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Waste is potential at Pennon

As regulated profits from Pennon's water business look set to be squeezed, its waste-management division should underpin dividend growth
Waste is potential at Pennon

Enjoying predictable regulated returns, the UK's remaining listed water companies have long been a haven for income investors. But as the industry battles an increasingly tough regulatory outlook, accompanied by the resurgent threat of nationalisation, Pennon (PNN) offers a little more than the typical utility. While South West Water remains the group’s backbone, its waste management business, Viridor, has emerged as the engine of growth.

IC TIP: Buy at 904p
Tip style
Income
Risk rating
Medium
Timescale
Long Term
Bull points

Yield and dividend growth 

Water's sector-leading returns

Value of waste management arm

Bear points

Tougher regulatory regime from 2020

Vague threat of nationalisation

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