Utility Dividend Growth Match-Up: Southern Company Vs. Consolidated Edison

It is no secret that utility stocks are great for income. They arguably enjoy the most defensive, recession-resistant business model one can find.

This makes them ideal for investors interested in high dividend yields, and safe dividend payouts.

Southern Company (SO) and Consolidated Edison (ED) are two of the largest utilities in the U.S.

Southern has raised its dividend for 15 years in a row. It is a Dividend Achiever, a group of 272 stocks with 10+ years of consecutive dividend increases.

ConEd has reached an even more exclusive level. It a Dividend Aristocrat, since it has raised its dividend for 43 years in a row.

This article will compare and contrast these two utility stocks, and try to determine which one is the better pick for income investors.

Fundamentals Winner: Consolidated Edison

Southern and ConEd are in the same industry—electricity generation and distribution. They differ in size and regional market served.

Southern serves 9 million electric and gas customers, located primarily in the southeast U.S.

ConEd provides electric service to more than 3 million customers in New York.

(Click on image to enlarge)

ED ConEd

Source: 4Q Earnings Presentation, page 4

ConEd performed slightly better than Southern in 2016. ConEd’s earnings-per-share rose 2% to $4.15 last year. Adjusted earnings-per-share increased 13% in the fourth quarter, thanks to favorable weather trends.

For its part, Southern’s earnings-per-share declined 1.2% in 2016, to $2.57. One reason for the decline is because Southern continues to be dragged down by cost over-runs at its major Kemper project.

The Kemper facility is a massive electric power plant that utilizes a new technology for burning coal. It uses lignite, which can be converted to gas at a lower temperature than existing techniques.

According to Southern, this is expected to result in lower costs with less harmful environmental impacts.

The problem for Southern is that costs are coming in much higher than originally anticipated.

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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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