Severn Trent turns up dividend tap after finding new efficiencies

Water supplier Severn Trent declared another chunky dividend and said it planned an enhanced payout for the next three years after spying further efficiencies in the business.

In the year to end-March, the water supplier increased turnover 3.7% to £1.8bn, underlying profit before interest and tax by 4.3% to £525m and underlying earnings per share by 19.9% to 122.4p.

It proposed a final dividend of 48.90p that takes the annual payout to 81.50p, up 1% on the previous year.

And for the new financial year until the end of the current regulatory period in 2020, Severn Trent will increase the dividend by at least RPI +4% each year, which in 2017/18 will mean a dividend of 86.55p.

Chief executive Liv Garfield said working out new improvements to efficiency had identified a further £100m of savings to 'totex' - capital expenditure - in the current regulatory period.

"We are delivering both strong customer-focused and financial outperformance this regulatory period, and we feel it is now appropriate to share this with our investors. The board is therefore pleased to announce an upgrade to our ordinary dividend policy, to growth of at least RPI +4%."