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ISA investors! Should you buy or sell this 5.4% FTSE 100 dividend yield before February?

There’s a galaxy of great dividend shares I think you should buy before the beginning of February. Some of these look particularly irresistible at current prices. I wouldn’t consider splashing the cash on Centrica (LSE: CNA) shares any time soon, though. Full-year results are scheduled for February 13 and I fear that a shocking set of trading numbers could be in the offing.

I’ve often talked about the rate at which British Gas is haemorrhaging customers. It’s something that the energy giant has failed to get a grip on as tough economic conditions have encouraged more and more households to switch suppliers. Centrica’s customer base shed another 107,000 accounts in the four months to October, its most recent update in late autumn showed.

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The energy supplier was able to find some crumbs of comfort in that most recent release. It said that the rate of energy supply net losses “was lower than in the first half of the year and significantly lower than in 2018, despite continued high levels of price competition and market switching.” But I’m not convinced that this marks a turning point for Centrica, and latest Energy UK data shows why.

According to the trade association, the number of energy switchers in the UK hit another fresh annual record in 2019. This came in at 6.4m and represented a 9% year on year rise. Worryingly for the established suppliers, though, switching activity seems to have accelerated again in the latter part of the year. In December some 519,343 customers changed provider, Energy UK said, up 12% on an annual basis.

Double trouble

It’s probably no surprise that City analysts are tipping a 38% dip in annual profits at Centrica for 2019. It might not shock you that they’re expecting a BIG reduction in the dividend, too. A 5p per share reward is expected for 2019. Rewards have recently come in at 12p.

Those with a glass-half-full approach to life might still be encouraged to invest, however. A rock-bottom forward P/E ratio of 10.1 times is complemented by a gigantic 5.4% dividend yield, after all. Broker consensus suggests that Centrica might finally be about to bounce back too, a 32% earnings rebound predicted for 2020.

Too much risk

Recent share price action suggests that a lot of optimists have been piling back in. Over the past six weeks Centrica’s share price has leapt 25%. Buying activity was helped by the Tory general election win that vanquished the possibility of nationalisation of utilities firms by a Labour government.

That said, I consider recent buying of Centrica shares to be a bit too bold. The business will likely have to engage in some hefty, profits-crushing reductions to stop its customers heading for the exits. And the ‘success’ of the price cap means that further regulatory action could be around the corner (the government estimates that households have shaved £1bn off their bills in 2019). I fully expect Centrica to endure another year of significant profits pressures in 2020.

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Royston Wild 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.