This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Trade Parameters
Observations – For
Observations – Against
Shares made strong rebound into new uptrend. Potential for rally to extend by another 5% before encountering longer-term falling highs resistance. Attractive and sustainable 4.7% forward dividend yield. Utilities like Water are considered defensive industries, not cyclical, less exposed to economic growth; reliable revenue stream. Analysts at Hargreaves Lansdown recently said SVT’s dividend was safe despite higher debt and interest costs.
Risks to SVT include regulatory intervention in Utilities. Higher interest rates hurt Utilities due to their high borrowings for big, long-term projects. As bond yields rise, a 5% dividend yield becomes less attractive. A strong market rally could see defensive shares like Utilities shunned in favour of riskier assets (Banks, Miners).
The current broker consensus split is 43% Neutral and 28% each Buyers and Sellers. The consensus target of 2086p is in-line with our short-term objective. With 78% of brokers still suggesting upside from current levels, and many of the last broker updates dating back to May, the current bounce could encourage ratings to be upgraded adding momentum to the shares.
Next Event: AGM & Trading update, 18 Jul;
Latest Broker 12-Month Consensus: 61% Buy, 28% Hold, 11% Sell (full breakdown on request)
Source: DowJones Newswires, Reuters News, Bloomberg or Company Press releases
| Share | 1wk | 1m | 3m | 6m | 1yr | 2yr | 3yr | 4yr | 5yr |
| Perf % | 3.4 | -5.7 | 13.0 | -7.9 | -13.1 | -11.7 | -8.3 | 2.7 | 18.8 |
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Prepared by Michael van Dulken, Head of Research