What You Were Selling Last Week: SSE

There may have been some profit-taking on SSE but it remains a dividend dynamo.

Jon Wallis
Jon Wallis
May 15, 2013 at 4:00PM
Energy, Materials, and Utilities

LONDON -- One of Warren Buffett's famous investing sayings is "be fearful when others are greedy and greedy only when others are fearful" -- or, in other words, sell when others are buying and buy when they're selling.

But we might expect Foolish investors to know that, and looking at what Fools have been selling recently could provide us with an indication of investments that might be past their prime.

So, in this series of articles, we're going to look at what customers of The Motley Fool ShareDealing Service have been selling in the past week or so, what might have made them decide to do so, and what the future might hold for the company concerned.

Dividend obsession
 (LSE:SSE) -- the utilities group formerly known as Scottish & Southern Energy -- has long been a favorite of income-seeking investors because of its spectacular dividend record. It's one of just only five FTSE 100 companies that has, according to SSE's website, delivered a real increase in its dividend for the past 13 successive years. They even describe their one strategic objective of "sustained real dividend growth" as their "dividend obsession".

And SSE's share price has also put in a very creditable performance over the past few years -- it's almost 22% up on this time last year, and 45% higher than this time in 2010. In the past three months alone, it's risen close to 15%. So maybe some people decided to take some profit, putting SSE in the ninth spot in the latest "Top 10 Sells" list*.

But it seems unlikely they've written SSE off as a long-term investment. Its retail business may be subject to the restrictions imposed by the industry regulator Ofgem, but people will always need to buy large amounts of electricity, no matter what the economic conditions, and SSE has always excelled at making the regulated market profitable. And its wholesale generation business knows no such bounds, with SSE able to make as much profit as the market will bear.

SSE is also making a substantial side-bet on renewables: 25% of its current generating capacity comes from "green" sources, and it plans to increase that to 40% over the next twelve years. Although it's uncertain how high government subsidies will remain, or for how long, SSE looks set to make the most of them.

SSE's dividend yield is an estimated 5.2% for 2013, forecast to rise to 5.44% in 2014, and the company has said that it aims to raise its dividend by more than the retail price index for the foreseeable future. So even if the share price growth slows down significantly, shareholders should still find their investment rewarding.

Five top tips
If you already own shares in SSE and are looking for more high-quality and reliable dividend-paying companies, you should definitely read the latest free Motley Fool report, "5 Shares To Retire On". This report contains five top long-term share selections from our team of analysts here at the Motley Fool.

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* based on aggregate data from The Motley Fool ShareDealing Service.