If I had to pick just one FTSE 100 stock to buy out of all the UK shares available to me, I’d acquire SSE (LSE: SSE).
There are a couple of reasons why I’d pick this business over any other. It operates in the relatively stable utility industry, offers investors an attractive level of income, and has the potential to achieve impressive earnings growth over the next decade or so.
While other UK shares in the FTSE 100 might make better income or growth investments, I think SSE offers the best of all worlds. That’s why I’d buy the stock over any other today.
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FTSE 100 growth stock
Power generator and network operator SSE fills a vital role in the UK economy. It provides energy to millions of households. Unlike other sectors, this is a very defensive business.
Consumers will always need energy. Demand isn’t subject to fashion trends, and it’s relatively resistant to economic cycles. As such, SSE’s investment plans stretch out over decades. This is good news for investors. There’s a very high chance the company will still be providing energy to customers two decades from now.
Therefore, it’s highly likely the stock will still be throwing off profits for investors in 20 years. This is really the primary reason why I’d buy SSE over other UK shares in the FTSE 100. If I had to own one company for the next two decades, I think there’s a high chance the SSE business will still be here.
Management is currently future-proofing the enterprise. It wants to triple the company’s renewable energy output by 2030.
To that end, SSE is selling £2bn of non-green assets while searching for new opportunities. It’s submitted a bid to develop Denmark’s largest offshore wind farm and formed an Iberian partnership to develop its renewables expertise overseas. On top of these international efforts, the FTSE 100 company has the largest wind farm pipeline in the UK.
SSE wants to invest up to £15bn in these growth initiatives over the next few years. As well as this potential for earnings growth, the stock also offers a dividend yield of 5.6%.
Risks
While I’d buy SSE for the next two decades, there are some challenges the company may face as we advance. The UK utility sector is highly regulated. If regulators decide to take a hard line with providers, it could impact profits.
Further, SSE is heavily reliant on debt to fund its capital spending plans. It has around £9bn of debt at the moment and may need more to support its large renewables projects. If creditors aren’t cooperative, SSE’s growth plans may fail. To free up cash, the firm may be forced to slash its dividend.
Even after taking all of these risks and challenges into account, I still think this is one of the best UK shares in the FTSE 100 to buy right now.
