Southern Company’s ( SO Quick Quote SO - Free Report) less-volatile, recession-proof business model presents a unique opportunity to earn high returns. With good rate base growth and constructive regulation, the company is expected to deliver steady earnings and dividend growth in the coming years. Let’s focus on the factors that make this Zacks Rank #2 (Buy) stock a strong investment option at the moment. Growth Projections & Surprise History
The Zacks Consensus Estimate for Southern Company’s 2023 earnings per share (EPS) is pegged at $3.61. This indicates a year-over-year bottom-line increase of 0.3%.
The company’s long-term (three- to five-year) earnings growth rate is 4%. SO reported an average earnings surprise of 11.4% in the last four quarters. Return on Equity
Return on equity (ROE) indicates how efficiently a company has been utilizing its funds to generate higher returns. Currently, Southern Company’s ROE is 10.78%, higher than the industry’s average of 6.16%. This indicates that the company has been utilizing its funds more constructively than its peers in the electric power utility industry.
The utility company has been consistently paying dividends to its shareholders since 1948. Southern Company has hiked its dividend for 22 consecutive years.
Recently, the company’s board of directors approved a dividend increase of 2.9%. This resulted in a quarterly dividend of 70 cents per share compared with the previous quarter’s 68 cents, and an annualized dividend of $2.80 per share. The company’s current dividend yield is 4.03%, better than the Zacks S&P 500 Composite’s 1.51%. Systematic Investments & Customer Growth
Southern Company has an estimated capital expenditure of nearly $40.5 billion through 2027. Out of this, the company expects to spend $9.1 billion in 2023. The planned expenditure is likely to benefit its construction programs in the same time frame.
Leveraging the demographics of its operating territories (as in healthy population and job growth), SO aims to further expand its regulated business customer base. The company added 11,000 new residential electric customers and 6,000 residential natural gas customers in the first quarter of 2023. Price Performance
In the past three months, SO’s shares have rallied 11.5% compared with the
industry’s average growth of 2.2%. Image Source: Zacks Investment Research Other Stocks to Consider
A few other top-ranked stocks from the same industry are
IDACORP, Inc ( IDA Quick Quote IDA - Free Report) , NiSource Inc. ( NI Quick Quote NI - Free Report) and OGE Energy ( OGE Quick Quote OGE - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. IDA’s long-term earnings growth rate is 3.68%. The Zacks Consensus Estimate for 2023 EPS is pinned at $5.07. The company delivered an average earnings surprise of 4.6% in the last four quarters. NI’s long-term earnings growth rate is 6.9%. The Zacks Consensus Estimate for 2023 EPS is pegged at $1.57, implying a year-over-year improvement of 6.8%. OGE Energy’s long-term earnings growth rate is pinned at 17.9%. It delivered an average earnings surprise of 19.9% in the last four quarters.