The Centrica (LSE: CNA) share price has been a bad investment to own over the past few years. The company has struggled with several headwinds which have hurt growth and put the firm’s balance sheet under pressure.
I don’t think these issues are going to dissipate anytime soon. As such, I reckon the business is worth avoiding. Below I’ve highlighted some UK shares I’d buy instead.
Avoid the Centrica share price
During the past five years, Centrica has struggled. The company has grappled with rising competition in the UK utility market, the government’s energy price cap, falling gas demand and plummeting oil prices.
To cope with these issues, management has tried to cut costs and sell assets. This hasn’t been enough. Centrica has continued to lose customers and growth initiatives have failed to yield positive results.
As a result, the group has been forced to cut its dividend repeatedly. Meanwhile, asset sales have impacted earnings growth. The company is now a shadow of its former self.
If the group continues down this route, I think it’s likely the Centrica share price will continue to languish. As such, I would avoid the stock for the time being and concentrate on other companies with brighter prospects instead.
UK shares to buy
If you are looking for income, rather than Centrica, I’d buy National Grid. This company operates in the same industry, but in the business-to-business market, which is much more predictable and stable than the business-to-customer market Centrica dominates.
Thanks to the stability of the market, National Grid has become a FTSE 100 income champion. The stock currently supports a dividend yield of 5.4%.
What’s more, unlike its struggling peer, National Grid’s growth initiatives are starting to bear fruit. Its US operation is producing profit and the company’s startup incubator has invested in some promising businesses.
Another alternative to the Centrica share price I believe is worth considering today is BP. The global oil giant is on a mission to transform itself into a green business in the next few decades. This means focusing on renewable energy while reducing dependence on fossil fuels.
The company could also grow into the energy market, which would bring it into direct competition with Centrica. Considering BP’s size, global diversification and international trading, I think it’s likely to come out on top.
Therefore, if I had to choose between the two businesses, I reckon BP could be the better long-term investment.
The bottom line
Overall, the Centrica share price may continue to be a poor investment during the next few years. As such, investors may be better off selling the business or avoiding the stock.
There are plenty of other companies out there that offer similar defensive qualities and income potential with brighter long-term outlooks. BP and National Grid are just two examples.
Rupert Hargreaves 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.