This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Pennon (first half earnings 29 November)
The value of utilities as safe stocks has taken something of a battering after Centrica's warning last week, when the shares dropped 15%. However, water firm Pennon is predicted to maintain its growth, with expectations of 2% this year, and over 10% for the following twelve months. In addition, dividends look to remain healthy, with yields of 4.8%, and over 5% in the coming years. And, unlike Centrica, these are well covered.
Regulatory scrutiny will still fall on the sector, but the big energy names will be the ones with plenty to worry about, rather than Pennon and its peers. Pennon is expected to report year-on-year earnings growth of 5%, to 24p per share. In a year when markets have rallied strongly, Pennon’s lack of performance is notable. However it continues to find support around £7.64, so as long as this holds a bounce back, £8.20 is possible. Below this £7.10, the 2015 low, is a possibility.