What was the stock of Southern Co. doing atop the New York Stock Exchange's most active list yesterday, with its nearly 66 million shares traded accounting for almost a quarter of total Big Board volume?

Southern, an Atlanta-based electric utility, was the target of "dividend capture" programs, a trading maneuver used by large institutional investors to own the stock just long enough to receive the company's lofty 8.8 percent dividend. Its shares closed at $24.25, up 25 cents.

Traders said volume in Southern was driven to extraordinary heights by Japanese insurance companies, which may soon be prohibited from certain dividend-capture trades that exploit loopholes in Japanese tax laws.

Differences in U.S. and Japanese tax laws account for differences in dividend-capture trading strategies. But in both cases, large brokerage firms on Wall Street benefit by earning commissions on the trading.

In the United States, domestic corporations are taxed on only 30 percent of the dividends they receive. To take advantage of this, some corporations buy stocks with relatively high dividends, hold them for the minimum period required to receive the tax break, and then sell them.

To keep the holding period as short as possible, corporations buy the stocks just before the "record date," the date on which stockholders must own the shares to receive the dividend. Yesterday was the last day for investors buying Southern shares to qualify for a 53 1/2 cent dividend that will be paid March 5.

The risk that U.S. investors utilizing this trading strategy face is that the stock price of Southern may decline before they sell the shares.

But that is not a risk faced by Japanese institutions, which are allowed to buy and sell the Southern shares at prices agreed upon in advance.

Japanese insurance companies were among the heaviest buyers and sellers of Southern shares yesterday, according to First Boston Corp. trader Mark Loehr.

Those companies bought the shares at one price and simultaneously sold the shares at a lower price, which reflected the value of the dividend. However, by structuring the transaction so that their sale of shares does not officially take effect until a day after the purchase is complete, they qualify to receive the dividend payment in March.

Because they are taking no risk on their investment in Southern Co. shares, the Japanese insurance giants are engaging in a form of "tax arbitrage." Under the Japanese tax law, the gain from the dividend is worth more to the insurance companies than the trading losses and brokers' fees.

Although some individual investors seek to profit by capturing dividends, most of the activity yesterday was institutional, traders said.

In addition to Southern, other utilities traded heavily yesterday included Cincinnati Gas & Electric, Pinnacle West and Eastern Utilities Association.

What does Southern Co. think about all the trading in its shares yesterday?

"We don't have a position on it," said Southern spokesman Gale Klappa. "The stock is publicly traded. For every buyer, there is a seller. It is strictly an open market process."