Today, I am looking at SSE (LSE: SSE), and weighing up whether to add more of the electricity provider to my personal stocks and shares portfolio.
Investment scheduled to keep on rolling
SSE announced in July’s interims that the number of its British electricity and gas retail clients dipped fractionally lower in April-June, to 9.46 million from 9.47 million in the same 2012 period. And average household power consumption dipped 2% on an annualised basis, while total gas consumption edged just 0.3% higher.
On a brighter note, at its Wholesale operations, the restarting of its Medway station helped push oil and gas output 14% higher, while the onset of new capacity helped bring generation from renewable sources leap 32%. Output from coal stations fell 4% during the period, however.
SSE has promised capital expenditure in the region of £1.5bn for the year ending March 2014, and the firm has already achieved a number of significant milestones across its Networks and Wholesale divisions for the current year. And hefty asset expansion is set to continue moving steadily higher, which analysts expect to undergird solid earnings growth from next year onwards.
Earnings growth ready to charge
Earnings per share are expected to dip fractionally in 2014, according to current City forecasts, to 118p. But a 6% bounce-back is pencilled in for 2015, to 125p.
SSE currently changes hands on a P/E ratio of 13.2 and 12.4 for 2013 and 2014 respectively. This represents excellent bang for your buck when compared with an average prospective reading of 17.3 for its electricity sector rivals, and 15.8 for the broader FTSE 100.
In my opinion, the electricity stock is a cracking stocks selection, with solid earnings prospects supplemented by one of the safest — and more lucrative dividend policies — currently on offer.
Plug yourself in for delectable dividends
SSE has built an enviable reputation as a dependable dividend payer for more than a decade and a half, having built the annual payout each year since 1999. And City forecasters expect this trend to continue at least over the medium term, with last year’s 84.2p final dividend anticipated to rise to 88p in fiscal 2014. A payout of 92p is expected in the following 12-month period.
These prospective dividends carry chunky yields of 5.7% and 6% for 2014 and 2015 respectively, which compares extremely well with other utilities plays so favoured by income investors. The electricity sector currently boasts a forward average of 3.4%, while the gas, water and multiutilities space carries a corresponding figure of 4.9%.
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> Royston owns shares in SSE.
