Within the first hour of trading today (21 May), the SSE (LSE:SSE) share price was up just over 1% after investors digested the company’s results for the year ended 31 March 2025 (FY25).
The timing of the release of its numbers was unfortunate. At exactly the same time, the Office for National Statistics announced a bigger-than-expected increase in inflation. Higher energy prices was one of the reasons given for the surprise.
And SSE shareholders appear to have benefitted from this. The energy group announced a 7% increase in its dividend to 64.2p. The stock’s now yielding 3.5%, exactly the same as the FTSE 100 average. However, in FY23, it was 96.7p – a reminder that dividends are never guaranteed.
Crunching the numbers
But apart from the payout, most of the group’s numbers were pretty flat. Indeed, adjusted earnings per share (EPS) were exactly the same in FY25 as in FY24.
| Measure | FY23 | FY24 | FY25 |
|---|---|---|---|
| Adjusted operating profit (£m) | 2,529 | 2,426 | 2,419 |
| Adjusted earnings per share (pence) | 166.0 | 160.9 | 160.9 |
| Dividends (pence) | 96.7 | 60.0 | 64.2 |
With EPS of 160.9p, it means its price-to-earnings (P/E) ratio is now around 10.5. This is higher than that of, for example, Centrica (8.9), the other integrated energy provider in the Footsie.
SSE claims that it has a “clearly defined pathway” to delivering EPS of 175p-200p by FY27. At the top end of this range, the stock’s P/E ratio falls to 8.5.
Perhaps conscious of its large debt pile, the company — which claims to be at the heart of the clean energy transition — announced a £3bn reduction in its planned investment programme over the next five years. It says this reflects “financial discipline in a changing macro environment across the energy businesses and consent phasing in networks”.
In other words, there’s increased uncertainty about the UK’s energy policy. Ørsted recently cancelled plans for the Hornsea 4 offshore wind project. It blamed higher costs and increased “execution risk”.
SSE’s debt is now equivalent to 3.2 times EBITDA (earnings before interest, tax, depreciation and amortisation). This time last year, it was three times. And despite the planned reduction in capital expenditure, the group’s expecting this to rise to four.
I think this is something to keep an eye on.
Slow and steady
SSE’s unspectacular performance in FY25 is, in my opinion, the biggest single reason for owning the utility stock. The sector’s defensive qualities can be attractive.
During times of economic turbulence, utilities should keep ticking along paying a generous dividend, while other stocks are caught in the fall out. And I do think we live in uncertain times, meaning there’s a strong case for considering shares in the sector. But despite SSE’s undoubted strengths, I believe there are other better FTSE 100 utility stocks out there.
Even after today’s dividend hike, four others offer a higher yield. And based on its beta value (a measure of share price volatility) its the second most unstable.
| Stock | 5-year beta value | Dividend yield (%) |
|---|---|---|
| Centrica | 0.61 | 2.9 |
| SSE | 0.58 | 3.5 |
| United Utilities Group | 0.40 | 4.5 |
| Severn Trent | 0.35 | 4.3 |
| National Grid | 0.31 | 4.3 |
Final thoughts
SSE’s reported another solid set of numbers and has pledged to increase its dividend by 3.7%-5% in FY26.
But there appears to be growing uncertainty surrounding large-scale renewable energy projects in the UK. Also, its growing debt — relative to earnings — remains a concern. For these reasons, despite its defensive qualities, I don’t want to own the stock.
