OK, I’ll admit, it was a little bit difficult for me to watch young kids opening up Christmas presents yesterday and not also think about participating in the fun. The kid in me also wanted to join in and unwrap something shiny! Unfortunately, I’m a little too old, and practical these days to be spending my hard earned capital on more toys (I already have enough).
Shiny New Toy!
With that said, my Christmas present to myself arrived a day later. Today, I initiated a position with The Southern Company (SO), purchasing 28 shares for $42.82/share.
Prior to making this purchase, my portfolio only contained one utility holding, Exelon Corporation (EXC). As readers may know, I nearly exited out of EXC last month, as there have been rumors swirling about a potential dividend cut in the works. With natural gas prices having rebounded a bit since early 2012, the future outlook for EXC may slowly be improving. I’m still monitoring this situation closely, but if I do sell, I will try and do so before any dividend cut is announced.
This time around, I decided to go with the best-of-the-best. The Southern Company serves over 4 million customers, delivering 43,555 megawatts of generating capacity. Electricity comes from the following sources: 52% coal, 30% oil and gas, 16% nuclear, and 2% hydro.
The Southern Company has been paying dividends for 260 consecutive quarters, dating back to 1948. There was a brief period when the dividend was not raised, but it has never been cut, or stopped. This year marks the 11th straight year of dividend increases. The current dividend yield is 4.58%, and the P/E is 16.89. Historically, a P/E around 18 and below represents fair value for SO. I’m not buying in at a huge discount, but I feel very comfortable moving forward with this holding.
Using the current payout of $0.49, this addition will add $54.88/year in dividend income.
Here are the technical data, assuming an initial investment date of January 2, 2002:
Although the Fiscal Cliff crisis has yet to be averted, and Congress is still in negotiations, I wanted to make a small purchase now, just in case things do get resolved soon. As I mentioned in my latest watchlist, I’m not going to let short-term news like the Fiscal Cliff change my investment strategy and philosophy. I still feel that the market as a whole is pricey, but there is still value to be found.
Had I not purchased SO today, I would have added some shares of Vodafone (VOD), which retreated below $25. VOD has been doing poorly, thanks in large part to dismal performance in Europe. Again, this may just be short-term headwinds, as I do feel that VOD will be OK in the long-term. However, the problems in Europe probably won’t be going away anytime soon, either, so there should be more opportunities to load up on VOD at a later date. VOD will remain on my watchlist for the foreseeable future.
I’m still keeping the majority of my funds in cash, though, just in case a major correction does occur. I probably won’t make any more purchases for the remainder of this year, unless there is a sell-off event. So, unless that happens, this will put the final wraps on my first year as a dividend investor! My first purchase was Wal-Mart (WMT) back in January, which now seems like a long, long time ago.
Happy hunting everyone! 🙂