The Southern Company (SO), Dominion Resources, Inc. (D): 3 Compelling Reasons to Pounce on This Electric Utility

Given the massive size of the three companies, a difference of $300-$400 million in cash reserves doesn’t hold much ground. But speaking in terms of trends, The Southern Company (NYSE:SO) has been accumulating cash and cash equivalents at a rapid rate.

Operating cash flows play a vital role in determining the financial health of a company. Rising debt levels (over the longer term) should be met with rising operating cash flows, otherwise the operating efficiency of the company is considered poor (if the company is not expanding/investing).

NextEra has seen staggering growth due to its expansive activities, while its operating cash flows have largely remained flat. Although the long-term debt of The Southern Company (NYSE:SO) has also risen, it has been accompanied by a significant rise in its operating cash flows.

The above series of charts indicates that metrics of Southern Company are swiftly improving. This suggests that its dividend payouts are matched with financial growth in key areas, hinting at sustainable dividend payouts in the coming years.

A quick wrap up

I think Southern Company has a great set of fundamentals and financials. Its capacity expansions and fuel savings will be key growth drivers in the coming quarters, paving the way for dividend hikes in the future. Altogether, these factors should help Southern Company grow at a faster rate than the industry average, which is among the reasons why I believe Southern Company deserves a Buy Rating.

The article 3 Compelling Reasons to Pounce on This Electric Utility originally appeared on Fool.com and is written by Piyush Arora.

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