Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



United Utilities' Inflation-Proofed Dividend

LONDON -- United Utilities (LSE: UU.L  ) is one of the few remaining utility companies in the FTSE 100, and it has long been a favorite of income-seeking investors. It's a simple business to understand, as it provides 7 million customers with water and waste services in the North West of England.

Today, the company issued a trading statement in advance of its annual general meeting. As you would expect with a utility company, progress has been slow but steady.

United said it had been moving up the industry service rankings -- but, as it admits, from a low point of 21st out of 21 from the year before. Customer complaints are also down by a quarter, and it met its "regulatory leakage target" for the sixth successive year -- which sounds rather disgusting, but which I presume is a good thing.

For those of us in the South East, just emerging from a hosepipe ban, the fact that United's reservoirs are currently more than 90% full is somewhat galling, but not entirely surprising.

United's latest full-year dividend of 32.01 pence is set to be increased by 2 percentage points over the Retail Prices Index for the next few years. When the RPI was more than 5%, such a prospect would have been highly attractive. Now that the RPI is nearer 2%, the proposed dividend advance is less impressive, but still not to be sniffed at.

United is able to make such dividend promises due to the regulatory structure of the industry, which sees prices set by Ofwat for a five-year period. We're currently in the middle of the 2010 to 2015 pricing period, and the next price review is set to be announced in 2014.

Here's how United's yield compares to those of the other FTSE 100 utility companies:


Forecast yield

National Grid






United Utilities


Severn Trent


Source: Digital Look.

While United Utilities is near the bottom of this list, it still offers a higher income than Severn Trent, the only other water utility in the FTSE 100.

The high yields on offer are among the reasons we picked utilities as one of our top sectors for 2012. This free report provides more details and also reveals our favorite share in this industry right now. Download your free copy here, while it is still free and available.

Further Motley Fool investment opportunities:

Stuart does not own any of the shares listed above. Motley Fool newsletter services have recommended buying shares of National Grid. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1961614, ~/Articles/ArticleHandler.aspx, 10/26/2016 5:56:58 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes