Tuesday, September 16, 2014

Solid Dividend Machine, Southern Companies SO

I write about three strategies to create retirement income:  Dividend Machine stocks, Discount Bond interest, and Covered Calls on dividend stocks.   This post reviews Southern Companies as a solid, Dividend Machine. 


Screening Criteria

Stocks move in and out of the Dividend Machine universe all the time.  This year we expect more than 3.5% in yield and a 5 year history of dividend increases no less than 4%. Some really great stocks miss the cut on yield and yield increases.  Today we have a widows and orphans stock that is solid; it beats the 3.5% yield threshold, the dividend increase threshold and like all Dividend Machines, earnings are greater than the dividend and the debt to equity ratio D/E is within industry standards.

It is such a pleasure to profile this stock.   I have owned it so long that my cost basis is in single digits.    Yet I have not been so happy with it lately. 

Southern Companies as a 2012 Dividend Machine

SO was a Dividend Machine in 2012 at a cost basis of $47.31.  http://www.themoneymadam.com/2012/06/utilities-mothers-milk-of-income.html  Folks that is an 8.35% loss.   But we always say that if we have to hold a dog because we need the income, then let’s hope for not only income but income increases.  SO does not get the award for biggest annual dividend increases but it meets our 2014 criteria of a 4% increase of income per year. 

SO yields 4.84% at the closing price of $43.37 on 9/15/2014.  The yield alone makes me a happy investor but I looked at the dividend increases again just to make sure my income will go up if the overall market tanks like it did in 2009.  Over the past 10 years, SO has delivered annual dividend increases of 4.685%.  

Southern Companies 2014 Dividend Machine Fundamentals

Seeking Alpha published an article recently explaining how Southern Companies has turned around their operation. http://seekingalpha.com/article/2470155-why-investors-should-continue-holding-southern-company-for-the-long-run .

I am going to add to my position.  I like the yield and the dividend increases and its solid nature. Consider SO for the income producing portion of your investment portfolio.