The Motley Fool

Has Energy Controversy Made Centrica PLC Shares A Buy?

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.

The business

Centrica (LSE: CNA) (NASDAQOTH: CPYYY.US) is the FTSE 100 business behind domestic fuel supplier British Gas. The company employs 33,000 staff directly. In 2012, Centrica’s operations generated £1.1bn of taxes payable to the Exchequer. Centrica is a big, blue-chip business. It plays a key part in the UK economy.

The threat

In September, Ed Miliband, leader of the opposition, announced a new energy policy. Should his party be elected in 2015, Mr Miliband has promised to freeze gas and electricity to consumers until 2017.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Since then, the shares the have fallen significantly, out of fears that government interference could significantly damage shareholder returns.

The reaction

Before Mr Miliband piped up, shares in Centrica traded at 402p. Since then, they have fallen to 336p, close to their low for the year. Other than a sharp fall in 2008 when announcing a rights issue, I can find no other time in the last five years when shares in Centrica have reversed so quickly.

The fall does not seem entirely unreasonable. Centrica shares were trading on a generous valuation in the summer. It is fair that investors would now regard Centrica as a riskier share than they did previously. When that occurs, investors will demand a discount before buying again.

The valuation

Centrica shares today trade at 13.1 times last year’s earnings per share (EPS). At today’s price, last year’s dividend of 16.4p per share equates to a yield of 4.9%. At the half-year stage, the interim dividend was increased by 6%. If this rise is repeated with the finals, the shares will yield 5.2% this year.


At the current valuation, Centrica is beginning to look interesting. Given how important Centrica is to the UK’s infrastructure, I do not believe that politicians of any shade will seek to wreck the company’s long term future.

The expected dividend is reasonably well covered by profits, which should give income investors some comfort. Given the political heat, Centrica is not without risk. However, for an income investor looking to build a balanced portfolio across sectors, these shares could be just the ticket.

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 daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

> David does not own shares in any of the companies mentioned.

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.