But an announcement has yet to take place. And now investors will need to wait until 9 November before knowing whether they would be getting their hands on the proceeds of the sale.

Fledging share price

An announcement in favour of special dividends or share buybacks could have a big impact on SSE’s flagging share price. Amid concerns about falling wholesale energy prices and intense competition in the retail market from smaller challengers, such as the likes of First Utility, Ovo Energy and Good Energy, shares in SSE have gained just 3.5% year-to-date, compared to an 11.9% rise in the FTSE 100.

SSE is selling its stake in the distribution network to focus on higher growth parts of its business. As gas demand in the UK has fallen by around a fifth over the past decade, management believes better growth prospects lie with its regulated electricity networks. Meanwhile, strong global investor demand means valuations are ripe for the company to realise value on its past investments.

What’s more, the sale still leaves SSE with an RAV of more than £7bn. And this is expected to rise to £10bn by 2020, given planned investments in its electricity distribution network. This implies that, going forward, more than half of the group’s profits would still come from the more stable regulated businesses. This would help the company to reduce the earnings volatility coming from its power generation and retail businesses.

Unless wholesale energy prices deteriorate markedly, SSE’s regular dividends seem sustainable given its dividend cover of 1.3 times. The utility currently yields 5.7%, and has also pledged to raise its dividends annually by at least RPI inflation.

Similar move

In a similar move, National Grid (LSE: NG) is looking to sell a majority stake in its own gas transmission network. Worth up to £11bn, the sale could lead National Grid’s shareholders to get a windfall which would dwarf any payout that SSE shareholders may get.

Due to the much greater size of National Grid’s gas distribution network, city analysts expect part of the proceeds would be used to pay down some of the group’s debts, with the remainder being used to fund a special dividend or share buybacks.

The last time National Grid embarked on a massive share buyback programme was back in 2007-8, when it returned £1.8bn in cash from the sale of its UK wireless business. Personally, I think this indicates a share buyback would be the company’s preferred method of returning cash to shareholders this time as well. After all, buybacks reduce the company’s outstanding share count, which would cut the cost of paying dividends in coming years.

Shares of National Grid have significantly outperformed those of SSE — they’re up 12.5% in the year-to-date and currently yield 4.1%.

The post Are NG and SSE set to return more cash to shareholders? appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

National Grid has just revealed its results for the year to March 2016, and once again the company’s predictable business meant that shareholders knew pretty much exactly what to expect — they saw a 6% rise in adjusted operating profit and a 19% rise in adjusted earnings per share to 63.5p.

That led to a 1.1% rise in the full-year dividend to 43.34p, which might not sound a lot but it’s ahead of inflation. It was actually slightly down on predictions and is possibly the reason behind the 2.7% fall in National Grid shares on the day so far, to 972p, but it would still yield 4.5% on the current share price.

Set for growth

Chief executive John Pettigrew reckons that National Grid is “well positioned to deliver asset growth in 2016/17 and beyond“, and I don’t think many would disagree given the company’s track record.

Dividend growth has been going on for years, and the only reason the yield has dropped a little in recent years is the steady rise in National Grid shares. Over the past five years, the price is up 58% to 977p, and when we add total dividend cash of 166p over that period, we’re sitting pretty on a total return of nearly 85% — and if the dividend cash had been reinvested in more National Grid shares, it would be even higher!

The whole business of supplying energy is a very profitable one, and at Centrica (LSE: CNA) we’re seeing another good example of a solid dividend-paying company — though in this case, a fall in the share price could be providing us with a very nice recovery prospect, too.

Centrica’s dividend yield for the year to December 2015 came in at 5.5%, and there’s a nice hike to 6% currently forecast for 2016, even though there’s a 12% fall in EPS expected — but there’s a 3% recovery on the cards for 2017.

Falling shares

So why have Centrica shares fallen by 37% over the past few years, to 201p? Well, Centrica did have to turn to an equity issue earlier this month to raise a bit of cash as its debts have risen to £4.4bn. Some of the cash raised, however, was to fund the firm’s continued acquisition plans, and only this week we heard of the purchase of ENER-G Cogen International Limited for £145m.

The equity issue was fully placed with institutional investors, and they clearly don’t seem worried about it. And with the shares on a forward P/E of around 13 and those big dividends looking good, I don’t think we should be either.

Although the total return from Centrica shares over the past five years, including dividends, has only come to 37%, I still see the owner of the British Gas and Scottish Gas brands as a good long-term investment.

The post National Grid plc and Centrica plc are still great investments! appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Super yield

Look at SSE (LSE: SSE), which is a big favourite among high-yield investors. It’s been offering up dividend yields of close to 6% for years, and for the year to March 2016 there’s a 6.5% yield forecast, with similar on the cards for the next two years — a share price that has dropped 16% since May last year to 1,433p has helped boost that percentage.

The problem is, there’s a 9% fall in earnings per share predicted for this year, followed by zero change for each of the next two years. In 2015 we saw dividend cover of 1.4 times, but that would drop to just 1.25 times on this year’s forecasts, and a shade less by 2018.

In its January trading statement, SSE reiterated its intention of “targeting an increase in the full-year dividend for 2016/17 of at least RPI inflation, with annual increases thereafter of at least RPI inflation“.

So we’re probably safe for this year and next, but if earnings don’t start picking up again, it won’t be sustainable for ever.

More erratic

Dividends at gas supplier Centrica (LSE: CNA) have been less stable, with a couple of years of falling earnings leading to a 21% dividend cut in 2014 followed by another 11% in 2015. There’s a further 9% decline in earnings currently forecast for the year to December 2016, yet the City folk are expecting the dividend to be lifted a little to yield 5.8% on today’s 226p shares — and with only a 1% EPS gain penciled in for 2017, they’re expecting a further dividend boost to 6%.

That would give us dividend cover of around 1.3 times this year, dropping to 1.26 times next. Again, I find that cutting it a bit fine, and Centrica has made less of a commitment to dividend growth having merely said in February’s full-year report that its progressive dividend policy is “tied to confidence in underlying operating cash flow“.

Again, probably safe, but by no means certain.

The safest?

The National Grid (LSE: NG) share price has bucked the trend, being the only one that has gained in the past 12 months — albeit a modest 8% to 947p. The potential dividend yield is the lowest of the three, with a relatively modest 4.5% (still way ahead of the FTSE 100 average) expected for the year to March 2016, blipping up a little to 4.7% by 2018.

But the nice thing is that National Grid’s dividend should be a bit better covered than the other two, with the 5% EPS rise forecast for this year taking it to 1.4 times. Admittedly, the next two years with a suggested EPS rise of only 2% in total would drop that cover to 1.35 times, but that would still be ahead of the pack.

National Grid’s dividend is probably the safest of the three, but the lesson that we should not be complacent is a welcome one.

The post How Safe Are Dividends At SSE PLC (6.5%), Centrica PLC (5.8%) And National Grid plc (4.5%)? appeared first on The Twelfth Magpie.

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• Down 15%! Is National Grid’s share price really a bargain right now?
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

On that score, today I’m looking at two big yielders that present an intriguing contrast.

Safer

The first is Centrica (LSE: CNA), the owner of the British Gas and Scottish Gas brands. Along with the other power utilities, Centrica is known for paying out a substantial portion of its annual earnings as dividends — usually around two thirds.

Earnings dipped in 2014 by 28%, and there’s a further smaller drop on the cards for the 2015 year just ended, and that’s led to a fall in the dividend from 17p per share in 2013 to a predicted 12p for 2015 — results are due on 18 February. But on today’s 191p share price, that would still bring you a yield of 6.3%, with the forecast 2016 yield up to 6.5%.

That big yield is due to the share price having fallen, but even if you’d bought your shares at their April 2014 peak of 345p, you’d still be looking at likely yields of 3.5% and 3.6% for 2015 and 2016 respectively — and if that’s as low as your yield gets during hard times, it’s really not too bad.

And the best way to invest in shares like Centrica, in my opinion, is regularly over a long period — that way you’ll benefit from pound-cost averaging, and once dividends start rising again you’ll enjoy higher effective yields based on the price you pay in the dips.

More exciting

My second for today is Aberdeen Asset Management (LSE: ADN), which is a very different company indeed. As an investment manager specializing in emerging markets, the Chinese slowdown has contributed to 11 quarters in a row of net cash outflows, and that’s triggered a share price collapse — at 225p today, Aberdeen’s shares are down 55% from their peak in April 2015.

But one thing that has done is pushed up the prospective dividend yield for this year to a massive 8.8%. As it stands, that would only be covered 1.2 times by forecast earnings, so it’s clearly at risk. But January’s first quarter update provided reasonable confidence for the firm’s long-term future. Although the three months saw a net outflow of £9.1bn, total assets under management had actually risen to £290.6bn between September and December.

Aberdeen has a progressive dividend policy, and has been raising its annual payment far in excess of inflation in recent years. A cut in the cash may well be inevitable over the next couple of years, but there’s plenty of room for that while still keeping a yield that’s way ahead of the market average.

Volatility? Pah!

And if emerging markets are going through a downturn, well, a bit of volatility is only to be expected. And Aberdeen has plenty of experience of dealing with it while maintaining a very prudent approach to financial management. On a forward P/E of only 9.7 for 2016, Aberdeen Asset Management shares look like a long-term ‘buy’ to me.

The post Will Dividends At Centrica PLC And Aberdeen Asset Management plc Really Hold Out? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Aberdeen Asset Management and Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.