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SSE’s third quarter trading update confirms earnings per share are set to come in around 116-120p. While lower than last year, this is slightly above prior market consensus. The group also intends to continue with the policy of paying dividend increase that at least keeps pace with RPI inflation this year.
The shares rose 1.7 per cent on the news
George Salmon, Equity Analyst at Hargreaves Lansdown:
“SSE’s investors may not have been singing in the rain up in the Highlands, but with output from hydro and wind stations up 25 per cent, the rain and howling gales will have been music to their ears.
Solid delivery so far this year has helped the group upgrade profit forecasts, and there’s also good news on 2017/18 investing requirements. Long-term capex guidance is unchanged, but for this year at least, more coming in and less going out is a nice combination.
However, the main question is what will SSE’s dividend look like after it splits off the cash generative UK Retail business? Shareholders will have an interest in the new npower-SSE retail entity, but it remains to be seen if their dividend return from both groups will exceed what they’re currently getting. In recent years, SSE’s dividend hasn’t always been covered by the cash it generates, so there’s a chance the group could use the deal as an opportunity to rebase the payment down.”
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