10 thoughts on “Southern Company Prices Baby Bonds”

  1. Gridbird this has always been a sticking point for me and the reason I’ve avoided Utility Preferreds. So then you’re saying that in fact, the 40 quarter suspension period makes the Cumulative Preferred less safe then a comparable Preferred without that provision because there’s basically no pressure on the Issuer because they can continue to pay a dividend on the common stock during the suspension period….whereas….a “normal preferred” would not allow them to do that?

  2. I am not understanding the value of purchasing this note verses purchasing Southern Company which has a higher current yield…..unless one is assuming the note will rise above par quickly and be a trade candidate.

  3. For anyone else that is interested, I was just able to buy this one through Schwab for $24.98. I called the bond desk (1-877-906-4670) and gave them the CUSIP.

    The YTW I’m computing for SOJD is around 3.15%. It would seem like this new 4.2% issue could go to $26 and provide a better YTW than SOJC.

    1. Thank you @Dick Whitman and this site posting about this baby bond.

      I too bought some of this SO 4.2% baby bond at Schwab. Though have had accounts at Schwab for long, had never called their bond desk so far – quick and efficient.

      Didn’t know they charge a $25 fee for it though I was quoted a price with it included in the ‘ask’ and price I paid…

      1. I wasn’t charged the commission when I bought so it wasn’t top of mind. Sometimes they charge me and other times they don’t. I’m not sure why.

  4. Ouch! This rate is too low for me to even consider the issue, although I like the company. While it appears that interest rates will stay low for the next several years, there are many unknowns at the present time. If interest rates ever return to “normal” in the next couple of years due to inflation, I could easily see this issue trading at $20 which would still then only provide a yield of 5.25%.

  5. Tim

    You mentioned earlier that the Company has the right to defer interest payments for up to 20 quarters. During such a deferral period, can the Company pay dividends? Thanks

    1. Potter, this is a point where people get confused on. Some people see this and think a cumulative preferred stock is safer from same company because that 40 quarter deferral is not shown. Its actually the opposite. A preferred from same company cannot pay if the subordinated debt is suspended because it sits higher in cap stack. So, no, the common stock cannot receive a dividend until subordinated debt interest is paid in full. Now keep in mind this does not affect subsidiary preferreds which are not SO’s obligation, but the subsidiary. So in theory a SO subordinated debt could be suspended and say the Alabama Power preferreds continue to be paid though.

      1. Great answer. Thank you

        I was looking through some of the older $100 utility preferreds and saw that some of them still allow preferred shareholders to elect the board of directors after missing dividends for a certain number of quarters.

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