Electricity company SSE (LSE: SSE) has rewarded shareholders with some healthy dividends in recent years. In FY2022 for example, the group paid out 85.7p per share which, at today’s share price, translates to a yield of nearly 5%. Is the group set to continue rewarding investors with sizeable cash payouts? Let’s take a look at the SSE dividend forecast for 2023 and 2024.
The latest dividend forecasts
Before I reveal those latest estimates, it’s worth pointing out that SSE’s financial year doesn’t end on 31 December. Instead, it ends on 31 March.
So the financial year just passed was FY2023. And the year ending 31 March 2024 is FY2024.
Should you invest £1,000 in Banco Santander right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Banco Santander made the list?
As for the forecasts, City analysts now expect SSE to pay out 95.4p per share for FY2023. At today’s share price, that equates to a yield of around 5.2%.
For FY2024 however, they currently expect a payout of 60p per share – nearly 40% lower. The yield at that level of payout is a less-exciting 3.3%.
These forecasts are in line with recent guidance from the electricity company. Back in January, SSE said it intended to recommend a full-year dividend of 85.7p per share plus RPI inflation for FY2023.
Yet for FY2024, it said it was planning to ‘rebase’ the dividend to 60p per share to support its investment and growth plans.
It’s worth noting here that the company said that it plans to increase the payout by “at least 5%” a year for FY2025 and FY2026.
Worth buying?
Are SSE shares worth today buying, given that the company looks set to reduce its dividend payout by a significant amount?
Potentially. They do look attractively valued today.
Last month, the company lifted its guidance for FY2023 adjusted earnings per share from 150p to “more than 160p” on the back of strong market conditions.
That puts the stock on a price-to-earnings (P/E) ratio of around 11, which is a relatively low valuation.
Meanwhile, they also have appeal from a defensive perspective. No matter what’s happening in the global economy, consumers are still going to need electricity.
Additionally, there appears to be reasonable growth prospects here. By 2030, the company is hoping to triple its renewable energy output from 2019 levels.
On the downside, SSE is planning to invest a lot of money in the years ahead as it boosts its exposure to renewables. For FY2023, its capital expenditure guidance was a huge £2.5bn. This spending may put pressure on earnings growth.
Debt is another issue to consider here. At 30 September, adjusted net debt stood at around £10bn. That’s quite high.
Weighing everything up, I can certainly see a case for investing in SSE shares today. However, they would not be the first shares I’d buy today. All things considered, I think there are better investment opportunities out there right now.
