Named after two of the largest rivers in the UK, Severn Trent PLC (LON:SVT) supplies 4.5 million households and businesses with more than 2.0 billion litres of water per day and treats more than 2.9 billion litres of wastewater. Severn Trent PLC is one of three water/wastewater companies listed on the London Stock Exchange.
Save water, save money: why do traders love Severn Trent Plc?
Severn Trent Plc is considered an income stock offering steady and reliable dividend and share price returns at a relatively low risk. After an extremely impressive five-year run which saw the share price rise by 29 per cent and the Total Shareholder Return (TSR) at 58 per cent, the UK government cracked down on the ability of utility companies to increase investor payouts. They achieved this by enforcing regulations that required cutting customer costs and improving infrastructure in late 2019.
While there was an initial drop in the share price of Severn Trent Plc, the company quickly recovered. The Severn Trent share price forecast improved when the company announced plans to invest more than £1.2bn in sustainability projects and reducing costs to vulnerable customers. A further £6bn will be invested over five years to improve the condition and efficiency of existing infrastructure within the UK.
Severn Trent stock performance
Severn Trent Plc had a market capitalisation of £5.8bn in 2019. SVT reached its high for 2020 of £2,696.00 on February 19 and has slowly crept downwards as panic surrounding the coronavirus continues to pummel global stock exchanges. The current stock price is £2,439.00 which represents the lowest price thus far in 2020. While virtually no listed stocks have been unaffected by the current sell-offs SVT has managed to decline less than the market overall at just 7.3 per cent.
Trade Severn Trent PLC - SVT CFD
It should be noted that in recent Severn Trent Plc share price news the stock tumbled just under 5 per cent in what has instantly become known as “Black Monday”. As it operates in the highly regulated UK water industry it seems unlikely that the price will fall as significantly as other industries as the government will be quick to support companies operating for the health and benefit of the general population.
Severn Trent share price forecast
According to Investing.com, 14 Wall Street analysts have issued ratings and price targets for Severn Trent for the next 12 months. Their average 12-month price target is £2,351.60. The high price target for SVT is £2,750 and the low price target for SVT is £1,850. There are currently six Hold ratings, three buy ratings and two sell ratings for the Severn Trent stock, resulting in a consensus rating of "Hold".
The Severn Trent share price forecast is based on regulated price increases and an inflation-linked dividend policy. There is increasing attention on its growing non-regulated business interests which are focused on renewable energy, long-term operational contracts and property development. These business lines present the biggest opportunity for substantial growth in the long term.
Severn Trent major rivals
Pennon Group (LON:PNN) is a water, wastewater and waste management company serving the regions surrounding Devon, Cornwall and parts of Dorset and Somerset. The corporation has a market capitalisation of £4.49bn and the current share price is £1,065.64. Pennon Group operates through its two main subsidiaries which are Southwest Water Ltd and Viridor Ltd. Southwest Water Ltd serves 1.65 million customers and businesses daily with water and wastewater services while Viridor Ltd is focused on waste management and renewable energy.
Thames Water Utilities
Thames Water Utilities is a monopoly which is responsible for the water supply and wastewater management for large parts of London, Lupton, Thames Valley, Surrey, Gloucestershire, Wiltshire and many other regions. It is the largest UK water company and traces its origins back to 1609. While granted a monopoly by the UK government the company is still subject to the strict regulatory requirements of all UK water companies. They have focused their strategy on increased customer support, increased use of data to improve the function of infrastructure and have planned to invest £2bn in 2020 towards continuous improvement.
United Utilities Group
The third UK water company to be publicly traded on the London Stock Exchange, United Utilities Group (LON:UU) had a market capitalisation of £6.27bn in 2019 and a current share price of £919.20. UU is responsible for the supply of water and treatment of wastewater for the majority of north-west England. It has recently released its five-year strategy which will see an increased focus on providing the lowest sustainable cost service while reducing bills for the majority of customers. It will continue to invest in existing infrastructure to lead to more efficient service.
Severn Trent shares: buy or sell
Severn Trent PLC is a true income stock and should be considered as such. It is considered a cautious buy for the investor looking for steady growth with a reliable dividend yield. The reason for caution is that SVT has an extremely high price-to-earnings (PE) ratio at 19.51. This means that at current prices it will take £19.51 to make £1 in earnings.
With no significant volatility seen in utilities stocks, the potential for quick profits is not likely, but it also means significantly reduced risk. SVT does provide the opportunity for continuous growth and with the latest investments in sustainable projects and increasing exposure in renewable energy projects this stock seems poised to continue on its upward trajectory.
With contracts for difference, it does not matter whether your view of the Severn Trent share price forecast is positive or negative. You can always try to profit from the future price fluctuations, regardless of their direction. If you want to become a part of the market and monitor Severn Trent share news before purchasing, join Capital.com where all major stocks are at your fingertips.