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The SSE share price is faltering. Is it a good ISA stock to buy for the long term?

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Earlier this week, energy group SSE (LSE:SSE) reported better-than-expected profits in its financial results for the year to 31 March 2020. The SSE share price rallied on the news and is up 11% since June 1. But as stock market volatility continues, the share price is now faltering. 

Energy infrastructure and renewables

SSE recently sold its retail business to Ovo in a deal worth £500m. This means SSE is no longer supplying the UK domestic market with utilities, but it still delivers electricity to homes through its network of infrastructure. The sale means SSE is free to focus on delivering the low carbon infrastructure required for the UK to reach its net-zero carbon emissions target. Its core operations are now in regulated electricity networks and renewable energy. 

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SSE shares were boosted by its plans to invest £7.5bn in growth over the next five years. This includes the Viking wind farm in Shetland and Seagreen wind farm off the coast of Angus.

The SSE dividend remains intact

Some 48 constituents of the FTSE 100 have cut or cancelled their dividends since the coronavirus pandemic took hold. Thankfully, SSE is not one of them. The fact that it still pays a dividend is a big plus for the renewables company and should help entice shareholders to stick with it. SSE’s dividend yield is 5.7%, which is a healthy return for an ISA stock.

SSE has committed to a five-year plan to sustain its dividend from 2019 to 2023 and intends to deliver this in full, but concern lingers that a dividend cut may be a consideration if coronavirus continues to impact the group.

Owning the networks provides SSE with a guaranteed income stream, which creates a recession-resistant nature and makes it a popular defensive stock.

A Stocks and Shares ISA is the perfect platform for long-term investors to grow a portfolio of investments. As a successful investor, you should not concern yourself with stock market volatility but aim for patience and discipline in your approach.

Are SSE shares good for a Stocks and Shares ISA?

With this strategy in mind, let us consider the outlook for SSE as a long-term investment. As a renewables-focused company, with its own infrastructure, wind farms, and hydropower operations, it is operating in a sector fit for the times. With climate change targets being top of government agendas globally, it is an area of focus and monetary stimulus.

Despite maintaining its dividend, SSE has not escaped scot-free from the pandemic. It expects a £150m-£250m hit in 2020/21 from Covid-19 due to lower energy demand and a rise in bad debts, chiefly from business customers. Considering this, SSE will provide guidance on its adjusted earnings per share later in the financial year.

Some 38% of its profits came from renewables last year, but it intends to treble this by 2030. It is disposing of its gas production assets and hopes to secure value from disposals of at least £2bn by autumn 2021. Increased capital expenditure has caused net debt to increase but it is working to reduce over the next three years.

Until the coronavirus crisis dissipates, SSE has challenges ahead, but I think it offers a unique balance of regular income from dividends and the opportunity for growth in renewables. I think the share price is reasonable and it would make a good addition to a Stocks and Shares ISA.

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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.