Times are tough for energy utility Centrica (LSE: CNA) just now. The company has become a political football and taken a public kicking for the country’s energy problems and rising bills. Opposition leader Ed Miliband’s threat to freeze energy bills if elected has done a lot of damage and seen Centrica’s share price tank in recent months.
Last week, the company revealed that it made less money in 2013 than it did the year before. Customers are leaving and its gas-fired power stations lost £133m. Its American profits are down, while costs are going up in its North Sea gas fields. All in all, there wasn’t much to cheer shareholders up.
It’s becoming increasingly difficult to see how Centrica’s profits will grow in the years ahead. It has said that profits will fall again in 2014. It probably daren’t increase profits at British Gas this side of the general election. Elsewhere, high costs and high tax rates mean that investment in offshore gas fields will probably not pay off soon.
The one bright spot is the dividend payment. Centrica raised the full-year dividend by 4% to 17p per share and says that it remains committed to growing payouts by more than inflation. The 5.2% dividend yield is worth having, even if it means that dividend cover will come down in the short term.