June 29, 2025 a 03:31 pm
SO: Dividend Analysis - The Southern Company
📊 The Southern Company, a key player in the utilities sector, showcases a compelling dividend history with over four decades of consistent growth. Investors can benefit from stable yields, although the financials reveal areas of caution, particularly the high EPS payout ratio which signifies a potential risk to dividend sustainability.
Overview
📈 The Southern Company operates within the utilities sector, offering a respectable dividend yield of 3.24%. With a current dividend per share of 2.70 USD and an impressive history of uninterrupted dividends for 44 years, The Southern Company stands as a reliable choice for income-focused investors. The absence of recent dividend cuts further strengthens its credibility.
| Metric | Details |
|---|---|
| Sector | Utilities |
| Dividend yield | 3.24% |
| Current dividend per share | 2.70 USD |
| Dividend history | 44 years |
| Last cut or suspension | None |
Dividend History
⚠️ Understanding a company's dividend history can provide insights into its ability to manage financial pressures while rewarding shareholders. A history of consistent payments means the company is financially healthy.
| Year | Dividend per Share (USD) |
|---|---|
| 2025 | 2.02 |
| 2024 | 2.86 |
| 2023 | 2.78 |
| 2022 | 2.70 |
| 2021 | 2.62 |
Dividend Growth
🗣️ Dividend growth reflects the company's financial health and its potential to reward shareholders. The growth rate over 3 and 5-year horizons can project future trends.
| Time | Growth |
|---|---|
| 3 years | 2.96% |
| 5 years | 3.06% |
The average dividend growth is 3.06% over 5 years. This shows moderate but steady dividend growth.
Payout Ratio
📉 The payout ratio is critical in assessing the sustainability of dividend payments. An EPS-based ratio of 64.37% suggests dividends are well-covered by earnings. However, the FCF-based payout ratio is concerning and indicates potential cash flow constraints.
| Key figure | Ratio |
|---|---|
| EPS-based | 64.37% |
| Free cash flow-based | -7595.51% |
The given EPS payout ratio appears sustainable; however, the negative FCF payout ratio hints at liquidity issues affecting dividend reliability.
Cashflow & Capital Efficiency
✅ A company's cash flow and capital efficiency are paramount indicators of its financial flexibility and long-term operational viability. Observing metrics like capital expenditures against operating cash flow can shed light on capital management efficiency.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Free Cash Flow Yield | 0.92% | -2.01% | -2.11% |
| Earnings Yield | 4.88% | 5.19% | 4.60% |
| CAPEX to Operating Cash Flow | 91.49% | 120.42% | 125.72% |
| Stock-based Compensation to Revenue | 0.49% | 0.54% | 0.43% |
| Free Cash Flow / Operating Cash Flow Ratio | 8.51% | -20.42% | -25.72% |
The data highlights a concerning trend in cash flow, as the free cash flow yield is negative, suggesting challenges in generating cash after capital expenditures. High CAPEX to operating cash flow ratios imply substantial reinvestment requirements, potentially straining liquidity.
Balance Sheet & Leverage Analysis
⚠️ Assessing the balance sheet and leverage gives insight into a company's financial stability. Metrics such as the debt-to-equity and net debt to EBITDA ratios reveal the company's capacity to manage its debt.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Debt-to-Equity | 1.996 | 2.019 | 1.945 |
| Debt-to-Assets | 0.457 | 0.456 | 0.438 |
| Debt-to-Capital | 0.666 | 0.669 | 0.660 |
| Net Debt to EBITDA | 5.021 | 5.342 | 5.740 |
| Current Ratio | 0.669 | 0.775 | 0.662 |
| Quick Ratio | 0.458 | 0.525 | 0.492 |
| Financial Leverage | 4.372 | 4.431 | 4.436 |
The leverage metrics raise red flags as high debt-to-equity and net debt to EBITDA ratios indicate elevated financial risk, necessitating careful debt management strategies.
Fundamental Strength & Profitability
📊 Evaluating fundamental strength and profitability includes analyzing return metrics and profit margins. These insights foster an understanding of operational efficiency and shareholder value creation potential.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Return on Equity | 13.25% | 12.64% | 11.63% |
| Return on Assets | 3.03% | 2.85% | 2.62% |
| Margins: Net | 16.47% | 15.74% | 12.07% |
| Margins: EBIT | 29.83% | 26.86% | 20.19% |
| Margins: EBITDA | 49.39% | 46.51% | 34.05% |
The strength and profitability metrics remain robust, suggesting solid business efficiency. Return on equity and profit margins are strong; however, room for improvement in asset returns indicates potential value creation opportunities.
Price Development
Dividend Scoring System
| Category | Score | |
|---|---|---|
| Dividend yield | 3 | |
| Dividend Stability | 4 | |
| Dividend growth | 3 | |
| Payout ratio | 2 | |
| Financial stability | 2 | |
| Dividend continuity | 5 | |
| Cashflow Coverage | 1 | |
| Balance Sheet Quality | 2 |
Total Score: 22/40
Rating
🗣️ The Southern Company offers a reliable dividend investment within the utilities sector, supported by a history of uninterrupted payout. However, investors should remain cognizant of the high payout ratios and leverage metrics, which indicate areas of financial concern. Emphasizing risk mitigation strategies will be essential for investors seeking long-term income stability from this asset.