PENNON (PNN) 811.5P

Prospec­tive div­i­dend yield: 4.8%

Shares - - MONEY MATTERS -

WA­TER GROUP PENNON is a clas­sic util­ity in­come stock. It has sta­ble reg­u­lated earn­ings balanced with faster growth from its en­ergy and waste busi­ness Viri­dor.

The two busi­nesses split neatly for in­vestors. Viri­dor pro­vides the growth, via its 12 en­ergy re­cov­ery fa­cil­i­ties, ef­fec­tively en­ergy gen­er­a­tion units from waste and re­cy­cling. th6e Its South West Wa­ter arm is re gu­lated wa­ter supply busi­ness. It pro­vides the big cash engine to pay the vi­tal div­i­dend.

Both sides of the busi­ness have been tick­ing over nicely with full year to 31 Match 2017 re­sults slightly ahead of an­a­lyst ex­pec­ta­tions.

The only drag comes from a rene­go­ti­ated con­tract in Manch­ester, with the lo­cal author­ity client plead­ing penury thanks to the gov­ern­ment’s on­go­ing aus­ter­ity penny pinch­ing. It ex­plains the re­cent share price weak­ness with the stock down 14% since late May. That is­sue now seems to be set­tled.

But Pennon has again re­it­er­ated its prom­ise to lift the div­i­dend by 4% over and above RPI in­fla­tion go­ing for­ward, se­cur­ing at­trac­tive in­fla­tion­proofed in­come for in­vestors.

An­a­lysts at UBS an­tic­i­pate 7.5% div­i­dend growth this year to 38.7p per share, im­ply­ing a 4.8% in­come yield. (SF)

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