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| SO Crosses Above 5% Yield TerritoryBy Dividend Channel Staff, Tuesday, August 9, 3:10 PM ET
In trading on Tuesday, shares of Southern Company (NYSE:SO) were yielding above the 5% mark based on its quarterly dividend (annualized to $1.89), with the stock changing hands as low as $35.73 on the day. Dividends are particularly important for investors to consider, because historically speaking dividends have provided a considerable share of the stock market's total return. To illustrate, suppose for example you purchased shares of the S&P 500 ETF (SPY) back on 12/31/1998 — you would have paid $123.31 per share. Fast forward to 12/31/2010 and each share was worth $125.75 on that date, a mere $2.44 or 2% increase over all those years. But now consider that you collected a whopping $20.53 per share in dividends over the same period, increasing your return to 18.6%. Even with dividends reinvested, that only amounts to an average annual total return of about 1.4%; so by comparison collecting a yield above 5% would appear considerably attractive if that yield is sustainable. Southern Company (NYSE:SO) is an S&P 500 company, giving it special status as one of the large-cap companies making up the S&P 500 Index.
In general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of Southern Company , looking at the history chart for SO below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 5% annual yield.
SO makes up 11.19% of the Utilities HOLDRS ETF (UTH) SO operates in the Electric Utilities sector, among companies like MGE Energy Inc (NASDAQ:MGEE) which is off about 1.7% today, and Atlantic Power Corp (NYSE:AT) trading up by about 0.1%. Below is a three month price history chart comparing the stock performance of SO, versus MGEE and AT.
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The Importance of Dividends
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