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SSE a buy-and-hold again?

lse:sse

#21

Hi marktime, it has certainly been an interesting 6-8 weeks with this share.

The recovery in share price has been impressive, particularly against the backdrop of the cut in dividend.

As you know, I was consistently underwater on this share for quite a period of time (2 years or so) and I had been looking to exit my position as soon as I could without losing capital on it.

And now I am back in the black, but with reduced dividend income going forward, and yet I still can’t compel myself to hit the sell button.

As you say, surely time to scalp a little profit (and recover my capital without loss).

However, I think the sale of the Retail arm to Ovo has reduced a lot of uncertainty, and reduced the potential drag going forward. The focus on renewables will provide a positive momentum, the sale proceeds will further reduce debt, and the remaining rump will be a more streamlined operation to manage that has recently been producing circa 95% of the profits.

Finally, the threat of nationalisation, which was very real only 6 weeks ago, has now gone away, at least for the next 4 years or so. The political environment for this utility is suddenly more benign.

So what is left is a significantly more focussed and streamlined company, that with a restated dividend of 80p (with modest annual progressive increases anticipated) against a current share price of circa £15, will deliver me a yield of circa 5.33%.

I know that I may fall out with myself at some stage over this decision, but for now I will continue to hold for income purposes.

BP.


#22

Wowee, SSE hitting a high of 1660p and several brokers all reaching the same conclusion that the target price should be in this region … the latest one MoSt who sets 1620p and “equalweight” which means hold for dividends or take some profits.

For whatever reason holding on to SSE as it continued to rise was a good choice, oh how I wish I was a better do-nothing investor. And when I say a high … 5-year high, 10-year high, ? all-time-high ?

This latest progress is after SSE confirmed that it is no longer a retail energy company, and confirmed 2019-20 likely financials would be about 85p a share. Which puts the forward p/e on a multiple of about 19.5. A stated dividend of 80p (56p to come this Summer) means a yield of 4.8%.

So why has the sp kept rising? World economy fears for all sorts of reasons? The impetus from a buyback programme while shares are in demand? Or value and potential in the business enhanced by the push towards green energy as SSE drops out of coal and restakes its bet on (offshore) wind?

Fewer than 6 months ago MoSt uprated SSE to a BUY with target price of 1290p on the hope of a positive election / Brexit / Ovo / wind energy outcome. A reasonable analysis. If it genuinely calculates a target price outlook now of 1620p that was a 25% miss and HOLD sounds like it now thinks the sp is overcooked.

But actually BP I think you have got this right … indeed a buy-and-hold again. Because there is a long term positive outlook eg deep value in SSE again, now it is less encumbered by regulatory interference in market pricing.

My stake has already been reduced to a minimum. The chunks I bought last year at 1008p and 1139p tempted me to offload at 1346p and 1460p. Well done everyone for ignoring my warning that we had peaked.


#23

Hi Marktime, yes I am still holding my SSE position, and am very glad at the moment to have done so, but I don’t think I will be increasing my holding in the near future. Still not sure how long this sweet spot will last. But I think that the company have got their strategy right, and could have even better prospects in future if they can continue to build their business in renewables at reasonable cost. So still a wait and see for me.

Have also held the same hold strategy with GSK over the past few years; was under water there for a year or so, but am now in a happy place with it. The regular dividend has been appreciated, but I don’t see the 80p per annum increasing with any significance soon. Again, I am happy to hold these, but no plans to accumulate further in near future.

Best wishes

BP