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(Sharecast News) - Jefferies upped its stance on Centrica shares on Thursday as it highlighted an attractive risk/reward in a broader note on utilities, in which it referred to the stock as a "value wildcard".
Centrica was boosted to 'buy' from 'hold' as Jefferies said the company's new strategy was likely to deliver stable earnings and a more resilient dividend and balance sheet.
"Clearly, there are execution risks relating to cost-cutting measures and disposals, but with the stock trading at a 50% discount to the utility sector (at historical lows of 8x forward price-to-earnings) and offering 6.7% cash yield, we see the risk-reward as attractive," it said. It has a 90p price target on Centrica.
Jefferies downgraded its rating on shares of United Utilities to 'underperform' from 'hold' and slashed the price target to 660p from 870p.
The bank initiated coverage of the stock with a supportive stance on the UK water sector in June. However, it said that its mark-to-market assessment of regulation suggests that baseline returns are likely to see a further reduction in December.
"With this, we see amplified risks around the sustainability of UU's current dividend policy, and see material downside to consensus forecasts," it said. "On our forecasts, the stock currently offers a sector low FY20-22 dividend yield, circa 25% valuation premium to the peer group."
Jefferies cut its recommendation on Severn Trent to 'hold' from 'buy' and lowered the price target to 1,920p from 2,340p as it pointed to more risk to dividend per share growth.
At 1330 BST, Centrica shares were up 2.1% at 74.28p, UU shares were down 1.1% at 794.80p and SVT shares were 1% lower at 2,081p.
1 Jun 2023 15:52
UK dividends calendar - next 7 days
| Friday 2 June | |
| Admiral Group PLC | dividend payment date |
| Admiral Group PLC | special dividend payment date |
| Arbuthnot Banking Group PLC | dividend payment date |
| Bodycote PLC | dividend payment date |
| Henry Boot PLC | dividend payment date |
| Capital & Regional PLC | dividend payment date |
| Derwent London PLC | dividend payment date |
| Fevertree Drinks PLC | dividend payment date |
| Greencoat Renewables PLC | dividend payment date |
| Headlam Group PLC | dividend payment date |
| Highcroft Investments PLC | dividend payment date |
| Lancashire Holdings Ltd | dividend payment date |
| LSL Property Services PLC | dividend payment date |
| Majedie Investments PLC | dividend payment date |
| Octopus Renewables Infrastructure Trust PLC | dividend payment date |
| Reach PLC | dividend payment date |
| TClarke PLC | dividend payment date |
| Zotefoams PLC | dividend payment date |
| Monday 5 June | |
| Bakkavor Group PLC | dividend payment date |
| Ecofin US Renewables Infrastructure Trust PLC | dividend payment date |
| J Smart & Co (Contractors) PLC | dividend payment date |
| Legal & General Group PLC | dividend payment date |
| Weir Group PLC | dividend payment date |
| Tuesday 6 June | |
| no events scheduled | |
| Wednesday 7 June | |
| AEW UK REIT PLC | dividend payment date |
| Ecora Resources PLC | dividend payment date |
| International Public Partnerships Ltd | dividend payment date |
| Porvair PLC | dividend payment date |
| Relx PLC | dividend payment date |
| Wickes Group PLC | dividend payment date |
| Thursday 8 June | |
| AJ Bell PLC | ex-dividend payment date |
| Assura PLC | ex-dividend payment date |
| Aurora Investment Trust PLC | ex-dividend payment date |
| C&C Group PLC | ex-dividend payment date |
| Centrica PLC | ex-dividend payment date |
| Compass Group PLC | ex-dividend payment date |
| CT UK Capital & Income Investment Trust PLC | ex-dividend payment date |
| Develop North PLC | ex-dividend payment date |
| Dr Martens PLC | ex-dividend payment date |
| Edinburgh Investment Trust PLC | ex-dividend payment date |
| Empiric Student Property PLC | ex-dividend payment date |
| Energean PLC | ex-dividend payment date |
| FDM Group Holdings PLC | ex-dividend payment date |
| HSS Hire Group PLC | ex-dividend payment date |
| IntegraFin Holdings PLC | ex-dividend payment date |
| Johnson Matthey PLC | ex-dividend payment date |
| M&C Saatchi PLC | ex-dividend payment date |
| Momentum Multi-Asset Value Trust PLC | ex-dividend payment date |
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| WPP PLC | ex-dividend payment date |
| Young & Co.'s Brewery PLC | ex-dividend payment date |
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