I'm a bit hesitant to predict what we'll see from Motley Fool Income Investor pick United Utilities' (NYSE:UU) semi-annual earnings report, due before the market opens Thursday.
My hesitancy isn't necessarily because the company's earnings are volatile, or its business unpredictable, seasonal, or otherwise subject to wild swings. Quite the contrary. As United itself noted in its last annual report, for fiscal 2005: "With prices in our water and electricity businesses now fixed for the 2005-10 period, and with plans in place which we believe will meet our operating and capital efficiency targets, our regulated businesses benefit from some of the most predictable index-linked income streams over the next five years." If not for the company's unregulated businesses, then, predicting tomorrow's numbers would appear to be a cakewalk.
Yet for all that, not a single U.S.-based equities analyst has taken it upon herself or himself to make the attempt. According to Yahoo! Finance's digest of analyst predictions, in fact, just one solitary analyst even predicted what numbers United might post for FY 2006. ($1.60 per ADR, since you asked.)
Fortunately, Foolish subscribers to Income Investor don't have to rely on the investment banks' spotty coverage of this stock -- we've got lead Income Investor analyst Mathew Emmert to help guide our expectations. When he recommended the stock back in March, Mathew noted that 90% of United's revenues come from its regulated businesses, providing water and electricity to thirsty and light-craving Britons. That alone tells us that there's little likelihood of deviation from the norm with this stock.
What's more, earnings aren't even the real story here. Most investors in United Utilities couldn't give a fig whether the company reports that net profits climbed 10% year over year or stayed completely stagnant. (That's assuming they can even figure out what the earnings numbers mean. Between currency exchange rate fluctuations, and the fact that it takes two shares of United common stock trading on the London Stock Exchange to make up one United ADR trading in the NYSE, just figuring out what exactly the company earned in American money will be an exercise in algebra.)
No, Fools, with this company, the dividend's not just the main story -- at a whopping 7.3% yield, United's dividend is the whole story. Tomorrow, look for news suggesting changes to the dividend in the near future. If it's hiked, the stock will rise. If it's cut, the stock will fall. End of story.
United Utilities is an official recommendation of the Motley Fool Income Investor newsletter, where we constantly monitor all our recommendations, updating you on major developments through articles on Fool.com, and in mid-month and semi-annual reviews in our newsletter. Take a free trial right now for access to all our past recommendations, mid-month updates, and six-month reviews for everything we've ever recommended.
Fool contributor Rich Smith has no position in United Utilities.
