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It’s been a powerful few months for SSE (LSE: SSE) shares. The power supplier has crushed expectations left, proper and centre, with the share value rising round 25% since October final yr.
The nice cheer was pushed by new of its full-year EPS of 166p, up 74% on the yr earlier than. Larger fuel costs had been the primary purpose for the rise and greater than offset disappointing wind revenues as a consequence of a scarcity of blustery circumstances.
The massive story right here, although, is concerning the dividend. SSE made the choice to chop its 96.7p dividend (a 5.43% yield) to a 60p fee, which brings the yield down to three.37%. As a pure revenue inventory, it means it’s wanting much less enticing.
However the purpose for the reduce is as a result of firm’s imaginative and prescient: it needs to make use of the cash for funding in renewable power.
I need to say I welcome this. It’s refreshing to see an power firm making an effort on this course in comparison with, say, Shell, which (understandably) continues to exploit the income from oil so long as it could possibly.
SSE’s greatest renewables venture proper now’s at Dogger Financial institution, a sandbank about 100 miles or so off the North East coast of England. By 2026, will probably be house to the world’s largest offshore wind farm.
The corporate’s report on the venture states that one sweep of one in all its wind generators is sufficient to energy a house for 2 days. One other approach of it’s that the unique plan was to construct 2000 generators. Now it could possibly generate the identical energy from solely 300 generators.
That reveals how rapidly this sort of know-how is creating. Certain, wind energy isn’t almost sufficient to drive the nation at current, however who is aware of the place we’ll be in 5, 10 or 15 years’ time?
Not solely do I applaud the intent behind offering clear and safe power, however extra tasks like this imply the longer term might be very brilliant for SSE, and naturally, its share value.
This imaginative and prescient would require plenty of funding, and internet debt did develop from £8.6bn to £8.9bn final yr. Debt-to-equity appears excessive at 89%, however in comparison with different utility corporations like Nationwide Grid (147%) and Centrica (288%), I’m not overly involved.
Am I shopping for?
Since saying the plan together with the dividend reduce, the share value has stayed largely flat. This tells me traders aren’t delay by the information however aren’t giddy with pleasure both. Contemplating the massive reduce to dividends, I’d name this a very good signal.
So, am I shopping for for my portfolio? Properly, I like the place SSE is heading and I’d should say the portfolio is missing in publicity to inexperienced power. I anticipate I’ll open a place right here within the close to future.