Southern Company (NYSE:SO) has just bounced off of the lower rail of a tight trend channel that has dictated price fluctuations over the last four months and it is just coming out of oversold territory on the daily chart. I have made several notations on the chart below. Take note of the circles on the slow stochastic portion of the chart as Southern Company doesn’t seem to stay in oversold territory for very long. I also made two circles on the price portion of the chart down near the $39 level. I will share more on that later.
SO is not typical of the stocks that I write about in this column. Normally I try to bring you a stock that is set to move sharply higher or lower, not a utility company. However there are several factors that I found interesting. The chart above is from StockCharts.com which is the charting service that I use for screening and running scans. I also have accounts with a couple of brokerage firms and can chart stocks using those platforms as well. I have included a second chart from one of the brokerage platforms and you will notice that the low on this chart is at $40 rather than $39.
The reason for the differential in the prices between the charts is that the top chart adjusts the price for the dividend while the bottom one doesn’t. Southern Company stock pays annual dividends of $2.10 and that can make a big difference in the returns. That is also one of the things that makes Southern Company an attractive stock to own, a yield of 4.6%.
I know utilities aren’t as sexy as high tech firms or an up and coming pharmaceutical company with a new wonder drug, but having a good solid stock like SO in your portfolio is a good idea. The company scores a solid 80 rating in the Investor’s Business Daily EPS rating system, meaning their earnings growth is better than 80% of the publicly traded companies out there.
The most attractive part about Southern Company stock may be the pessimistic sentiment outlook. The sentiment composite reading is a whopping 22.07. The short-interest ratio is a hefty 7.6 and the put/call ratio is in the highest one percent of readings for the past year. Analyst hate the stock with only one “buy” rating, 18 “hold” ratings and two “sell” ratings.
The combination of the sentiment readings, the recent selloff that put the stock in oversold territory and the very attractive dividend make SO a great stock to own. I would add it to your portfolio now so there is a greater chance of capital appreciation as well.
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