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Recently the Southern Company announced fourth quarter earnings results. The company had higher revenues, income and earnings –- slightly offset by a larger share count. Expect a dividend increase in the next quarter, but perhaps not much more as an intermediate-term investment. Recently the Southern Company (NYSE: SO ) released fourth quarter and full year earnings results. Here’s a look at how 2014 compared to 2013: 2014 2013 % Change Revenue ($b) $18.50 $17.09 8.3% Net Income ($b) $1.98 $1.64 20.4% Basic EPS $2.21 $1.88 17.6% Basic EPS Excl Items $2.80 $2.71 3.3% Dividend/Share $2.08 $2.01 3.5% Shares Outstanding (-m) 906.0 885.0 2.4% As you can see above, Southern Company posted higher sales, income and earnings as compared to the previous year. Note that the earnings increase was offset slightly by the increase in common shares outstanding, as is typical with utility companies. Additionally, the company was able to increase its dividend for the 13th straight year. Earlier last month the company announced a $0.525 quarterly dividend , payable March 6th, which marks the 4th payout at this rate and 269th consecutive payment overall. Southern Company President and CEO Thomas Fanning said that the company had one of its “best years ever” as weather conditions were “closer-to-normal.” Adjusted earnings were quite a bit higher than basic earnings in both years due to increased cost estimates for the construction of the company’s Mississippi Power Kemper project. During 2013 these after-tax charges amounted to 83 cents per share, while they represented a 59-cent drag in 2014. In a previous article I indicated that, while utilities have had strong returns recently, it’s probably not prudent to expect this moving forward. The Southern Company was a prototypical example of this, having generated 14% yearly total returns over the past half decade. Today the company has a “current” yield around 4.1% — which would be expected to increase next quarter — and a trailing earnings multiple in the 18 to 23 range depending on whether you look at adjusted or basic earnings. This compares to a “normal” multiple closer to 16 or so. Analysts are expecting intermediate earnings growth around 3% per annum . Taken collectively, this could translate to 5% anticipated annual total returns — effectively matching the dividends received without much expected capital appreciation. Of course the company could grow faster or trade at a higher multiple in the future, but these might not be altogether prudent expectations given its history. The Southern Company remains a solid income-producing security, but perhaps not as compelling as it has previously been. Disclosure: The author is long SO. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. Are you Bullish or Bearish on ? Bullish Bearish Neutral Results for ( ) Thanks for sharing your thoughts. Submit & View Results Skip to results » Share this article with a colleague Scalper1 News
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