The utilities sector has performed pretty well over the past year or so but is beginning to lose its shine as 'risk on' comes back into prominence. But that is not to say that there is no growth in the sector.
Kcom, who are expected to declare final results this Friday (not yet confirmed on the company's website) is one such example, having grown strongly last year. Current analysts forecasts for the stock predict a flat performance over the next few years. I'm not so sure and expect slightly better than that.
In spite of the flat outlook, of the four analysts that cover the stock, one is neutral and the other three have a strong buy recommendation.
In the the Interim Management Statement back in February, commenting on trading, Bill Halbert, Executive Chairman stated:
“Market conditions continue to be challenging. The Group has however continued to exploit successfully the opportunities that are there, with positive momentum across all brands. We remain confident about the quality of our business operations and their capacity to generate cash and reconfirm our commitment to a minimum ten per cent growth in the dividend in this financial year.”
The forecasts for dividend growth can be expected to be around 10% per annum for the next couple of years, so what does this mean as we head towards the results this Friday?
Expect a dividend declaration of around 2.95p, going ex around June 26th followed by an interim payment of 1.65p and then a final dividend in just over one year's time of 3.25p.
This all adds up to approximately 7.85p in around thirteen months . The DividendMax optimizer has this at an annualised yield of 9.14% at the current share price of around 83.75p. That is a pretty good return for a stock that is defensive in nature and has not shown the very high share price rises seen in so many stocks over the past year. Dividend cover is fine at 1.7x, which is decent for a utility. Dividend of the week is Kcom.
