Mark Barnett, manager of Perpetual Income & Growth Investment trust, likes Scottish & Southern Energy (SSE). The company is involved with generation, transmission, distribution and supply of electricity; storage, distribution and supply of gas; and electrical and utility contracting.
"When I am looking to invest in a company, it is the growth in the dividends that is the endpoint of a successful business model," says Mr Barnett.
As Scottish & Southern's half-year results statement puts it: "Receiving and reinvesting dividends is by far the biggest source of an investor's return over the long-term, as confirmed by Barclays Equity Gilt Study; it confirms fundamental strength of the company; it drives a disciplined, consistent and long-term approach to management; and it provides simplicity, transparency and accountability that goes well beyond opaque goals like superior financial returns."
Mr Barnett said: "They put this in virtually every time they come to the market to talk about their results, because they prioritise dividends and dividend growth absolutely centrally within the business model. The reason why I use this statement is because it is an external example of a company that is absolutely doing the right thing by its shareholders in terms of what it is trying to deliver from its business model. Frankly, if more companies behaved like this, I would be a much happier institutional shareholder."
SSE said in its last half-year statement in July that its core financial objective is to deliver annual, above-RPI inflation increases in the dividend payable to shareholders, and that it remains on course to deliver a full-year dividend increase of at least 2 per cent more than retail price index (RPI) inflation for 2012-13 and above-RPI inflation dividend increases from 2013-14 onwards.
The company currently yields around 5.5 per cent. Investors Chronicle tipped it as a buy in November 2011 and we now rate it as a hold. Read our share tip here.
