The current historic yield is approaching 6% - which is impressive for a company in a highly regulated industry. How do they do? And is this level of income sustainable?
The company was formed in 1998 following a merger between Scottish Hydro-Electric and Southern Electric and has subsequently been snapping up a range of energy-related companies.
SSE is one of the broadest-based energy companies in the UK, with interests in electricity and gas production, electricity and gas distribution, electricity and gas supply and electricity and gas services. It is also - unexpectedly perhaps - the UK's fourth largest telecoms network company.
Wisely perhaps (in my view at least), SSE is staying away from nuclear, although it has flirted (and then withdrawn) with the development of a new nuclear power station at Sellafield.
Their mission statement is reassuring (for dividend-oriented income investors): "Our core purpose is to provide the energy people need in a reliable and sustainable way. Our strategy is to deliver sustained growth in the dividend payable to shareholders through the efficient operation of, and investment in, a balanced range of regulated and non-regulated businesses."
- Full-year dividend up 6.8% to 80.1p per share
- Dividend covered 1.41 times by adjusted earnings per share*
- Thirteenth successive full-year dividend increase
- Targeting full-year dividend increase of at least RPI inflation +2% in 2012/13
- Targeting annual dividend increases above RPI inflation in 2013/14 and beyond
- Adjusted profit before tax up 2.0% to £1,335.7m
- Thirteenth successive increase in adjusted profit before tax
- Capital and investment expenditure up 18.2% to £1,706.9m
- Adjusted net debt and hybrid capital up 14.7% to £6.76bn
- Average debt maturity of 9.3 years
- Operating profit up 6.7% to £737.1m
- Capital investment in electricity networks up 48.5% to £489.0m
- Electricity transmission Regulated Asset Value up 37.5% to £770m
- Total network RAV (inc share of SGN) up 9.3% to £5.86bn
- Operating profit down 19.7% to £321.6m
- Total energy customer accounts (GB and Ire) down 100,000 to 9.55 million
- Agreement to acquire 130,000 customers in NI from Phoenix Holdings Limited
- GB gas consumption (ave) down 19.9%; electricity consumption (ave) down 6.9%
- Operating profit up 6.4% to £607.9m
- 570MW (net) of additional capacity for renewable energy operational
- Output from gas-fired power stations down 26%; from coal-fired stations up 24%
- Output of renewable energy (hydro and wind) up 73%
- £42.6m operating profit from Gas Production (£4.6m from two months in 2010/11)
As might be expected, the Annual Report contains a lot of detail on power generation and the market conditions facing SSE. I can't pretend to have digested all of this. However, despite the disappointing result in the retail market, the overall financial result is acceptable and the continuing commitment to paying attractive dividends helps (for the time being) to keep me happy about continuing to hold SSE shares, which are showing a capital gain equivalent to nearly two years' dividends.
[Purchase price: £11.82]