Despite constant attempts by analysts and the media to complicate the basics of investing, there are really only three ways a stock can create value for its shareholders:

  1. Dividends.
  2. Earnings growth.
  3. Changes in valuation multiples.

In this series, we drill down on one company's returns to see how each of those three has played a role over the past decade. Step on up, Southern (NYSE: SO).

Southern shares returned 187% over the past decade. How'd they get there?

Dividends did a lot of the heavy lifting, which isn't surprising for a utility company. Without dividends, Southern shares returned 78% over the past 10 years.

Earnings growth was decent over the period. Southern's earnings per share grew at an average rate of about 5% a year over the past 10 years. That's about what you should expect from a utility -- earnings growth that inches higher at a rate just a notch above inflation.

Now look at Southern's P/E ratio:

Source: S&P Capital IQ.

Southern's valuation multiple has stayed fairly constant over time, which is what you should expect from a utility company. But there is indeed a range, and at 19 times earnings, the current P/E multiple is approaching the high end of that range. The same trend is true for other utilities like Consolidated Edison (NYSE: ED) and NextEra Energy (NYSE: NEE). This isn't surprising: In today's low-rate environment, investors have an insatiable appetite for dividend yield, and utilities offer some of the best yields around. But that says a lot about what investors should expect going forward. With valuations at the high end of the historic range, don't expect the next decade to be as fruitful as the last one.

Why is this stuff worth paying attention to? It's important to know not only how much a stock has returned, but where those returns came from. Sometimes earnings grow, but the market isn't willing to pay as much for those earnings. Sometimes earnings fall, but the market bids shares higher anyway. Sometimes both earnings and earnings multiples stay flat, but a company generates returns through dividends. Sometimes everything works together, and returns surge. Sometimes nothing works and they crash. All tell a different story about the state of a company. Not knowing why something happened can be just as dangerous as not knowing that something happened at all.

Fool contributor Morgan Housel owns shares of Edison and Southern. Follow him on Twitter @TMFHousel. Motley Fool newsletter services have recommended buying shares of Southern. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.