Southern: Safe Haven for Income and Growth
02/05/2016 7:00 am EST
Most of 2015 was a difficult year for the US utility sector, largely because of investors worried about the Fed interest rate increase, explains Bryan Perry, editor of Cash Machine.
Moving into 2016, unregulated utility companies’ performance will stay weak, whereas utility companies with significant and growing regulated business operations will be an attractive investment option for income-hunting investors.
Adding to all-weather dividend growth during the current correction is how we can accumulate blue chip stocks that are on the receiving end of bullish fund flows.
With more than 4.4 million customers, Atlanta-based Southern Company (SO) is a premier energy company serving the Southeast, providing power from Florida to Texas, Nevada, and New Mexico.
The stock offers a solid yield of 4.7%, which is supported by its operating cash flow yield of 15%. The company generates almost 90% of its earnings from regulated operations, which provides stability to its cash flows.
The company’s fundamentals are strongly backed by its large and growing capital investment plan, which in turn keeps its earnings growing.
As part of this plan, the company is actively expanding its renewable energy generation portfolio, which is regulated and offers huge earnings growth potential.
I deem Southern Company an excellent addition to our newly launched Safe Haven Portfolio and recommend purchase of SO shares under $47.50.
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