SSE plc and United Utilities Group plc are still great investments!

SSE plc (LON: SSE) and United Utilities Group plc (LON: UU) shares just keep on rewarding investors.

| 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.

If you’d bought shares in energy supplier SSE (LSE; SSE) five years ago, you’d have seen their value rise by only 15% to today’s 1,543p. That’s ahead of the FTSE 100, but it’s nothing to shout about, so why do people rate SSE shares so highly?

The secret, of course, is in the dividend, and SSE has been providing yields of close to 6% per year. For the year just ended in March, SSE has announced a dividend of 89.4p to provide a yield of 5.8% on the current share price, maintaining its policy of lifting its dividend each year by at least RPI inflation.

Adjusted earnings per share dropped by 3.7%, but at 119.5p that was ahead of SSE’s target of 115p. It was enough to cover the dividend 1.34 times, which falls comfortably within the company’s target range of 1.2 to 1.4 times — and SSE says it’s targeting an EPS rise to at least 120p in the current year.

Should you invest £1,000 in Carnival right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Carnival made the list?

See the 6 stocks

Total return

If you’d bought SSE shares five years ago with the price at 1,340p, in addition to your modest share price gain you’d also have accumulated a total of 429p in dividends, which would take your total return for the period up to 47% — and that is something worth getting excited about.

And with the company’s business being so predictable and its costs and revenues relatively easy to predict, SSE shares are as about close as they can be to offering a guaranteed annual return. If you want steady income, it’s hard to think of a better sector to be in than utilities.

The story is similar at United Utilities (LSE: UU), which provides water services, and is due to report its full-year results on 26 May.

United Utilities shares have actually outperformed SSE over five years, gaining a very respectable 51% to 945p, though at the same time the dividend yields have been a bit lower at under 5% — and while the actual cash has been keeping ahead of inflation, the rising share price has caused the yield to drop, to 4% last year.

Even bigger profits

But the total return? The past five years of dividend cash would have added up to 170p, and with the share price at 629p five years ago, if you’d bought then you’d have accumulated 1,115p per share for a total return of 77%! And remember, that’s by taking the cash — if you’d reinvested your dividends in more United Utilities shares, you’d have done even better.

What does the future hold for United Utilities? The company’s most recent trading update in March told us that things were in line with expectations for the year to March 2016, so current analysts’ forecasts are likely to be pretty close. They’re actually predicting a 10% fall in earnings per share followed by a further 4% dip next, but EPS should start to grow again in the year to March 2018.

That would still be plenty to keep the dividend cash flowing, and rises are still on the cards for the next few years.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Google office headquarters
Investing Articles

$1bn a day! This S&P 500 share still looks like a stock market bargain after Q1 earnings

The owner of Google and YouTube just announced strong results to the stock market, including another massive $70bn share buyback.

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

3 cheap FTSE 100 stocks with big dividends to consider buying right now

Sector weakness in some FTSE 100 industries has also left some of my long-term favourite stocks offering attractive dividend yields.

Read more »

Growth Shares

Forecast: £1,000 invested in Rolls-Royce shares could be worth this much by next year

Jon Smith talks through both his opinion and analysts’ forecasts when trying to predict where Rolls-Royce shares could head from…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

£5,000 invested in Lloyds shares 5 years ago is now worth…

The price of Lloyds shares has more than doubled over the past five years. However, our writer’s cautious about the…

Read more »

Investing Articles

Up 58% in a year, the BT share price could be the FTSE 100 target to beat in 2025

The BT share price has been steadily climbing back since newish boss Allison Kirkby came on board. Is the new…

Read more »

Businessman hand stacking money coins with virtual percentage icons
Investing Articles

£10,000 invested in Nvidia stock 5 years ago is now worth…

Even after the Nvidia stock falls of the past couple of months, its five-year performance remains stunning. And it could…

Read more »

artificial intelligence investing algorithms
Investing Articles

I asked ChatGPT for the best UK stocks to buy for my portfolio in the market sell-off. Here’s what it said

When Edward Sheldon asked the generative AI app for the best stocks to buy amid the market pullback, he was…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Could now be a rewarding moment to buy shares?

Christopher Ruane's looking for shares to buy in a turbulent market. But while he's focused on quality, he's equally interested…

Read more »