United Utilities Group PLC On Course For 5.1% Yield

The shares of United Utilities (LSE: UU) rallied 8p to 700p during early trade this morning after the utility said its upcoming interim results would show “moderately higher” operating profits.

The FTSE 100 member, which supplies water to seven million people in the North West of England, also confirmed revenues for the six months to 30 September had been higher than last year following regulated price increases.

However, the blue chip did admit the revenue improvement had been “slightly below” the allowed regulatory price rise due to the “ongoing impact of a tough economic climate on volumes“.

In addition, United Utilities confirmed it remained on course to deliver its 2010-2015 regulatory outperformance targets and had delivered further customer service improvements.

Today’s statement revealed net debt was now “slightly higher” than the £5.4bn reported in May and capital expenditure for the full year would be £800m.

The update also said the group was “well advanced” with its 2015-2020 business plan, which will be submitted to Ofwat, the water regulator, by 2 December.

Prior to today, City brokers predicted United Utilities would lift its earnings from 39.1p to 42.2p per share during the twelve months to 31 March 2014. The same experts also projected the dividend moving from 34.3p to 36p per share.

Following this morning’s price movement, the shares of United Utilities trade at 16.6 times possible profits and yield a potential 5.1%.

Of course, whether that 5.1% income, today's trading statement and the general prospects for water suppliers all currently combine to make United Utilities a 'buy' right now is something only you can decide.

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> Maynard does not own any share mentioned in this article.