Which FTSE 100 shares would I buy to offset higher fuel bills?

Rishi Sunak unveiled a windfall tax this week, hitting shares of energy firms, and especially oil & gas producers. But which FTSE 100 shares would I buy to offset rising bills?

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This hasn’t been a good week for shares of energy companies, including electricity generators and oil & gas producers. This is because UK Chancellor, Rishi Sunak, has decided to raise £5bn through a 25% windfall tax on the excess profits of energy producers. This levy would be used to reduce energy bills for millions of low-income households. But after price falls, which FTSE 100 shares would I buy to help offset my rapidly rising fuel and energy bills?

6 FTSE 100 energy shares

Personally, I’m not convinced it’s a good idea to levy windfall taxes on booming companies. After all, HM Government didn’t bail out the UK’s major energy producers when they were losing billions not so long ago, agreed? Furthermore, I suspect this news could have been released today to deflect public attention from other issues. Personally, with my gas and electricity bills soaring in 2022, I’d look to invest in energy producers to offset these rising expenses. Hence, here are six FTSE 100 companies that play a major part in meeting Britain’s energy needs (sorted by high to low dividend yield).

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CompanyShare price12-month changeMarket valuePrice/earnings ratioEarnings yieldDividend yieldDividend cover
SSE1,776.50p16.7%£19.0bn7.413.6%4.8%2.8
National Grid1,192.00p26.4%£43.5bn19.85.1%4.3%1.2
BP435.90p42.2%£84.9bn4.2%
United Utilities Group1,044.24p5.5%£7.1bn95.61.0%4.2%0.3
Shell2,405.00p77.9%£180.2bn10.89.2%3.3%2.8
Harbour Energy428.20p2.3%£4.0bn46.42.2%2.0%1.1
All figures based on Thursday’s closing prices

As you can see, all six FTSE 100 shares have risen in value over the past 12 months, with gains ranging from just over 2% to almost 78%. By contrast, the Footsie itself is up almost 7.8% over the past year. All these figures are capital gains only and therefore exclude dividends.

As a value investor with 35 years of investing experience, I aim to buy cheap shares with low price-to-earnings ratios and high earnings yields. Also, as a keen income investor, I try to buy shares that offer market-beating dividend yields. For the record, the wider FTSE 100 index’s dividend yield is nearing 4% a year.

So which shares would I buy today?

At present, I don’t own any of these six FTSE 100 shares. But based on my own personal investment criteria — which admittedly are fairly narrow — I’d buy three utility stocks and two oil & gas shares. In short, I’d buy all six of these stocks, bar Harbour Energy, whose dividend yield is a little low for my liking.

Also, it’s important to note that the last four columns in my table include backward-looking figures. With the prices of oil and gas soaring since 2021, some of these FTSE 100 companies might make out like bandits in 2022-23. And rising earnings could mean even higher dividends for patient investors like me.

Then again, there’s a whole lot that could go wrong over the next year or so. For example, I worry about red-hot inflation, rising interest rates, the war in Ukraine, slowing global growth and the risk of a recession. But despite my fears, I’d gladly buy five of these FTSE 100 shares today!

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Cliffdarcy has no position in any of the shares mentioned. 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.

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 considered, so you should consider taking independent financial advice.

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