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This is what I’d do about high-yielding SSE shares right now

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FTSE 100 energy supplier SSE (LSE: SSE) has done a good job of turning itself around from the bleak-looking situation I saw in April 2019.

Back then, the deal to demerge its underperforming household energy business had just collapsed. Earnings and the share price had been falling for around two years. The directors were considering other options to get shot of the troublesome division. But that wasn’t the only problem. Trading had been difficult across most of the company’s operations for some time.

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Green shoots

However, things started to improve. I reported in September last year that the stock looked more attractive to me than it had for a long time. By then, the share price had risen by around 22% from its low in May. The directors had engineered a new agreement to sell the household energy services division to Ovo Energy for around £500m. They also announced their intention to use the funds to pay off some of SSE’s high debts.

The share price has continued to climb since last September, and last Friday’s third-quarter trading statement shines more light on why that has happened. Adjusted earnings per share have been rebounding strongly and the directors expect the full-year figure to come in between 83p and 88p, which is well up on the 31p we saw last year.

The company is making great progress optimising its business for the future. The sale of the energy services division went through on 15 January and SSE is no longer involved in supplying energy and energy services to households in the UK. The firm is also “on course” to cease production at its last coal-fired generation plant at Fiddlers Ferry by the end of March 2020. And “work is continuing” regarding the sale of gas production assets.

There were also several developments in the period contributing to SSE’s re-focus on renewable energy assets such as wind and hydro-electric power. Finance director Gregor Alexander said in the report the directors are focusing SSE on businesses that are “well placed to play a leading role in the delivery of a low-carbon strategy that supports the transition to net-zero emissions.

There may be dividend increases ahead!

He also said the first financial objective of that strategy is to remunerate shareholders’ investment through dividends based on “the quality and nature of assets and operations, earnings derived from them and the long-term financial outlook.”  The first nine months of the financial year have been “generally positive,” he said.

After the directors lowered the dividend recently, it’s encouraging to hear the finance chief emphasising shareholder dividends going forward. Looking back, I think a combination of poor operational performance and a challenging political situation pushed the share price down. But there’s no denying the strength of the turnaround going on in the company and it joins my list of such successful recent outcomes along with the likes of Tesco, Rank, and Haynes Publishing.

Congratulations if your contrarian investment strategy helped you spot the potential and get in when the share was near its lows last year. But if you didn’t, the shares still look attractive to me at the recent 1,511p, and I’d aim to pick up a few.

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Kevin Godbold owns shares in Rank. The Motley Fool UK has recommended Tesco. 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.