MENU

Should You Invest In Centrica PLC?

CentricaMost people might not know the name Centrica (LSE: CNA), but many know about British Gas. After all, they supplied everyone’s gas in the country at one point, and they are still the UK’s biggest gas supplier.

I’m going to be upfront about this right away — not only do I own shares in Centrica, but I also worked for them for two years. My role was selling gas, electricity, Home Care and many other products ‘door to door’, and I did it for two years. I also worked for SSE and NPower in a similar role, too. You could describe it as ‘quite tough’ (I’ve been bitten by a couple of dogs and had to work with snow up to my waist), but I’ve managed to see a lot of customers and save them a lot of money.

Anyway, much more importantly, should you invest in the company? Centrica currently has an attractive yield of 5.54% and the P/E ratio is reasonable at 13.1. Centrica also has a good history of rising dividends, as you can see from the table below:

 

2013          

2012

2011

2010

2009

Total Dividend Paid

17.00p per share

16.40p per share

15.40p per share

14.30p per share

12.80p per share

Centrica is more than just British Gas, too — it operates in many countries around the world, including America, Canada and Australia, and even offer financial service products. So it’s a more globalised offering than many of its sector peers.

However, in the UK, energy companies are under quite a lot of political pressure. Ed Miliband would like to ‘freeze’ energy prices if he comes into power. Whether he would legally be able to do that is another question; I’m sure the companies would fight it very hard, and it would at best take quite a while to implement. However, this is one of the main factors why Centrica and other utility shares have taken quite a hit recently. At their high point in 2013, CNA shares traded at 400p. They’re now trading at 307p.

I worked for Centrica from 2007-2009 and I saw plenty of people back then who struggled with their bills. For some people, sadly, it was ‘heat or eat’. People being hit the hardest were often those who stuck with ‘gas for gas and electric for electric’ and ended up paying the highest prices despite being unable to afford it.

Economic conditions are tougher now. More people switch their gas and electricity in the UK than in any other European country and the regulators want to make it quicker and easier to do so, too. It’s worth people investing their time to, as there are significant savings to be had.

Anyway, I rate Centrica at least as a solid hold now — I have no intention of selling my shares. If you are a long-term ‘buy and hold’ investor, then I believe they are a reasonable buy if you can purchase around the 305p mark.

If you want to stash your portfolio with some quality shares, I strongly recommend you have a look at this brand-new special report. It's available at the best price (free!) so have a look now by simply clicking here.

Mark owns shares in Centrica.