Key Takeaways
- Southern Company yields 3.7% and AEP yields 3.3%, and data center demand is driving growth at both utilities.
- Southern has raised its dividend 25 years in a row, while AEP’s dividend grew faster from fiscal 2020 to fiscal 2025, at 5.7% a year against 3% at Southern.
- Southern paid out 68% of its fiscal 2025 normalized EPS as dividends, against 63% at AEP, and analysts expect 66% and 60% for fiscal 2026.
- AEP carries more debt, at 5.8x EBITDA against 5.1x for Southern, as it funds a $78 billion five-year capital plan.
Any retiree hunting for a dividend check they can count on is going to look hard at utilities like Southern Company (SO) and American Electric Power (AEP).
And data centers are driving demand at both, as their July 30 results showed.
Southern pays the bigger yield, 3.7% against 3.3%. But AEP raised its dividend almost twice as fast from fiscal 2020 to fiscal 2025. So which is the better dividend stock for retirees?
| Metric | Southern Company (SO) | AEP (AEP) |
|---|---|---|
| Dividend yield (Oct. 7, 2026) | 3.7% | 3.3% |
| Annual dividend, current rate | $3.04 | $3.80 |
| Dividend growth, fiscal 2020–2025 | 3.0% a year | 5.7% a year |
| Payout ratio of normalized EPS, fiscal 2025 | 68% | 63% |
| Payout ratio of normalized EPS, fiscal 2026 consensus | 66% | 60% |
| Net debt/EBITDA (LTM) | 5.06x | 5.78x |
| Forward P/E (NTM) | 18.3x | 18.4x |
Southern Company has the record
Southern raised its annual dividend rate to $3.04 a share in April. Management put the raise in context on its April 30 call: “This action marks our 25th consecutive annual increase, and this will now be 79 consecutive years, dating back to 1948, Southern Company has paid a dividend that is equal to or greater than the previous year.”
Its business is growing, too. Data center usage rose 55% in the second quarter of 2026 from a year earlier. Contracted and large-load agreements now top 17 gigawatts, including a 3.2-gigawatt, 25-year contract with OpenAI in Georgia.
Earnings have outpaced the dividend. Normalized EPS rose from $2.89 a share in fiscal 2016 to $4.30 in fiscal 2025, while the dividend went from $2.22 to $2.94.
That took the payout ratio from 79% in fiscal 2019 to 68% in fiscal 2025. Analysts expect 66% for fiscal 2026, which is comfortable for a regulated utility.
The tradeoff is slower growth: 3.0% a year from fiscal 2020 to fiscal 2025. Southern also still plans to raise $1.1 billion of new equity by 2030.
AEP is raising its dividend faster
AEP is riding the same data center wave and turning more of it into dividend growth. Its dividend rose 5.7% a year from fiscal 2020 to fiscal 2025, from $2.84 to $3.74 a share. It pays $3.80 a year at its current rate.
Contracted load additions now reach 69 gigawatts through 2030, up from 63 last quarter. AEP says Texas data centers, hyperscalers and industrial customers are driving most of that. On July 30, it raised its 2026 operating EPS guidance to $6.25 to $6.55 a share, from $6.15 to $6.45.
Through it all, AEP’s payout ratio of normalized EPS has held between 63% and 65% from fiscal 2017 to fiscal 2025.
Analysts expect 60% for fiscal 2026, which leaves more room than Southern has.
The main risk is debt. AEP’s net debt is 5.8x trailing EBITDA, against 5.1x at Southern, as it funds a $78 billion five-year capital plan. CFO Trevor Mihalik says “we have addressed all the anticipated marketed equity needs to support the $78 billion 5-year capital plan.”
So which dividend wins?
For retirees, AEP is the better dividend stock. Its dividend grows faster on a lower payout ratio, and management has reaffirmed 7% to 9% annual operating earnings growth through 2030. Analysts see normalized EPS rising from $5.97 in fiscal 2025 to $7.58 in fiscal 2028.
Today, $10,000 in AEP pays $330 a year, against $370 in Southern. At each company’s 5-year dividend growth rate, though, AEP’s check passes Southern’s around 2031. In year 10, AEP would pay about $542 against about $481 for Southern. That’s a 5.4% yield on the original $10,000, against 4.8%.
And you aren’t paying up for that growth. AEP trades at 18.4x forward earnings, against 18.3x for Southern.
This isn’t to say Southern’s dividend isn’t safe. It pays the bigger check today on less debt, and 79 years without a lower dividend is a record any retiree can lean on. It’s just that, for someone counting on that check for a decade or more, I’d rather own the dividend that’s better covered and growing faster.
Of course, that depends on AEP’s earnings growth holding at 7% to 9% a year while it builds out a $78 billion plan on more debt than Southern carries.
So what is AEP stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
