AEP vs SO: Dividend Comparison
Dividend data as of
American Electric Power Co Inc (AEP) and Southern Co (SO) are both in the Utilities sector, making them natural rivals for dividend investors. Both stocks offer similar yields — AEP at 3.07% and SO at 3.22%. For dividend growth, AEP leads with a 5-year CAGR of 13.4% versus SO's 2.9%. AEP holds the edge in dividend safety with a "Safe" rating. AEP is a Dividend Contender while SO is a Dividend Aristocrat.
Verdict
Yield Analysis
SO yields 0.15% more than AEP. In dollar terms, AEP pays $3.72/share vs SO's $2.92/share annually.
Dividend Growth
AEP: Dividend growth is accelerating — the 3-year CAGR of 21.3% exceeds the 5-year rate of 13.4% and the 10-year rate of 9.1%.
SO: Dividend growth has been steady, with a 3-year CAGR of 2.8% and a 5-year CAGR of 2.9% (10-year: 6.4%).
Dividend Safety
AEP: The payout ratio of 54% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 1.8x.
SO: The payout ratio of 73% is moderate. The dividend is currently covered by earnings but leaves less room for growth. Earnings cover the dividend 1.4x.
Estimated Annual Dividend Income
Based on current dividend yields. Actual income may vary.
What does $10,000 buy in AEP vs SO today?
At $129.48 per share, $10,000 buys about 77.2 shares of American Electric Power Co Inc (AEP). Each share pays $3.72 per year in dividends, so the position starts out generating roughly $287 per year — about $24 a month.
At $94.53 per share, $10,000 buys about 105.8 shares of Southern Co (SO). Each share pays $2.92 per year in dividends, so the position starts out generating roughly $309 per year — about $26 a month.
SO is the larger income stream from day one: $22 per year more on the same $10,000 invested.
What could $10,000 of AEP or SO income look like in 10 years?
American Electric Power Co Inc (AEP) has raised its dividend about 13.4% a year over the past five years. If that pace held, the $307 per year that $10,000 generates today at the current 3.07% yield would reach $1,081 per year by 2036 — a 10.8% yield on the original cost.
Southern Co (SO) has raised its dividend about 2.9% a year over the past five years. If that pace held, the $322 per year that $10,000 generates today at the current 3.22% yield would reach $429 per year by 2036 — a 4.3% yield on the original cost.
On those trailing rates, AEP pays more in 2036: $1,081 versus $429 per year. The projection assumes each five-year growth rate persists and no dividends are reinvested — real payouts will differ.
When would AEP's dividend growth overtake SO's higher yield?
American Electric Power Co Inc (AEP) yields less today (3.07% vs 3.22%) but has grown its dividend faster — 13.4% vs 2.9% a year over the past five years. If both trends continued, a $10,000 position in AEP would start out-earning the same position in SO around 2027 (roughly 1 year from now), paying about $348 per year at the crossover. Before that point, SO pays more each year; after it, the gap compounds in AEP's favor.
Can AEP and SO afford their dividends?
American Electric Power Co Inc (AEP) earns $6.83 per share against $3.72 paid out in dividends — 1.8x coverage (a 54% payout ratio).
Southern Co (SO) earns $4.02 per share against $2.92 paid out in dividends — 1.4x coverage (a 73% payout ratio).
AEP's wider coverage leaves more cushion if earnings dip. As a rule of thumb, coverage below about 1.5x (a payout ratio above ~65%) is where a dividend starts to look stretched — worth watching for SO if earnings weaken.
Which fits an early-retirement income portfolio better, AEP or SO?
For income you need right now, Southern Co (SO) leads: $100,000 invested today pays about $268 a month at the current 3.22% yield, versus $256 a month from American Electric Power Co Inc (AEP) at 3.07%.
With a decade or more before the income is needed, AEP's faster dividend growth (13.4% vs 2.9% a year) matters more than the starting yield — raises compound into the larger paycheck over time.
On consistency: AEP has raised its dividend 16 consecutive years; SO has raised its dividend 25 consecutive years.
Many income investors simply hold both — the mix pairs current yield with growth and spreads single-name risk. Whichever way you lean, dividends are never guaranteed; recheck the payout each quarter rather than setting and forgetting.
$10,000 with DRIP: projected annual income
If each holding keeps raising its dividend at its real 5-year rate and every payment is reinvested, a $10,000 position pays $1,462/yr in AEP vs $589/yr in SO by year 10.
Assumes dividends are reinvested at the current yield and grow at each holding's trailing 5-year dividend CAGR. A projection, not a prediction — no price appreciation modeled.
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