Southern Company’s ( SO Quick Quote SO - Free Report) low-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. Given its growth opportunities, SO makes for a solid investment option in the utility sector. Let’s focus on the factors that make this Zacks Rank #2 (Buy) company a strong investment option at the moment. Growth Projections & Surprise History
The Zacks Consensus Estimate for Southern Company’s 2024 earnings per share (EPS) has moved up 0.3% in the past 30 days to $4.01.
The company’s long-term (three- to five-year) earnings growth rate is 4%. SO reported an average earnings surprise of 6.22% 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 9.86%, higher than the industry’s average of 5.45%. 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. It has hiked dividend for 22 consecutive years. Currently, its quarterly dividend is 70 cents per share, which resulted in an annualized dividend of $2.80 per share. The company’s current dividend yield is 4.01%, better than the Zacks S&P 500 Composite’s 1.45%.
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), the company aims to further expand its regulated business customer base. Southern Company continues to witness strong customer growth. It has added 24,000 new residential electric customers and 13,000 residential natural gas customers year to date. Price Performance
In the past month, SO’s shares have rallied 3.1% compared with the
industry’s average growth of 2.3%. Image Source: Zacks Investment Research Other Stocks to Consider
A few other top-ranked stocks from the same industry are
TransAlta ( TAC Quick Quote TAC - Free Report) and Vistra Corp. ( VST Quick Quote VST - Free Report) , both currently sporting a Zacks Rank #1 (Strong Buy), and OGE Energy Corp. ( OGE Quick Quote OGE - Free Report) , carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here. The Zacks Consensus Estimate for TAC’s 2023 EPS indicates a year-over-year increase of 1,912.5%. It delivered an average earnings surprise of 107.1% in the last four quarters. The Zacks Consensus Estimate for VST’s 2023 EPS indicates a year-over-year improvement of 205.8%. The same for sales indicates a year-over-year increase of 46.2%. OGE’s long-term earnings growth rate is 3.65%. It delivered an average earnings surprise of 3.8% in the last four quarters.