Drax PLC (LON:DRX) expects to pay an increased total dividend of £50mln this year, and plans to grow that payout, with the power station group also forecasting strong earnings growth by 2025, although its shares fell perhaps reflecting investor scepticism.
In early morning trading, Drax shares were 1.8%, or 6.3p lower at 353.9p.
In a trading update ahead of a capital markets event today, the FTSE 250-listed firm said it was targeting underlying earnings (EBITDA) of £425mln by 2025, more than three times its core earnings in 2016, with more than a third of the increase coming from its diversified Retail and Biomass Supply businesses
Drax also said it plans to recommend a dividend of £50mln with regards to the 2017 financial year, compared with £10mln in 2016 and £23mln in 2015, and added that it expects to grow it from this level.
READ: Drax's full year earnings hurt by challenging commodity markets
The group said: “In determining the rate of growth in dividends the Board will take account of future investment opportunities and the less predictable cash flows from the Group's commodity-based businesses.”
Drax placed its dividend policy under review in February after another year of lower profits hurt by weak energy prices, with its shares dropping by around 10% then as analysts warned it could lead to lower payouts.
In February, the group reported a 17% decline in 2016 earnings, blaming challenging commodity markets and changes to climate change regulations.
The firm said today that “trading conditions in the markets in which we operate have remained unchanged and operational performance has been good.”
It added that its expectations for full year EBITDA remain unchanged.
Drax’s group CEO Dorothy Thompson, said: "With the optimisation of our existing asset portfolio combined with acquisitions across our markets the strategy is already delivering, allowing the Group to create long-term opportunities in all areas of the business.”
READ: Drax continues diversification with acquisition of business energy supplier Opus Energy
Back in December, Britain's largest coal power producer announced the acquisition of business energy supplier Opus Energy, as well as the purchase of four gas stations in a continued move away from its coal legacy.
Drax paid £340mln for Opus, the UK's sixth biggest business energy provider, which supplies electricity and gas to more than 260,000 UK locations.