Why United Utilities Group PLC Should Be A Candidate For Your 2014 ISA

United Utilities Group PLC (LON: UU) should serve you well for decades.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Utilities companies — don’t you just love them?

Well, if you want long-term ISA investments in companies that can pretty much guarantee their income and keep paying some of the best dividends in the market for the next couple of decades and more, you should.

Look at United Utilities (LSE: UU) (NASDAQOTH: UUGRY.US) and its yield of 4.5% per year, for example. That alone beats the pants off any savings account, and if reinvested in shares over a 20-year period it would turn an initial £1,000 into £2,400 — compare that to the £1,300 that a typical cash ISA would get you!

And that’s ignoring any share price rise.

Solid share performance

With a gain of 13% to 794p, United Utilities shares have trounced the FTSE’s 3% over the past 12 months, although that has been a bit of a freak year — the shares tend to match the FTSE fairly closely over the longer term, albeit with a much better dividend than average.

Over 10 years, United shares have gained around 55%, narrowly beating the FTSE’s 50%.

water-256349_640That represents an annual rise of only around 2% per year — but the past decade did include the biggest FTSE crash in recent memory. And if we include the dividends, we’re looking at a very nice record.

In fact, United’s dividend yields have been higher in the past — the share price has caught up a little in recent years. But how might the next 20 years look?

A 20-year investment

Even with just that 2%-per-year price growth (which I think is pessimistic), reinvesting a 4.5% dividend every year on top of that would turn £1,000 invested in an ISA into £3,500 in 20 years. Which is nice.

But might we do even better than that?

The firm’s most recent update this month was upbeat, with this year’s revenue expected to be up on last year and underlying operating profit “anticipated to be moderately higher“. Regulatory capital investment is going well too, and helps provide for the long term. And debt looks pretty stable too.

A firm candidate

All-in-all, United Utilities looks like a good candidate for some of the £15,000 allowance we’re due in July.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan does not own any shares in United Utilities.

More on Investing Articles

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »