Recent Buy – Southern Co. $SO

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I love the dividend community. I was buying $D, when MoreDividend told me about SO. Utilities are on my antenna, but with the market plummeted 1,100 points in 2 days, the deals were too good to pass up. So I decided to buy 20 shares of SO at $43.xx

I’ve looked around, and here are some other dividend investors are holding SO:

MoreDividend

DivHut from the Recent March Purchase 2018

DividendDaze the Recent February Purchase 2018

MrFreeat33 – If you remember Jason at the old DividendMantra, that’s him. He has 85 shares at $50.20/share. I guess, he’s a longterm stockholders, so if he thinks $50.20/share is fair, $SO at anything <$50 is a good entry point to me. LOL 🙂

Some points here about $SO:

  1. The electric utilities have fallen out of favor with dividend investors (or investors in general, as the sell off hasn’t stopped since the high of $54.54 June 2016 – due to interest rate on the 10 years T-note is close to 3%. It’s always much safe to preserve your capital for the next crash. LOL 🙂 At least, I felt good about it in 2018 when 40% of my 401K was in the no-growth stock, therefore I had very little to gain, but felt really good when I didn’t “lose” as much money as I would have.
  2. Moody’s Investor Service has slashed the outlook of 24 regulated utilities from stable to negative.
  3. Southern Company is moving forward with the over-budget nuclear project after receiving approval from the Georgia Public Service Commission.
  4. Southern Company is heavily leveraged, but aggressive investments will fuel future cash flows.
  5. The valuation levels seem reasonable after recent sell-off. Yes, $43 price is very enticing. Therefore, I’ve jumped into it, I’d probably add more if it falls below $40. Cutting dividends, or investments or ventures start to make money again, slashing cost of some sort. But in that case, the we might be looking at the price of $27 or so.
  6. The company has raised its dividend for 17 consecutive years and has not cut its dividend for 71 consecutive years.

Some STATs:

P/E: $52.17 – Horrid

Yield: 5.25% – Fair – Risk of dividend slashing

Dividend Payout Ratio: 273% – Horrid. The company is borrowing money to invest, and bleeding money each time it pays dividends.

Comparison to $D

 

Company:                                       $SO                      $D                  $DUK

PE:                                                 $52.17               $14.44               $17.41

Yield:                                               5.25%               4.88%                 4.67%

Dividend Payout Ratio:                 273%                64.30%               79.86%

 

That’s why I own >100 shares of $D, dipping my toe to $SO, and possibly buying $DUK at some point. Taking precaution with $D because it’s buying another company with legal trouble with nuclear clean up.  Yikes. It’s like walking on the minefield with Utilities right now, but I’m thinking of longterm here, so it’ll be fine.

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Update on biking – the weather has been cold this year. The ground hog predicted 6 more weeks of winter back in february, and boy it’s right again!! But it did  hit 60s, so Mr.W and I went for 2 bike rides over the past week. And it’s super nice to be out again, getting used to the “pollen pollution” in the Eastern part of the US hemisphere. LOL 🙂

 This picture was taken on the bike ride. The flowers were just weeds from the corn field. No corn plants because the field is resting for winter.

 

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Do you consider a buy of SO at $43.xx or it’s too risky for you? Please share your thoughts.

3 Comments

  1. Both D and SO have been my March buys. I think you need a long term outlook with SO as their cash situation isn’t that great at present. Heavy debt and excessive borrowing are hallmarks of utility companies though so I don’t see SO’s present situation as being necessarily bad or unusual.

    • You’re right. SO’s outlook is very good. Forward P/E when their investments return a profit is 14. So, I’ll hold this until it pays off. In the meanwhile, I’m collecting the 5.xx% dividend. 🙂

  2. This is a great buy. Now just sit back and collect the dividends. It is the only utility I hold … unless you count AT&T lol…. and I have no intentions of selling it anytime soon. Thanks for the mention, I really appreciate it!

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