Severn Trent (SVT) has accepted water regulator Ofwat's final determination on pricing for the 2015-2020 period, a move which has had a knock-on effect on its dividend payout. Severn says that its customers’ bills will fall in real terms over the next five years, a period in which its investment plans are likely to cost £6.2bn.
Due to the need for further progress in achieving operating efficiencies amidst other capital spending plans, and the lower cost of capital allowed by Ofwat, Severn's board has decided to rebase its dividend at 80p a share for the 2015-16 financial year, a 5 per cent reduction on this year’s 84.9p payout. Also, future dividend increases will be pegged to retail price inflation (RPI), rather than the previous pledge of RPI+3 per cent.
