Edison International (EIX), The Southern Company (SO): Are Investors Saying No to Nukes?

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CEO Tom Fanning insists that renewable energy is not yet price-competitive in his region, but the company does have an active renewable program emphasizing biomass and landfill gas.

For the first quarter of 2013 The Southern Company (NYSE:SO) performed about as well as energy, increasing revenue by about 10% year-to-year. But it was only able to bring $97 million to the bottom line, less than one-quarter of what it brought in the same period a year ago, as the growing nuclear construction cost started to bite. The balance sheet shows about $1 billion more in long-term debt than a year ago, and half as much cash. By the end of March the company had nearly exhausted its cash reserves, and is cash flow negative.

Despite all this the company continues to pay a healthy dividend of $0.51 per share, a yield of 4.58%. This compares with a $0.34  per share dividend, yielding 2.85%, for Edison International (NYSE:EIX). Still, if Southern is pulling other money from the sofa cushions to pay off shareholders, while Edison is able to fund the dividend from operations, as it is, which yield is safer?

My Foolish take

There is an assumption in the business press that utilities with a high mix of renewable energy, especially solar energy, are more vulnerable than those which rely on more “stable” forms of energy like nuclear power.

It’s hard to challenge such assumptions. But you can profit from them, if you see investment and financial trends moving the other way. Edison International (NYSE:EIX), which is closing a nuclear plant, is becoming a better long-term bet than the company that is building new ones.

The article Are Investors Saying No to Nukes? originally appeared on Fool.com and is written by Dana Blankenhorn.

Dana Blankenhorn has no position in any stocks mentioned. The Motley Fool recommends Southern Company. Dana is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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