This dividend-paying stock is a safe bet regardless of market conditions

The market has been tough lately. the S&P500 (^GSPC 1.91%) is down 17% from its peak in January, and given the still rampant inflation, it could easily continue to decline. Even the average dividend stock is not proving to be a safe haven, as the specter of rising interest rates helps drive up dividend yields by driving down dividend-paying stock prices. It doesn’t matter what kind of difficulties higher costs can create in terms of the affordability of those dividends.

There is one notable exception to this headwind, however, which yields a fairly good return. Take a look at The Southern Company (SO -0.92%) if you’re looking for a safe, dividend-paying name amidst this market-wide carnage. It has resilience and proved it by withstanding the broad bear tide.

La Compagnie du Sud is a dividend machine

If you don’t know it, Southern Company is a utility stock. The organization supplies electricity (and natural gas) to 9 million people, mostly in the southern part of the United States. It has been around for a long, long time, adding companies to its portfolio along the way to evolve into an operation generating annual revenues in the range of $23 billion.

Southern Company’s history and sales are not the high point for investors, however. It’s not really profits either, even though his profits are significant. Most impressive about this particular company is its 21 consecutive years of annual dividend increases.

DO Dividend Data by YCharts

He can also afford these payments. Net income of $3.41 per share last year more than covered the company’s per-share payout of $2.62, as did 2020 earnings of $3.25 per share, when it distributed $2.62 in dividends.

It’s the nature of the utility industry

The secret to these reliable and stable results and payouts is no secret at all. It’s the nature of business.

An investor reviews the allocation of his portfolio.

Image source: Getty Images.

Think about it. Consumers might put off buying a new car or skip a trip to the mall. But they usually keep the lights on no matter what it takes to do so. And while any rate hike imposed by an electricity supplier usually has to be approved by regulators, it’s rare for a regulator to deny such a request. Uninterrupted power is necessary, after all, and switching to another utility company can be expensive and complicated.

To that end, the Bureau of Labor Statistics reports that the average price of electricity in the United States has nearly doubled since the year 2000, with many more annual rate increases than decreases during this time.

As impressive as this endless growth trend is, there is a specific strategic reason why investors might want to take a closer look at The Southern Company right now, even if current income is not your goal. This is the surprising resilience of the title. While the S&P 500 is down 17% since early January, SO stocks have defied predictions and are now more than 8% above where they started the year.

Don’t be too surprised, though. Money taken out of more aggressive growth stocks is not always necessarily set aside. Some investors are always looking for the best option available to them at the time. Right now, utility stocks are a top choice. In some ways, it’s an even smarter and safer bet than cash, as runaway inflation turns the deteriorating value of the dollar into a liability in its own right.

Don’t complicate things

The $64,000 question is, of course, how much more productive is a stake in The Southern Company than any of your alternatives? The stock’s current yield is slightly lower at 3.7%, compared to next to nothing for money market accounts, while less income-generating, growth-oriented stocks are still at significant downside risk.

That’s not to say Southern is a risk-free option, mind you. There are always risks. New legislation could make the electricity sector more complicated and more expensive. Investors as a whole could also change their minds about the utilities sector being the safe haven they currently view as such. You never know.

Given what we can and do know about the company, however, and how this title has held up when so many others haven’t, there aren’t many other better ways to protect your portfolio against the current market turbulences, mainly bearish.

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