United Utilities Group PLC, Severn Trent Plc And National Grid plc Are Flying, But Still Good Value

The low price of oil does seem to have given the electricity and gas suppliers a boost, as lower wholesale costs are relieving the pressure on margins. And, along with the current rush for safer investments, it’s helping give the whole utilities sector a leg up too.

United Utilities (LSE: UU)(NASDAQOTH: UUGRY.US), for example, rewarded its investors with a new 52-week high of 1,040p on Thursday, and that’s taken the share to a 12-month gain of 43.5%! And on top of that, shareholders look set to pocket a dividend yield of 3.9%, which is above the FTSE 100‘s average of around 3%.


You’d be paying for a forward P/E of nearly 22, which is about 50% higher than the FTSE average, but these utilities are about the most reliable dividend stocks out there.

The picture at Severn Trent (LSE: SVT) is similar, with the shares reaching a 52-week high of 2,196p on Wednesday while on the way to a 12-month gain of 24.6%. After such a performance we’re looking at a P/E based on March 2015 forecasts of a bit above 23, which is even higher than United Utilities. But the dividend is stronger too, with a yield of 4% pencilled in.

Pricey? Maybe, but it’s another of the best safety stocks around.

A better bargain…

But my favourite safety stock right now is National Grid (LSE: NG)(NYSE: NGG.US), on the lowest P/E of the three at just 17%. For a company with a forecast dividend yield of 4.6%, that’s good the best of times — and looks like very good value in these safety-conscious days.

National Grid hasn’t quite regained its 52-week high of 965p set in November, but with a recent spike up to 947p it’s not far off. And it’s still up 22.4% over the past 12 months.

With EPS forecasts suggesting rises of 4% and 2% for the next two years, the P/E would drop to 16 by 2017 — by which time there’s a dividend yield of 4.9% forecast.

A bit extra?

National Grid could be set for a bit of a windfall from rising property prices too. Now that the UK’s gas comes from natural supplies and demand can almost always be met from high-pressure mains, those famous gasometers we see dotted around the landscape are redundant. National Grid owns more than 500 of them, and with many in areas of high property demand there’s money to be made by dismantling them and selling off the land.

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Alan Oscroft has no position in any shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.