Southern Company's (SO 0.34%) Vogtle nuclear power plant project is over budget and delayed, which is the bad news. However, once you get past that one issue, the giant U.S. utility is basically a pretty boring company. For conservative investors, it's worth closer inspection despite its construction-related woes.

Its efforts to get that pair of nuclear reactors built in Georgia, the only two nuclear plants being built in the country at this time, have been dragging on the company for several years. Matters got so bad that, following the 2017 bankruptcy of the construction management company (Westinghouse) that the utility had tapped for Vogtle, Southern stepped in to take over project oversight directly. Things were going relatively well after that -- until 2020, when the coronavirus pandemic upended the construction process.   

A man with blueprints and high voltage power lines behind him.

Image source: Getty Images.

Due to COVID-19, costs increased again, but it is hard to blame Southern for this. The good news is that the utility still hopes to meet its revised target dates of November 2021 and November 2022  for bringing the two reactors into service. Even if that timeline slips a little, given the pandemic, it would be understandable. The key here, however, is that there's only around $1.6 billion worth of spending left to get Vogtle units 3 and 4 up and running. That's a tiny slice of Southern's $40 billion capital spending plans through 2025 and would remain so even if the price tag increased again.   

Vogtle is an important project, partly because it will help Southern reach its clean energy goals. However, it is no longer as financially massive a consideration as it once was because it's so close to completion. This is why investors should be taking a wider view of Southern.

A lot to like

For starters, Southern Company is largely a regulated utility, serving 9 million customers with electric operations in three states, natural gas distribution in four states, and a comparatively small long-term-contract-driven merchant power business. The stability of its business is well-illustrated by its dividend history. It has either increased its annual payout or held it steady every year since 1948 -- that's more than 70 years. Right now, it has an annual increase streak of 20 years going.   

To be fair, the average annualized increase over the past decade was a modest 3.5%. However, that's large enough to keep up with inflation and protect the buying power of your dividends. Moreover, at current share prices, the 4.2% dividend yield is more than twice what you'd get from an S&P 500 Index fund today, and about a full percentage point higher than the average utility, using Vanguard Utilities ETF (VPU 0.01%) as a proxy. The payout ratio was around 85% in 2020, which is a little high, but appears to be manageable.  

SO Chart

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On the growth front, the highly regulated nature of Southern's business means that it needs to get rate hikes approved by the government. But in exchange, it gets a monopoly in the areas it serves. To get those rate increases approved, it spends money on things like electric grid reliability, the transition to cleaner energy sources, and capacity expansion to meet expected demand growth. That's what most of its $40 billion capital spending budget is for. That spending is basically baked into the business once it gets approved, so regardless of any gyrations that may happen on Wall Street, these projects are highly likely to keep going. And that means top-and bottom-line growth, which should lead to continued dividend growth, as well.   

Behind the negative headlines

Some might argue that the long and difficult road at Vogtle, and the impact it has had on the company's business, is a sign that investors could find better utility options elsewhere. That might very well be true. However, Southern's generous yield and impressive history of returning value to shareholders via dividends should entice those looking to maximize their income streams at a time when the S&P 500's yield is only around 1.5%.

Indeed, the Vogtle project is fast drawing to a close and, once the overhang from the project is gone, Southern will return to being a boring, slow-growth utility. That's not exciting, but that's kind of how the company likes to do things. If creating a generous stream of dividends is your main goal, this utility is worth a deep dive for investors who are willing to give a reliable dividend payer some slack (it is the only U.S. utility willing to take on the task of building carbon-friendly nuclear power plants) and appreciates relatively boring stocks.