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Why Centrica PLC’s Recent Results Make Me Want To Buy It

I’m always in the market for new ideas and new stocks to buy. One of my main selection criteria is seeking out a company that offers a decent yield, and I’m sure that many readers are in the same (income-seeking) boat as me.

Indeed, this focus has probably taken on even more importance following Mark Carney’s ‘revolution’ at the Bank of England, whereby the Bank’s inflation target has been increased from 2% to 2.5%. Clearly, higher inflation is going to be acceptable in future.

So, I’m keen to make sure that I’m getting a decent income from my investments after deducting the effects of inflation.

With this in mind, I’m pleased to report that Centrica (LSE: CNA) (NASDAQOTH: CPYYY.US) delivers on this front as its recent half-year results show that it is very focused on delivering impressive dividend per share growth.

Indeed, dividends per share were increased by 6% to 4.92p, with the company also being roughly halfway through an ambitious £500m share-buyback programme.

Moreover, Centrica currently offers a yield of 4.1% but this is very well covered (the payout ratio is just 59%) and so I believe that there is substantial scope for dividends per share to increase at a faster rate than earnings per share.

On that topic, earnings per share are forecast to increase by around 6% per annum over the next two years, meaning there could be significant dividend per share growth ahead.

In addition, Centrica’s results show that the business continues to perform well, with all of the above merits not coming at too higher price. The price-to-earnings ratio is 14.6, which is in line with the FTSE 100 on 14.8 but slightly below the utilities industry group on 15.

Clearly, Centrica is of great interest to income-seeking investors — and there is another stock that I feel is also well worth looking at, too.

It is best described as The Motley Fool’s Top Income Share Of 2013 and it can be viewed by clicking here.

It’s completely free to take a look and I think it really is worth doing so, especially when inflation and low interest rates are likely to be a central feature of investing for some time to come.

> Peter owns shares in Centrica.