Should You Invest In Centrica PLC?

Will Centrica PLC (LON: CNA) warm up your portfolio?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

CentricaMost people might not know the name Centrica (LSE: CNA), but many know about British Gas. After all, they supplied everyone’s gas in the country at one point, and they are still the UK’s biggest gas supplier.

I’m going to be upfront about this right away — not only do I own shares in Centrica, but I also worked for them for two years. My role was selling gas, electricity, Home Care and many other products ‘door to door’, and I did it for two years. I also worked for SSE and NPower in a similar role, too. You could describe it as ‘quite tough’ (I’ve been bitten by a couple of dogs and had to work with snow up to my waist), but I’ve managed to see a lot of customers and save them a lot of money.

Anyway, much more importantly, should you invest in the company? Centrica currently has an attractive yield of 5.54% and the P/E ratio is reasonable at 13.1. Centrica also has a good history of rising dividends, as you can see from the table below:

 

2013          

2012

2011

2010

2009

Total Dividend Paid

17.00p per share

16.40p per share

15.40p per share

14.30p per share

12.80p per share

Centrica is more than just British Gas, too — it operates in many countries around the world, including America, Canada and Australia, and even offer financial service products. So it’s a more globalised offering than many of its sector peers.

However, in the UK, energy companies are under quite a lot of political pressure. Ed Miliband would like to ‘freeze’ energy prices if he comes into power. Whether he would legally be able to do that is another question; I’m sure the companies would fight it very hard, and it would at best take quite a while to implement. However, this is one of the main factors why Centrica and other utility shares have taken quite a hit recently. At their high point in 2013, CNA shares traded at 400p. They’re now trading at 307p.

I worked for Centrica from 2007-2009 and I saw plenty of people back then who struggled with their bills. For some people, sadly, it was ‘heat or eat’. People being hit the hardest were often those who stuck with ‘gas for gas and electric for electric’ and ended up paying the highest prices despite being unable to afford it.

Economic conditions are tougher now. More people switch their gas and electricity in the UK than in any other European country and the regulators want to make it quicker and easier to do so, too. It’s worth people investing their time to, as there are significant savings to be had.

Anyway, I rate Centrica at least as a solid hold now — I have no intention of selling my shares. If you are a long-term ‘buy and hold’ investor, then I believe they are a reasonable buy if you can purchase around the 305p mark.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Mark owns shares in Centrica.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »