Should You Buy SSE?

LONDON -- I think SSE  (LSE: SSE  ) is a great bet for stock pickers looking to boost their investment income.

In a bid to lure custom away from its competitors, the firm spelled out its new five-point Customer Service Guarantee last month, which will see it refund £20 to clients unhappy with the service provided. 

SSE has a solid history of providing industry-leading customer experience, and I believe the electricity supplier should continue to report solid earnings growth as demand for power rises.

An electrifying dividend pick
SSE's role as a major utilities operator makes it a perfect pick for income investors, as one would usually expect. A dividend of 84.4 pence has been penciled in by analysts for the year ending March 2013, up from 80.1 pence last year. And the payment is expected to rise to 88 pence per share in 2014 and 92 pence per share in 2015.

The firm's generous dividend policy is expected to keep the yield well north of the 3.5% FTSE 100 average, with an income of 5.8% for this year projected to rise to 6% and 6.3% during 2014 and 2015 respectively.

SSE does not offer the sturdiest of dividend cover, with coverage of around 1.3 times predicted until the end of 2015. However, coverage some way off the traditional watermark of 2 times is not unusual for utilities, where defensive qualities help to ensure steady earnings growth and thus copper-bottomed shareholder payouts.

Earnings growth expected to ascend
City brokers expect earnings per share to edge 1% higher to 114 pence in 2013, before accelerating 3% next year to 117 pence and 8% in 2015 to 126 pence.

The electricity provider currently changes hands on a P/E ratio of 12.9 for 2013, which is expected to slide to 12.6 and 11.7 this year and next.

In my opinion, these ratings represent great value for money given SSE's steady earnings growth and record of building dividends. As well, the share seems better value than sector cousin National Grid, whose earnings multiples for 2013 and 2014 are projected at of 13.9 and 13.6 and whose dividend yield comes in below that of SSE.

Zone in on other sterling stocks
Whether or not you already hold shares in SSE, check out this newly updated special reportthat highlights a host of other FTSE winners identified by ace fund manager Neil Woodford.

Woodford -- head of U.K. Equities at Invesco Perpetual -- has more than 30 years' experience in the industry, and boasts an exceptional track record when it comes to selecting stock market stars.

The report, compiled by The Motley Fool's crack team of analysts, is totally free and comes with no further obligation. Click here now to download your copy.

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