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Why the SSE share price rose 8% in September

UK energy company SSE (LSE:SSE) enjoyed a positive month for its share price in September. It started the month at £11.50 and closed on September 30 up over 8% at £12.45 per share.

September highs

It had an exciting month, which was quite unexpected from all accounts. A year prior, the company’s trading statement included a profit warning blaming persistently high gas prices and a warm summer. Some shareholders worried a repeat of this was to be expected in 2019.

Thankfully, that wasn’t the case and instead, SSE announced it’s selling the retail arm of the business to OVO Energy. This news was received positively as it should help the company avoid increasing regulatory and political pressures while concentrating its efforts on renewables and infrastructure.

The SSE share price ended the month on a high as it was announced that the FTSE 100 company had launched a share buy-back program of up to £150m on September 30. Shareholders authorised this buyback at its July AGM, which will conclude by the end of the year and will not exceed 13.4m shares.  

SSE’s trailing price-to-earnings ratio (P/E) of 9 is very attractive, as is its forward dividend yield of 7.8%. However, future growth is questionable, and the company is highly geared with a 70% debt ratio, which is unlikely to reduce much, even with the sale of its retail arm.

Brexit-proof stock

An alternative stock I’ve liked for a while is Rentokil Initial (LSE:RTO). It is an evergreen stock that has been on an upward trajectory for over eight years and has skyrocketed more than 36% this year alone.

Pests such as vermin, fleas, bedbugs and wasps will never be completely eradicated in Britain or the rest of the world and with Rentokil increasingly venturing into emerging markets, these types of unwanted bugs mean big business for the company.

With the Brexit deadline fast approaching and global growth concerns predicting doom and gloom for stock markets around the world, I think stocks like utilities and pest control are safer bets than British retailers or the Oil and Gas industry.

Around 90% of Rentokil’s revenue comes from outside of the UK and it rarely trades across borders, so I think a UK recession is unlikely to have much of a negative impact.

Acquisitions are a part of Rentokil’s strategy and its trading statement in July announced a further acquisition of Residex LLC. It also won a US government contract with the Centers for Disease Control and Prevention, to control mosquitoes carrying the Zika virus. These both offer Rentokil the potential for further growth. 

This £8bn company has a dividend yield of 1%, debt ratio of 63% and earnings per share are negative. These figures don’t look too appealing from a potential investor’s point of view, but I like that it sells a product that’s unlikely to go away, it has room for further growth and is still the global leader in its field. I consider Rentokil a Buy. 

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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.