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United Utilities: buy for the attractive dividend

United Utilities (UU, 658p) has a new CEO on the horizon, Philip Green, who is due to take over from John Roberts in March.

United Utilities (UU, 658p) has a new CEO on the horizon, Philip Green, who is due to take over from John Roberts in March.

Green's slogan of no, the other one' (so you don't mix him up with the Philip Green of BHS fame), is bound to start grating sooner rather than later.

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Investors seem fairly happy with him for now though, says Questor in The Daily Telegraph mainly because he isn't about to tinker with United's reputation as a generous payer of dividends (its shares offer a handsome yield of almost 7%). He also endorsed the policy of raising United's payout in line with inflation, and investors are looking forward to a 14.29p interim dividend coming their way on 9 February.

Outgoing chief John Roberts has been busy. The group's turnover is up 13% to £1.2bn in the first half of the year. He has overseen a regulatory review that will lift customer water bills 18% over five years to fund a £3.5bn infrastructure investment and which helped interim pre-tax profits surge 20% to £244m. He's also put United's telecoms division, Your Communications, up for sale at £100m.

These are good developments and investors should also note that there's more to United than water alone, says Tempus in The Times. It is "as much an electricity play as a water play" and has a "well developed, unregulated business managing other people's utility infrastructure and undertaking back-office administration". This is an increasingly lucrative part of the business, turnover being up 35% in the first half, thanks to a $1.6bn deal with IBM providing management services to a US utility.

Despite all this, the stock has lagged the FTSE 100 and its sector this year, says Questor. It trades on 15 times next year's earnings, but is a buy "for the dividend and hope of a better run ahead".

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