Southern Company (SO): A 3.5% Yield and a Premium Multiple
Southern Company pays $2.98 a share in dividends and earned $4.15 a share over the past twelve months. That is 72 cents of every profit dollar going straight back out the door, and the stock still costs 20.6 times earnings. I have been turning that pairing over for a while, because a utility that hands out most of its profit is supposed to be cheap, and this one is not.
The shares changed hands around $85.52 as I write this, which puts the yield at 3.48% and the market value near $98.4 billion. Only 25% of the 12 analysts in my data rate it a Buy. My view is that Southern is a fine income holding but a poor place to expect price gains, because the multiple already pays for quality that the yield does not fully repay.
What a regulated utility actually sells
Southern owns electric utilities in Georgia and Alabama and a gas distribution business, and state commissions decide what return it may earn on the money it invests. That structure is the whole point of the stock.
Profit is set by rate cases and the size of the asset base, not by how many kilowatt-hours a customer happens to buy in a quiet month. Growth therefore comes from spending: build a plant, a transmission line or a gas main, win approval, and earn an allowed return on it.
The spending is not small. On the second-quarter call in late July, management described a base capital plan of about $81 billion, according to the Yahoo Finance summary of the call. The same coverage says retail base rates in Georgia and Alabama are expected to stay stable until 2029. Read together, those two facts are the utility bargain in one sentence: customers get flat base rates, shareholders get a growing asset base, and the gap is filled by cost control and financing.
Demand from data centers is the new variable. Georgia Power signed a 25-year, 3.2-gigawatt electric-service agreement with OpenAI for a site near Savannah, per the same source. I cannot tell you what that does to earnings, because the contract terms are not in what I read. I can say it is the kind of load that justifies plant spending, and plant spending is what a rate-base utility earns money on.
Flat revenue, seasonal earnings
Quarterly revenue in the June quarter was $7.0 billion, essentially unchanged from a year earlier (growth of 0% in my data). Full-year 2025 revenue was $29.6 billion, up 11% from $26.7 billion in 2024, but the series is bumpy: it was $29.3 billion in 2022, dipped to $25.3 billion in 2023 and $26.7 billion in 2024, then recovered. Fuel costs pass through to customers, so revenue swings with gas prices while profit barely notices.
That is why I look at earnings instead. Second-quarter net income was $1.2 billion, or $1.03 a share, against $0.80 a share in the second quarter of 2025, according to the company’s results as summarized in the coverage above. That is an increase of about 29%. The company also reported adjusted earnings of $1.13 a share for the quarter, which excludes items management does not consider part of ordinary operations. I use the reported number for the year-over-year comparison and treat the adjusted figure as a reference, because adjustments have a way of only ever going one direction.
Quarters mislead.
Seasonality makes single quarters a poor guide. A hot summer in the Southeast lifts the June and September quarters, and a cold snap does the same for winter. Comparing a quarter with the same quarter a year earlier removes most of that noise, which is the only way I can read a utility without fooling myself.
The full-year picture is steadier. Net income was $4.2 billion in 2025 against $4.3 billion in 2024, a net margin of about 14%. Operating income of $7.3 billion on $29.6 billion of revenue is a 25% operating margin, which is high for anything that sells a commodity, and it exists because regulators let the company earn a return on its invested capital.
| Metric | Value | Context |
|---|---|---|
| Share price | $85.52 | 52-week range $82 to $98 |
| P/E (trailing) | 20.6 | five-year average 23.4 |
| P/E (forward) | 18.9 | forward EPS $4.54 |
| Dividend yield | 3.48% | $2.98 per share over twelve months |
| Payout on trailing EPS | about 72% | $2.98 divided by $4.15 |
| Analyst target (average) | $98 | range $79 to $106, 12 analysts |
Paying 20.6 times for a bond with growth
The trailing multiple of 20.6 sits below the stock’s own five-year average of 23.4, so on its own history the shares look modestly cheaper than usual. The forward multiple of 18.9 on expected earnings of $4.54 implies earnings growth of roughly 9%, and that is the number I keep coming back to. Nine percent is quick for a regulated utility. If it arrives, a forward multiple in the high teens is fair. If it comes in at four or five percent, the stock deserves less.
Price-to-sales tells a similar story. The current figure is 3.3 against a five-year average of 3.2, so the stock is priced almost exactly where it usually is on that measure. Price-to-book is 2.5 against 2.7 on average, a little below. None of the three says expensive against its own past, and none says cheap.
The stock sits 13.1% below its 52-week high of $98 and only 5% above its low of $82. That is a narrow band.
It is what I would expect: a utility that moves in a $16 range over a year is behaving like one. I do not have a verified peer average for regulated utilities in this data, so I will not put a premium number on Southern against the group. What I can say is that the multiple is the reason I am not enthusiastic. Buying at 20.6 times earnings means the yield has to carry more of the return than it would at 16 or 17 times.
I made a similar argument about a different kind of payer in why 6% yields often disappoint. The logic here is the opposite end of the same spectrum: a 3.5% yield with growth attached is easier to defend than a high yield with none, but it still has to be earned by the numbers underneath.
What twelve analysts are saying
Of the 12 analysts covering Southern, 25% rate it a Buy. The rest sit at Hold or lower, and I do not have a verified breakdown of that remainder, so I will not guess it. The average price target is $98, about 15% above the current price, with a high of $106 (up 24%) and a low of $79 (down about 8%).
That range is telling. Even the most bullish analyst sees a 24% gain, and the most cautious sees an 8% loss. For a utility that is a normal, tight spread, and it says the debate is about the multiple, not about whether the business works. A target 15% above the price plus a 3.5% yield adds up to a respectable return on paper, and I treat it with the usual suspicion: targets tend to chase the price, and a Hold consensus with a Buy-sized target usually means people expect the stock to drift up slowly rather than jump.
The independent quant rating I follow is a D, unchanged from my earlier reading. That grade leans heavily on momentum and revisions, which explains it: the stock is not moving and earnings estimates are not being pushed up in a hurry. I would not sell a utility because a momentum screen dislikes it, but I would not treat the grade as a hidden opportunity either.
Is the dividend covered?
Yes, with less room than the yield suggests. The trailing payout of about 72% is typical for a utility, and the trailing EPS of $4.15 covers $2.98 in dividends with $1.17 left over. On expected earnings of $4.54 the payout falls to about 66%. Both are workable, and neither leaves cash for much besides the construction program.
That is the thing to understand about a high-payout utility. The dividend is paid from earnings, but the capital plan is paid from new debt and new equity. Southern’s approach is to keep raising the dividend a little each year, and the price of that promise is a steady flow of financing. When borrowing costs rise, the same asset base earns a smaller spread. That is the main way I could be wrong on the stable-income thesis, and it is a slow-moving risk that shows up in the interest line of the 10-Q, not in a headline.
Anyone weighing the yield against safer options should also remember the benchmark moves. I wrote about how rate cuts change the arithmetic for banks in my note on bank stocks after the rate-cut turn, and the same shift matters here: when Treasury yields fall, a 3.5% stock yield looks better, and when they rise, it looks thinner. Utilities trade like long-duration bonds more often than their owners admit.
How the stock reacts to earnings
Quiet, mostly.
The average earnings-day move has been 2.8%, and the last report, on July 30, was -1.8%. Short interest is 3.1% of shares. Those are the numbers of a stock nobody is fighting over. A holder is not likely to get hurt by a single quarter, and equally is not likely to be handed a windfall by one.
Where I would step in, and where I would be wrong
I would own Southern for income, and I would not expect the shares to do much else. At 20.6 times earnings the price already assumes the earnings growth arrives, so the yield is doing the real work. A buy at $85.52 makes sense to me only for someone who wants a growing dividend and accepts a mid-single-digit total return as the base case.
The level I would watch is a forward multiple below 17, which would be about $77 on today’s estimates and a yield near 3.9%. That would give the yield room to earn its keep. Below the 52-week low of $82, the yield would rise toward 3.6%, and I would look again.
The specific case against me is a data-center load that turns out larger and faster than expected. If the OpenAI agreement and the other requests for proposals in Georgia and Alabama lift rate-base growth well above what analysts model, the 9% implied earnings growth becomes conservative and the premium looks cheap in hindsight. I would change my mind if two consecutive quarters of adjusted earnings growth came in above 10%.
Analysis and opinion only, not investment advice. Figures come from Southern Company’s SEC filings on EDGAR and its investor site, together with the second-quarter call coverage linked above; valuation multiples are approximate and were checked on September 22, 2026.