:11 PM
- Southern Co. (NYSE:SO) says its Kemper County clean coal power plant in Mississippi will cost almost 3x more and take three years longer than originally proposed.
- SO's new estimated cost for the project is now $6.1B, and it expects the plant to be in service in H1 2016, according to an SEC filing; it initially said the project would cost $2.2B and begin generating power four years after it was proposed in 2009.
- SO says the increased costs will hit Q3 earnings by $258M, adding to the $963M hit shareholders already have taken from project cost overruns in four of the prior six quarters.
- SO -0.7% AH.
Tue, Oct. 28, 5:30 PM
- ACCO, ADP, AIT, ALKS, ALLY, AMED, ARW, AUO, AVX, BAH, BDC, CCJ, CFR, CKSW, CMC, COT, CTCM, DXYN, ETN, EVER, EXC, GHM, GRMN, GT, H, HES, HSY, IACI, ISSI, JLL, LFUS, MHFI, MRGE, MTH, NVMI, OMG, PAG, PB, PSX, PSXP, PX, RES, RL, ROL, RYAM, SEE, SKYW, SO, SODA, SPW, SPWR, STM, TEL, TFX, UAM, UBSI, VLY, WEC, WLP, WM, XRAY
Thu, Oct. 23, 11:59 AM
- Southern Company's (SO +0.4%) Souther Power subsidiary tops 300 megawatts of solar generating capacity in California with the purchase of the 150-MW Solar Gen 2 facility from First Solar (FSLR +2.5%).
- Solar Gen 2 is expected to generate enough electricity to power more than 60K average CA homes. Construction of the project by First Solar began last year and is expected to be completed before year-end.
- The juice from the plant is contracted to San Diego Gas & Electric on a 25-year agreement.
- Source: Press Release
Mon, Oct. 20, 3:04 PM
Thu, Sep. 18, 12:53 PM
- Banks, insurers, brokerages and anything else starved for yield continue to gain following yesterday's FOMC news. Among the gainers are Bank of America (BAC +1.9%) - which breaks above $17 for the first time since April - Citigroup (C +2.7%), Wells Fargo (WFC +1.1%), PNC (PNC +1.1%), Fifth Third (FITB +1.7%), SunTrust (STI +1.2%), Schwab (SCHW +2.3%), Prudential (PRU +2.5%), and Lincoln National (LNC +2.4%).
- The XLF +1.2%, KBE +1.5%, and KRE +2%.
- Financial sector ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, KBWB, FNCL, RKH, QABA, FINU, KRU, KBWR, RWW, RYF, KRS, FINZ
- Lit up bright red is the utility sector (XLU -1%), led by Southern Company (SO -1.1%), Dominion Resources (D -1.2%), Duke Energy (DUK -1.4%), and Pinnacle West (PNW -1.9%).
- Utility ETFs: XLU, IDU, VPU, UPW, RYU, FUTY, PUI, FXU, SDP, PSCU
Thu, Aug. 14, 6:52 PM
- Coal imports to the U.S. surged 44% Y/Y to 5.4M metric tons during the first six months of 2014, even as coal mines close throughout central Appalachia.
- The main reason is price: It costs $26/ton to ship coal from central Appalachia to power plants in Florida vs. $15/ton to get coal from a mine in Colombia.
- Appalachian miners such as Alpha Natural Resources (NYSE:ANR) say imports from Colombia have added to their troubles; Colombia produces a high quality thermal coal, it's inexpensive to mine it, and relatively inexpensive to ship it to the U.S. east coast.
- The cheaper imports benefit some utilities such as Southern Co. (NYSE:SO), which has 63 coal-fired power generating units in four states and bought 25% more imported coal than expected.
- Low prices for international shipping also have helped Colombian coal, as the Baltic Dry Index has fallen to one-tenth of its level five years ago; U.S. rail rates have mostly held firm over the same period.
- ETFs: KOL
Sat, Aug. 9, 8:25 AM
- Investors who had flocked to utility stocks now may be wondering what went wrong, after the sector was the S&P's worst performer in July.
- Fears of rising interest rates have recently sent dividend-paying stocks and high-yield junk bonds tumbling; utility stocks also have been hurt by the power sector's growing exposure to volatile natural gas prices, which have dropped ~19% since mid-June.
- Some analysts think dividend growth among utilities could slow or even stop, with power demand falling and utilities being forced to spend record amounts on replacing and upgrading aging plants and meeting stricter emission standards; Exelon (NYSE:EXC) and FirstEnergy (NYSE:FE) are big utilities that have cut dividends this year.
- Utilities that auction the power they generate - and are most exposed to moves in gas prices - have fallen the most; NRG and EXC have lost 20% and 13%, respectively, since the end of June.
- Regulated utilities such as Southern Co. (NYSE:SO) and Duke Energy (NYSE:DUK), whose rate changes are more closely controlled, haven't been hit as hard.
- ETFs: XLU, IDU, VPU, NLR, JXI, NUCL, UPW, RYU, DBU, IPU, FUTY, FXU, SDP, UTLT
Mon, Aug. 4, 5:48 PM
- The Sierra Club agrees to withdraw its legal challenges to Southern Co.'s (NYSE:SO) $5.5B clean-coal power plant in Kemper County, Miss., in return for the utility's agreement to burn less coal in Mississippi and Alabama, among other concessions.
- The environmental group has argued for years that Kemper is too expensive for the 186K customers of Mississippi Power Co., the SO unit building the plant, and has been skeptical of the project's unproven coal gasification technology.
- Kemper has been mired in cost overruns that have resulted in rate increases for consumers and more than $1.5B in charges against earnings for SO shareholders.
Wed, Jul. 30, 7:32 AM
Tue, Jul. 29, 5:30 PM
- AB, ACCO, ADT, AMED, AMT, ATRO, AUO, BAH, BDC, BEN, CFR, CVE, D, DHX, DORM, DX, ENR, EVER, GIB, GRMN, GT, HAE, HES, HSP, HUM, HUN, IACI, ICLR, INGR, LFUS, LL, LO, LPLA, MGAM, MINI, MMYT, MRGE, MWV, NICE, NVMI, PAG, PBI, PEG, PSX, PSXP, PTRY, ROK, RRD, S, SAIA, SEE, SGNT, SMP, SO, SODA, SONS, SPB, SPW, TASR, TFX, TRI, VLO, VLY, WEC, WLP
Mon, Jul. 21, 3:08 PM
Tue, Jun. 3, 12:45 PM
- EPA chief Gina McCarthy says she expects for significant changes in proposed state emission goals before a final rule is issued next year if the individual states show they can’t meet the targets.
- McCarthy says the agency made changes when developing its rules on mercury pollution in 2012 after utilities complained, and says she "wouldn’t be surprised if we made significant” revisions to the carbon proposal.
- McCarthy notes "confusion" around the targeted 30% emission cuts, saying it’s not a goal of the plan but an estimate of what the EPA thinks can be achieved.
- Coal names are broadly lower: WLT -4.4%, ACI -3.7%, ANR -2%, ARLP -1.9%, CNX -1.3%, CLD -0.3%, BTU -0.2%.
- Big utilities are mostly higher: EXC +1.6%, AEP +1%, NRG +0.7%, D +0.5%, XEL +0.4%, SO +0.3%, PEG +0.2%, NEE +0.1%, DUK -0.2%
- ETFs: XLE, XLU, TAN, ERX, KOL, IDU, VDE, OIH, ERY, FCG, VPU, DIG, KWT, GASL, DUG, IYE, GASX, PXJ, RYE, FENY, UPW, RYU, FUTY, FXN, FXU, DDG, SDP
Mon, Jun. 2, 3:31 PM
- Walter Energy (WLT -6.3%) shares aren't helped by the coal producer's statement that new EPA proposals aimed at controlling carbon emissions from U.S. power plants should have no material impact on the company; in fact, WLT is down more than peers: CNX +1.1%, BTU +0.1%, CLD -0.3%, ACI -2.8%, ANR -4.6%.
- Long-term losers also will include electric companies that burn lots of coal - such as American Electric Power (AEP +0.1%), Duke Energy (DUK -0.3%), Southern Co. (SO -0.3%) and NRG Energy (NRG -0.1%) - but stiff regulations have been expected for some time.
- Likely winners include companies that pump natural gas and those that use it as their primary fuel, such as Calpine (CPN +0.3%), and companies that operate nuclear plants that generate little carbon but have been expensive to run, such as Exelon (EXC -1%), hope that their aging plants will become more competitive.
- A reduction in coal-fired capacity would increase utilities' demand for natural gas by 3B-10B cf/day from 22B cf/day now, potential benefiting major natural gas producers like Chesapeake Energy (CHK +2.1%), Cabot Oil & Gas (COG -0.8%) and Range Resources (RRC -0.6%).
- ETFs: XLE, XLU, TAN, ERX, KOL, IDU, VDE, OIH, ERY, FCG, VPU, DIG, GASL, DUG, IYE, GASX, PXJ, FENY, RYE, UPW, FUTY, RYU, FXN, FXU, DDG, SDP
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