Forward Guidance Makes Me Turn To Centrica PLC

Centrica (LSE: CNA) (NASDAQOTH: CPYYY.US) has always been one of my favoured stocks, and watching Mark Carney sit in front of MPs recently had two effects on me.

Firstly, it did not give me a huge amount of confidence in the idea of forward guidance, and secondly it made the prospect of investing in Centrica even more appealing.

While I appreciate that Dr. Carney has a strong track record and that forward guidance is, in theory, a very logical and sensible policy, there seem to be too many ‘ifs’ and ‘buts’ for it to be considered useful.

For instance, using the unemployment rate as a clear indication as to when interest rates will go up sounds very useful and clear. However, when it acts as merely a guide, which is what it is set to do, then it leaves the market and investors no more clued up on when interest rates will rise.

So, I’m as unclear as I was before the arrival of Dr. Carney as to when interest rates will go up and this makes the investment world feel even more uncertain to me.

However, what I am clear on is that Centrica remains a great stock for income-seeking investors like me.

For starters, it currently yields a very impressive 4.1%; however, this is only half the story. Dividends are forecast to increase by 12.2% over the next two years alone, meaning that Centrica has a forward yield of 4.7%.

This easily beats savings account rates and gives income-seekers like me a return above and beyond inflation.

Furthermore, the company currently pays out only 60% of earnings as dividends, meaning there is scope for dividends to be increased further while maintaining a generous level of investment in the business.

In addition, shares are currently very reasonably priced, trading on a price-to-earnings (P/E) ratio of 14.6. This compares favourably to both the wider utilities industry group and also to the FTSE 100, which trade on P/Es of 14.7 and 15 respectively.

So, a great yield and an attractive price are all reasons why I’m really bullish on Centrica at the moment, with forward guidance making me appreciate the additional stability that Centrica offers.

However, Centrica isn’t the only stock I’m turning to.

Indeed, the team at The Motley Fool has found five others (including one utility that yields over 5%) and written about them in an exclusive report entitled 5 Shares You Can Retire On.

The stocks offer exciting prospects and good yields at attractive prices, so are well-worth a look.

They may provide the boost your portfolio needs and it is completely free and without obligation to find out more.

Click here to take a look at the exclusive report.

> Peter owns shares in Centrica.