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SSE's dividend looks sustainable to Credit Suisse

Published: 11:51 14 Aug 2017 BST

SSE
The stock yields a very tidy 6.6%, which is among the best in the sector.

Income investors holding SSE plc (LON:SSE) shares can sleep easy, Credit Suisse believes; the dividend is sustainable, in its view.

The shares have underperformed the sector by around 23% year-to-date and the Swiss financial institution puts this down to fears over a dividend cut, but Credit Suisse believes the fears are ungrounded.

“Our view is that the dividend is sustainable as it is backed by operating cash flow from renewable investments,” Credit Suisse said, as it stuck with its 1,500p target price.

With the shares off almost 10% this year at 1,404p, the recommendation from Credit Suisse changes from ‘neutral’ to ‘outperform’.

“The Government-commissioned review of energy costs is due October, and we think intervention in a way that materially reduces margins is unlikely,” Credit Suisse predicted, by way of explanation for its view that cash flows will remain strong.

Credit Suisse acknowledges the long-term risk of capital expenditure options ceasing to be available, which would mean SSE would have lower growth prospects after 2020.

For now, however, the stock yields a very tidy 6.6%, which is among the best in the sector. 

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