One example of a company that arguably stands a better chance than most, however, is FTSE 100 water and wastewater business Severn Trent (LSE: SVT).

A quick glance at today’s trading update from the company goes some way to explaining why.

“No material change“

In contrast to the vast majority of listed companies, Severn stated this morning that it had seen “no material change” in terms of business performance from its last trading update (28 January) to the end of March.

As a result, the £5.5bn cap expects full-year numbers to be in-line with the guidance it previously issued.

How many other firms can say that at the current time?!

In response to the Covid-19 outbreak, Severn said that it is doing all it can “to keep essential services flowing“, particularly for hospitals, schools, and care homes. Only customer visits deemed “essential” are going ahead. 

Aside from this, the Coventry-based business said that it was “actively promoting” its vulnerable customer schemes for those experiencing financial difficulties as a result of the pandemic.

As positive as all this is, Severn did say that government restrictions brought in to minimise the spread of the coronavirus were likely to have “a material impact” on its non-household customers and the recovery plan of its WaterPlus business (a joint venture with United Utilities). This may go some way to explaining why shares were down this morning while the index as whole was up. 

Nevertheless, I have no concerns over Severn’s finances. Less than 2.5% of its debt requires re-financing in the current year. It also has £1.1bn in cash and committed facilities to see it through. 

Another option

Severn isn’t the only utility in the FTSE 100, of course. Environmental infrastructure company Pennon (LSE: PNN) is another option for cautious investors. 

Yesterday’s full-year trading statement was similarly reassuring. The company stated that performance over the last year (which includes the coronavirus crisis) had been in line with management expectations.

Like Severn, Pennon said that only essential customer visits are taking place and it is prioritising support to those most vulnerable.

Like Severn, it also said that its finances were in good order to weather the coronavirus storm. In fact, the recent sale of waste business Viridor for £4.2bn, expected to complete this summer, will pretty much wipe all debt from its balance sheet.

Priced in?

Based on their share price performance over the last month (-10% and -3% respectively), both Severn and Pennon look likely to remain relative ‘safe havens’ in this unpredictable environment. 

Assuming no additional crises hit, both should also continue to be good options for dividend hunters. If analyst predictions prove correct, Severn yields 4.4% for the financial year ending today. At its current share price, Pennon offers 4.1% (with, I suspect, a potential special dividend in the works).

Naturally, the only issue with all this is that neither company is cheap to buy. Severn trades at 19 times forecast earnings for the 2020–21 financial year. Pennon trades on a P/E of almost 21. As such, it’s unlikely either will soar in price when the coronavirus is overcome.

The post Looking for dividends while markets crash? I think these FTSE 100 stocks could be great buys! appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Pennon Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

If things had been different

That was the plan outlined by Jeremy Corbyn’s Labour Party for its first 100 days in power. It was pretty popular among the electorate, although not popular enough, as it turned out.

If the election result had been reversed, FTSE 100 dividend-paying stalwarts such as Centrica and National Grid would be plunging today, as investors waited to see how much compensation Chancellor John McDonnell would pay when he took them into public ownership.

In the real world, the one where Boris Johnson is still Prime Minister but now with a landslide, the Centrica share price is up 7.46%, while National Grid is up 6.94%. For them, it is now business as usual.

Post-election spike

These are not the only utilities flying today. The water companies were also in line for nationalisation, and now they’re not. The result is that the Severn Trent (LSE: SVT) share price is up a whopping 8.24% at time of writing, and United Utilities Group (LSE: UU) is up 7.78%. That is way ahead of the 1.67% rise on the FTSE 100, at time of writing. Clearly, some investors took the prospect of nationalisation seriously. Not anymore.

I would still think twice about rushing to buy them right now, however. That kind of spike often retreats in later trading, as investors pocket their profits. However, the long-term attraction is greater, now that one major area of uncertainty has gone for the foreseeable future.

Power of Severn

The Severn Trent share price has performed particularly well over the last year, trading 17.67% higher, but you cannot expect that kind of return from a utility year after year. What is at stake is the income. Here things look pretty good, with the stock currently yielding 4.5%.

Management is taking a progressive attitude, recently lifting its interim dividend by 7%, in line with its policy of growing it by inflation plus 4%. However, that followed an 11.2% drop in first-half pre-tax profit to £180.7m, which partly explains why dividend cover is relatively thin at 1.4.

The £5.72bn group now trades at 16.6 times earnings, after today’s leap, so looks fairly valued rather than a bargain play. Business costs are mounting, while City analysts are predicting a 7% drop in earnings this year and a drop of 18% the next. The nationalisation threat may have passed, but Severn Trent still has other issues to deal with.

United we fall

Today’s jump in the United Utilities share price is welcome given that it has gone nowhere for the past five years. I have previously warned that the UK’s largest listed water company has a massive debt pile of £8.8bn, although management says this is within its target range.

The £6.2bn group now trades at 15.1 times earnings, pretty much fair value, while offering a generous forecast yield of 5%, although again, cover is thin at 1.3. However, with earnings forecast to fall 26% next year, I’m getting cold feet.

Loyal investors are enjoying themselves today, but the future could be patchy. I would put these two on my watchlist, now the nationalisation threat has receded, but I wouldn’t buy them yet.

The post These 2 FTSE 100 utilities soar as Labour loses. Should you buy them? appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

That said, some companies are likely to be impacted more than others, no matter what the outcome.

High price 

Auto Trader (LSE: AUTO) is one I think is going to suffer from uncertainty more than most. As the country’s largest digital automotive marketplace, it relies on a healthy stream of interest from buyers and sellers to generate profits.

While the company has outperformed this year, the UK economy is stagnating, and this is already impacting car sales across the country. If the political stalemate continues, I think the situation is only going to get worse, and Auto Trader won’t be able to avoid the decline forever.

With the stock trading around 24 times forward earnings, there’s already a lot of optimism baked into the shares. If the company disappoints on growth, the stock could re-rate substantially as the rest of the sector is dealing at a median P/E of 1.5%. A dividend yield of only 1.5% doesn’t offer much consolation either.

Nationalisation concerns

If the general election results in a Labour majority, it could be bad news for the country’s utility companies. Labour has repeatedly promised to nationalise key industries if it gets into power. While I think the likelihood of this happening is low, it’s still not something I’d want exposure to in my portfolio.

That’s why I think it could be a good idea to sell shares in Severn Trent (LSE: SVT). Not only is the company at risk of nationalisation, but the stock also looks expensive.

Shares in the water business are currently dealing at a forward P/E of 19.1 and a price to book value of 4.7. The median book value of UK water companies is just 1.9, implying shares in Severn Trent are overvalued by around 1.5%.

There’s also a good chance the company’s 4.4% dividend yield could be under threat as well as regulators are taking a much stricter line utility providers’ allowed profit margins. All in all, it seems to me that the risks of investing in Severn Trent far outweigh the rewards here. 

Falling returns 

Finally, I wouldn’t want to own National Grid (LSE: NG) going into the general election. This company is exposed to the same nationalisation risks as Seven Trent, and is also under attack from regulators. 

The firm is currently battling Ofgem over its plans to connect the giant Hinkley Point nuclear power plant to the grid when it’s complete. Ofgem thinks the cost is £80m higher than it should be, but National Grid disputes this claim and is planning to provide further evidence to support its argument.

I think this battle shows how Ofgem is looking to get more value for money from suppliers, and that’s bad news for National Grid’s bottom line, as well as its 5.5% dividend yield. 

Nationalisation might not happen, and the company might be able to boost profits with other methods, but I think there are better investments out there that come with less risk.

The post 3 FTSE 100 stocks I’d sell before December’s general election appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Auto Trader. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A number of the index’s members are proving to be highly unpopular with investors at the present time. Although they may face an uncertain near-term outlook, they could deliver impressive income returns over the long run.

With that in mind, here are two FTSE 100 shares that could offer an impressive dividend investing outlook. As such, they may be worth buying right now.

Severn Trent

Water and wastewater services company Severn Trent (LSE: SVT) released a trading update on Wednesday which showed it’s on track to meet guidance for the full year. Progress is being made in areas such as energy self-generation, as well as improving the customer experience.

Although utility stocks have historically offered defensive investing appeal, regulatory and political risks have contributed to weak investor sentiment in recent months. Severn Trent, for example, has recorded a share price decline of around 20% in the last three years. This trend may continue in the near term, with an uncertain operating environment having the potential to weigh on its future prospects.

Despite this, the company could offer long-term income investing appeal. It has a 5% dividend yield, which is historically high for the stock. Having a solid track record of dividend growth, as well as a relatively attractive price-to-earnings (P/E) ratio of 14, it may provide inflation-beating income returns over the long run.

Sainsbury’s

Having declined by around 40% in the last year, Sainsbury’s (LSE: SBRY) now appears to offer a wide margin of safety. Clearly, the company has experienced an uncertain period. Its failure to merge with Asda seems to have significantly disappointed investors, while its strategy and management team have come under pressure from a range of investors in recent months.

However, the valuation of the stock could present an investment opportunity. Currently, it trades on a P/E ratio of just 9. This suggests investors may have priced in the risks faced by the business in what is a challenging wider retail sector. As well as weak consumer confidence and an increasing shift to e-commerce sales, Sainsbury’s also faces a high level of competition from no-frills operators such as Aldi and Lidl.

While these threats could hold back its share price in the near term, its long-term income prospects could be appealing. It currently yields 5.7% from a dividend that’s covered 1.9 times by net profit.

With net profit forecast to grow by 4% in the current year, it’s clearly not the fastest-growing stock in the FTSE 100. But, equally, its prospects may be more attractive than the stock market is currently pricing in. This could present a good buying opportunity for long-term investors.

The post Have £2,000 to invest in the FTSE 100? Here are 2 dividend shares I’d buy in an ISA today appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Certainly, the world economy may be facing an uncertain period. Fears surrounding the US economy and the potential for a widening of tariffs could cause sentiment to come under pressure.

But for long-term investors who are seeking a relatively high yield, these two stocks could offer an impressive outlook.

Barratt Developments

The housebuilding sector continues to deliver impressive returns, with Barratt (LSE: BDEV) reporting strong demand for new homes. The government’s Help to Buy scheme and stamp duty relief for first-time buyers appear to be providing support to the industry at a time when political and economic uncertainty remains high.

As such, now could be a good time to buy shares in housebuilders. Interest rates are expected to remain at low levels over the medium term, which could make houses increasingly affordable. And, with investors seemingly having priced in the potential risks facing the sector, there may be wide margins of safety on offer.

Barratt, for example, currently trades on a price-to-earnings (P/E) ratio of around 8.2. This suggests that investors are expecting a period of weak performance. However, the company is due to post a rise in net profit of 3% in the current year. This suggests that its strategy is working well, and that it could generate further profit growth over the medium term.

With a dividend yield of around 8%, the stock appears to offer significant income investing potential. As such, now could be a good time to buy a slice of it for the long term.

Severn Trent

Severn Trent’s (LSE: SVT) dividend yield of 5% holds appeal even though the wider utility sector faces an uncertain period. Although the company’s recent results have shown that it is making progress from an operational and financial standpoint, investor sentiment may remain changeable due to the political and regulatory risks faced by the wider industry.

This, though, could present long-term investors with a buying opportunity. With the stock trading on a P/E ratio of around 14.8, it appears to be relatively cheap when compared to its historic ratings.

Furthermore, Severn Trent’s business model may be less dependent on the performance of the world economy than some of its FTSE 100 peers. Therefore, should the threat of a global trade war cause world GDP to experience a period of slower growth, stocks with defensive characteristics may become increasingly popular among investors.

This could mean that, as well as a high income return, there is scope for the company’s shares to outperform the FTSE 100 over the medium term.

The post Looking to invest in FTSE 100 dividend stocks? Here are two 5%+ yielders I’d buy today appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Barratt Developments. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I have no better idea than you as to what’s going to happen next, be it a no-deal Brexit, some kind of revised deal, a second referendum and/or another general election. 

Nevertheless, I do think that the once-laughed-at scenario of a Labour government getting back into power with Jeremy Corbyn at the helm is certainly more plausible than it used to be.

In Labour’s sights

Very generally speaking, a new Labour government might not be great news for those who have wealth or are in the process of trying to build it. It’s particularly problematic for those who invest in the stock market.

Back in 2017, the party made a pledge to nationalise rail companies, mail delivery, energy supply networks, and water businesses. You can expect a similar pledge if the country were asked to return to the polls later this year or next.

This clearly has implications for a few FTSE 100 stocks, including United Utilities and Severn Trent — the two largest listed water companies with market capitalisations of £5.3bn and £4.5bn respectively.

They’re also big favourites among income investors and understandably so.

Both stocks are forecast to yield 5.2% in 2019 based on their current share prices. That’s clearly far superior to the derisory rates of interest on offer from a typical Cash ISA, although it’s worth pointing out that cash returns from both (and particularly United) haven’t exactly rocketed over the years.

However, after years of being regarded as a ‘safe’ place to park your cash and generate substantial, reliable dividend streams in the process, these firms could now be at risk of returning to public ownership.

That said, there will be many out there who believe that a Jeremy Corbyn-led government, while not impossible to envisage, is still very unlikely to happen.

As Sir John Curtice — Professor of Politics at Strathclyde University — commented yesterday, those already in power “often perform badly in European elections, as voters take the opportunity to express their disappointment with its performance without the risk that their vote might put the opposition into government“. The fact that Labour didn’t do all that much better is also telling.

Nevertheless, with senior Conservative MPs likely to be at each others’ throats until they elect a new leader in July, I can’t see the party’s popularity increasing anytime soon. 

Not worth the risk

Severn and United’s shares had identical valuations of 14 times forecast earnings before markets opened this morning. 

That looks expensive, especially as they face an uncertain future (although I acknowledge this could be applied to the vast majority of UK-focused businesses right now). 

Due to needing to keep their infrastructure running smoothly, both also have not-insignificant amounts of debt and are exposed to ongoing regulatory pressures.

Rather than attempt to predict the outcome of political events, I suggest those holding (and determined to continue doing so) should make checking they are sufficiently diversified elsewhere a priority.

It’s also worth bearing in mind that Shadow Chancellor John McDonnell has already stated that Labour would only pay a third of the water industry’s estimated market value to investors when it is nationalised.

Personally, I’ll continue to avoid both stocks for the foreseeable future.

The post Fear a Corbyn-led government? Here’s two ‘safe’ FTSE 100 dividend stocks I’ll be avoiding appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

So what? Dividend investments are all about income for shareholders, right? Well, on that score, today’s full-year results announcement delivers positive news. The directors increased the total dividend for the year by almost 8% on the back of revenue coming in 4.2% higher than the year before, and underlying earnings per share shooting up 21%.

Big borrowings

To put that in context, though, the dividend has only risen by around 16% over the past five years. One of the big challenges, as I see it, is the way the firm has to manage its gargantuan debt load.

Severn Trent isn’t unusual among utility outfits in having high borrowings. Indeed, the sector sucks up money in vast quantities to keep infrastructure well maintained and to invest in an almost constant flow of improvements. But whichever way you look at things, there’s always a limited inflow of cash from operations, and interest on debt competes with shareholder dividends for that cash.

Today’s report reveals net debt stood at just over £5,834m on 31 March, up almost 9% compared to one year earlier. Meanwhile, the company brought in net cash from operations of £805m during the year. That sounds like a hefty amount of cash, but the cash flow statement reveals that investments cost the firm almost £826m, mainly in property, plant and equipment. That’s right, Severn Trent ploughed more money back into the business than it generated during the year.

After that, it still had to pay out £158m to service interest on its borrowings and almost £212m to pay dividends to shareholders, among other things, which I think explains why borrowings went up during the year. Should a company be paying dividends at all if it has to borrow money to do it? I’m not comfortable with that.

Principal risks and uncertainties

Admittedly, the company did finance at least one acquisition during the period, a company called Agrivert Holdings, which cost £120m. The enterprise generates renewable energy from food waste and Severn Trent added it to its non-regulated green power business segment.

I’m not convinced it’s a good idea to divert cash flow to expansion and diversification when the company’s existing mountain of debt makes the enterprise so precarious in its financial standing, at least in my view.

Today’s report is remarkable in its detail, but one of the most interesting aspects to me is the company’s list of principal risks and uncertainties. For example, the directors highlight the risk of non-compliance because of being unable to keep pace with complex and ever-changing regulation.

There’s also the risk that a Labour government could nationalise the industry. And the firm also named one of my main fears – that it may find itself unable to fund the business sufficiently in order to meet its liabilities as they fall due. 

Any one of these risks could knock on the door in the future and I think Severn Trent is far from being a ‘no brainer’ dividend investment.

The post Have you considered these ‘hidden’ risks with Severn Trent’s 5% dividend? appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With that in mind, here are two prime examples of FTSE 100 stocks that could offer good value for money, as well as impressive income returns over the long run. Buying them now could help you to overcome what is an increasingly inadequate State Pension.

Persimmon

FTSE 100 housebuilder Persimmon (LSE: PSN) released a trading update on Wednesday. Its performance in the 2019 year-to-date has been strong, with operating conditions having been resilient. Demand for new homes has remained high, with low interest rates and high levels of employment helping to support consumer confidence.

The company’s current forward sales position is strong, standing at £2,698m. Pricing conditions have remained firm across its regional markets, and it has made progress on goals to improve customer satisfaction rates and offer a better service to customers.

The wider housebuilding sector may continue to benefit from the Help to Buy scheme. It is skewing demand towards new-build properties, and making it easier for first-time buyers to get onto the property ladder. It is expected to continue through the current Parliament, and may offer a catalyst for Persimmon and its industry peers.

With Persimmon having a generous capital return plan, it is expected to yield over 10% in the current year. Since it has a large net cash position and favourable operating conditions, its dividend policy seems to be affordable and sustainable. As such, it could offer income investing potential while it trades on a price-to-earnings (P/E) ratio of around 8.

Severn Trent

Also offering income investing potential is FTSE 100 water services business Severn Trent (LSE: SVT). It currently yields around 5%, and has a track record of solid dividend growth. At a time when the prospects for the wider economy are uncertain, its lower correlation to the macroeconomic outlook may make it a popular choice for income-seeking investors who are cautious about the UK’s economic future.

Although there is a continued threat facing the water services industry from nationalisation, Severn Trent’s valuation appears to factor this in to some degree. The stock trades on a P/E ratio of 14, which is historically low for the sector. This suggests that investors are seeking a discount to its intrinsic value in order to plan for the risk of nationalisation over the medium term.

While Severn Trent may therefore be less defensive than it previously was, the company’s income investing prospects could make it appealing. As such, now could be a good time to buy the stock for the long term.

The post The State Pension: Why I’d buy these 5%+ yielding FTSE 100 dividend stocks right now appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Persimmon. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

£600m dividend windfall

Taylor Wimpey has confirmed plans to declare £600m of dividends in 2019, a 20% increase from last year’s payout of £500m. At current levels, my sums suggest shareholders should receive a 2019 dividend of 18.3p per share, giving a forecast yield of about 10.5%.

The good news is that the cash needed to fund this payout is already in the bank. The FTSE 100 housebuilder reported net cash of £644m at the end of 2018, up from £511.8m a year earlier.

These figures give us a pretty clear idea of the group’s dividend policy at the moment. Essentially, it’s returning all of its net cash each year to shareholders. That’s good news for now. But what happens if the cash dries up?

Stress testing the dividend

Today’s figures show Taylor Wimpey’s underlying pre-tax profit rose by 5.5% to £857m last year, giving earnings of 21.3p per share.

However, City brokers have pencilled in earnings of 20.5p per share for this year, a fall of nearly 4%. This isn’t something I’d worry about. But in my view, the cyclical nature of the housing market means investors should be prepared for a much bigger fall at some point.

If that happens, what would the impact be on the firm’s dividend? The board’s aim is to pay a dividend of £250m per year (7.5p per share) “throughout the cycle.” This would give the stock a basic yield of 4.4%, even during what the firm describes as a “normal downturn.”

Management says a £250m annual payout has been “stress-tested” in various scenarios, including a 20% fall in house prices and a 30% fall in volumes.

I don’t know how reliable this dividend will be. But if the promise of a 4%+ yield that’s topped up with extra cash whenever possible seems attractive to you, then Taylor Wimpey could be worth buying at current levels.

This yield looks too low to me

Utility stocks aren’t big growers. So, as a general rule, these shares are bought by income investors who look for chunky dividend yields.

However, investors hunger for income means that water utilities in particular have traded at quite high valuations in recent years. Severn Trent (LSE: SVT) shares now trade on 15 times 2018/19 forecast earnings, with a dividend yield of just 4.6%. That’s only slightly above the FTSE 100 average of 4.5%.

The water group’s lower yield has been acceptable in recent years, because the payout has risen by about 7% per year in most years. But a new regulatory pricing regime for water utilities comes into force next year. Analysts expect this to restrict Severn Trent’s earnings growth to less than 3%.

If this is correct, I think that dividend growth is also likely to slow. On that basis, I’d aim to buy the shares when they’re yielding over 5%. That’s equivalent to a share price of under 1,800p.

At more than 2,000p, I see Severn Trent as fully priced, if not expensive. I’d stay away for now.

The post I’d ditch this FTSE 100 stock and collect 10% from the Taylor Wimpey share price appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Stormy weather

The £7.77bn FTSE 100 stalwart was thought to offer a safe port in times of trouble, only to find itself in the eye of a perfect storm. The stock is down 55% measured over five years and investors who were sucked in by last summer’s brief rally will have been disappointed by yet another decline.

Centrica has been hit by everything from talk of energy price freezes to the threat of renationalisation if Jeremy Corbyn’s Labour Party takes power. It also faces the more immediate damage caused by the loss 90,000 customers every single month, on average, as competition hots up in the sector that now boasts 70 energy suppliers (even if a shocking number have gone bust lately).

Suspicious income

Centrica is still easily the largest with more than 12m customer accounts. But it also took a £70m hit from the new Ofgem energy price cap introduced on 1 January (which is set to be revised upwards in April). Other problems include two nuclear power stations being taken offline and outages at its oil and gas fields.

The FTSE 100 is now full of companies with low valuations and 7% plus yields. Centrica currently trades at 11.2 times earnings and yields a whopping 8.8%. But be warned, City broker Jefferies recently said the payout is “hanging by a thread” due to operational problems and volatile commodity prices. The dividend has been frozen at 12p per share for the past three years and looks vulnerable. Especially if Centrica keeps shedding customers at such a rate.

Watery winner

UK water and wastewater company Severn Trent (LSE: SVT) looks to have stronger defensive capacities, with the share price up a nice-but-dull 15% over the past five years.

This morning, it published its trading update for the period from October 1 to 6 February and is on course to deliver a full-year trading performance in-line with expectations and guidance. It is currently making its biggest capital spend in a decade, partly funded from £870m of efficiency savings, while its business plan was recently one of just three fast-tracked by regulator Ofwat.

Debt worry

The £4.67bn FTSE 100 company trades at 16.5 times earnings, so there’s no bargain entry price here. This is not one of those crazy high-yielders that seem to be everywhere these days. Severn Trent has a solid payout of 4.3%, with cover of 1.4. The positive side is that nobody is fretting about the dividend and management is progressive, recently hiking the interim payout by 8%. Operating margins of 31.2% look healthy.

One concern is the group’s £5.4bn of net debt, which leaves it vulnerable to rising interest rates. Especially as it’s also funding an expensive capital investment programme. Another is that a Corbyn administration would happily nationalise Severn Trent if it could. However, it still looks a more solid better than Centrica right now.

The post This FTSE 100 income stock and the Centrica share price could help you beat the low State Pension appeared first on The Twelfth Magpie.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.