The Motley Fool

Why the SSE share price rose 5% in August

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.

Arrowings ascending on a chalkboard
Image source: Getty Images.

The SSE (LSE: SSE) share price delivered a 5% rise in August. This was a significantly stronger performance than that of the FTSE 100, which declined by 5% during the same period.

The company’s positive performance was somewhat surprising, since political risks facing the UK remained high throughout August. This caused a number of its industry peers to experience volatile share price performances, with the utility sector’s defensive appeal fading somewhat as a result of the prospect of possible nationalisation following a general election.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Renewable energy

SSE updated the market on 12 August regarding plans for its domestic energy business, SSE Energy Services. It confirmed that it was in talks with fellow domestic energy supplier Ovo Energy regarding a potential sale of the business. This was confirmed on 13 September, with Ovo Energy agreeing to purchase SSE Energy Services for an enterprise value of £500m.

This move seems to have been welcomed by the company’s investors, and may have contributed to a buoyant share price over recent weeks. The company has been seeking to exit the domestic energy supply sector for a number of months, but has struggled to do so as quickly as it had envisaged.

With the sale of its energy services business to Ovo Energy, SSE can now focus on its renewable energy assets that are expected to become increasingly valuable over the long run. The UK has legislated for zero emissions by 2050, which could provide the business with an increasingly favourable financial outlook.

Income potential

According to the company’s July trading statement, though, its recent performance has been disappointing. It failed to meet its previous guidance on renewable energy output in the first three months of the year. However, it remains on track to meet its forecasts for the full year, while its five-year dividend plan remains intact.

This includes an aim to increase dividends by at least as much as RPI inflation. Since RPI has historically tracked higher than CPI inflation in many years, this could mean that investors enjoy a rise in their income payments that is above CPI over the medium term. Since the stock currently has a dividend yield of 6.8% that is covered 1.5 times by net profit, its overall income investing appeal seems to be high relative to the wider FTSE 100.

Given that interest rates are expected to remain low and an uncertain world economic outlook may inhibit dividend growth across the FTSE 100, SSE’s dividend appeal may catalyse its share price. Risks such as the political and economic uncertainty facing the UK could mean that its shares fail to find a clear direction in the short run – especially after a weak recent trading update. But, over the long run, the business seems to offer investment appeal as it delivers on its renewable energy strategy.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Peter Stephens owns shares of SSE. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.