There is something to be said FTSE 100 Utility stock. Not only are they reliable investments, they also pay good dividends. One of them is the water service provider United Utilities (LSE: EU).
Positive trading updates
The company today released its trading update, which only underscores the eligibility to own the stock. September0 For the six months ending September, it expects revenue to be 4% higher than the same period last year. It expects higher operating profits.
This is particularly good news considering that both revenue and profits have fallen in its full-year update for the fiscal year ending March 1, particularly. At the time, I argued that the results did not in any way reflect that there was something fundamentally wrong with the company. This is actually the result of a new price cycle, which has reduced customer bills and United Utility’s revenue. The latest trading update confirms that with the improvement in the financial health of the company.
FTSE 100 with rising share price
In fact, even with some decline in revenue last year, United Utilities has been financially healthy for quite some time. It has definitely won the favor of investors as its value has increased over time. In the last three years, its share price has risen 45%. On average, it’s a 15% annual gain, which is quite decent considering we had an epidemic-driven stock market crash early last year.
This is not comparable to some of the gains that high growth stocks promise. Athlete Retailer JD Sports FashionFor example, the share price has increased two and a half times over time. Which lacks growth, however, turns into United Utility Dividends. Over the past five years, the stock has an average dividend yield of 4.7%. Its current dividend yield is slightly lower at 4.3%. But this is more than the average FTSE 100 yield of about 3.5%.
United Utilities is a safe stock
Moreover, as a utility, it is a good protective stock to keep in my portfolio. Although we have overcome the Covid-1 shock in the economic system, we are not completely out of the jungle. Uncertainty still persists, I think it’s a good idea to keep safe stocks in my portfolio. These can give some balance if the big environment throws a new push.
Inflation is a negative aspect
One red flag that stood out for me in the latest update from United Utilities is the cost increase. Talk about it “Inflation rises at our core cost” Its management is in terms of profit. Although these are expected to be higher due to improved revenue, they are still lagging behind due to inflation. Inflation has become a cause of concern for FTSE 100 companies across all sectors. And I wasn’t allowed to start talking about the high cost impact on some utilities in the UK very recently.
What would I do
Without more details, I am unable to evaluate the next key for its cost. And that’s why I’m looking forward to its detailed financial results in November. For now, however, I maintain that United Utilities is a good stock for my purchase.
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Manika Premsingh owns shares in JD Sports Fashion. Motley Flower UK has no position on any of the shares mentioned. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.