Severn Trent dividend to at least track consumer prices
Severn Trent said its dividend would rise at least in line with consumer prices over the next five years as the water company said flooding penalties would not undermine its outlook for the current year.
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The FTSE 100 company said it had accepted the water regulator Ofwat's final price and service package for 2020-2025. As a result, Severn Trent said its dividend policy over the period would be to increase the payout by at least consumer price inflation (CPIH).
Based on CPIH of 1.5%, the dividend for 2020-2021 is expected to increase to 101.58p a share from 100.08p, Severn Trent said in a third-quarter trading update.
Severn Trent said Ofwat's price and service measures were in line with its five-year spending plan of £6.8bn, scheduled reductions in leaks and blockages and an expected capital value growth rate of 3.8%.
The company said stretching targets for flooding would result in penalties that would partially offset outperformance in other areas. It said it was on track to achieve at least £25m in customer outperformance delivery payments for 2020-2021.
"There have been no material changes to performance or outlook for the year 2019/20," Severn Trent said.