By Gordon Pape, Internet Wealth Builder

Although there are some encouraging economic signs out there, prudent investors need to stay defensive and blue-chip, dividend-paying stocks should continue to form the core of your portfolio.

One of the areas on which to focus is U.S. utilities which offer relative price stability and an attractive dividend yield. And one stock in particular that I like is Southern Company (SO) which is celebrating its 100th anniversary this year.

Atlanta-based Southern Co. traces its roots back to the founding of Alabama Traction, Light & Power in 1912. Over the ensuing years, the company aggressively expanded and today it provides electricity to most of the U.S. south-east including Alabama, Georgia, south-eastern Mississippi, and the Florida panhandle.

Most of Southern's generating plants use fossil fuels or hydro but the company also has three nuclear generating stations and is in the process of constructing America's first 21st century nuclear energy facility in Georgia.

Southern owns 42,000 megawatts of generating power which it delivers directly to homes through some 27,000 miles of transmission lines, 3,700 substations, and 300,000 acres of right of way. The transmission assets alone are worth an estimated $6.2 billion.

As well, the company controls SouthernLINC Wireless, a communications network with a 127,000 square-mile coverage area in the Southeast U.S., and Southern Telecom, a fiber optic wholesaler.

Southern is an attractive buy for your portfolio for three reasons: modest growth potential, a good dividend, and downside protection.

The company's growth potential arises from its operational base. The U.S. Southeast until recently was one of the fastest growing areas of the country and that growth is expected to resume once an economic recovery takes hold. As it does, Southern's profit potential will increase.

Even in a slow economy and with flat residential growth, the company reported earnings of $2.2 billion ($2.57 a share) for fiscal 2011, up from $1.97 billion ($2.37 a share) in 2010.

On an earnings per share basis, that represents an increase of 8.4% which is very good for a regulated company, especially in weak economic times.

The stock pays a quarterly dividend of $0.4725 ($1.89 a year). That translates to a yield of 4.3% annually.

No stock is immune from a broad market collapse but the utilities usually fare better than most. During the crash of 2008-09, Southern fell from a mid-year 2008 high of $38.62 to a low of $27.14 during the week of March 9/09, a loss of 29.7%.

That's a significant decline but it was nowhere near as bad as the Dow Industrials which lost more than 50% in the same period. In the market plunge of August 2011, the stock declined only 6.8%.

The stock is fair value at the current level for investors who want a decent dividend and longer-term growth potential. Action now: Buy.

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