Shares in multi-national energy company SSE plc (LSE: SSE) have been seeing some fairly consistent selling recently, despite bullish comments from the analyst community.
SSE shares were trading at £14.49 at time of writing but have been slipping off recent highs achieved in June and July.
Selling of SSE shares really only set in during the last couple of days. SSE provided a trading statement 22 July which was well received by analysts.
“Operational performance has been solid overall, with the company reiterating its commitment to its five-year dividend plan and confirming that good progress continues to be made on its disposal programme and construction projects,” said Mark Nelson, an analyst with Killik & Co. “We are Buy rated on SSE shares, as a play on two of the pillars of the global energy transition; renewables and electricity networks. The shares trade at a price to March 2022 earnings ratio of 15.9x and offer a prospective dividend yield of 5.4%.”
Barclays also raised SSE to a buy rating in May.
During the quarter, the company published its business plan for SSEN Distribution for the period 2023 to 2028. The plan includes £4.1bn of investment with the aim of increasing the division’s regulated asset value to over £6bn.
Progress continues on disposal programme
Progress on the disposal programme continues, with the business on course to realise more than £2bn from the sale of non-core assets and businesses that are not a good fit with SSE’s net zero strategy.
Construction continues to progress on major projects in Transmission and Renewables. These include the world’s largest offshore wind farm at Dogger Bank, Scotland’s largest offshore wind farm at Seagreen, and one of Europe’s most productive onshore wind farms at Viking on Shetland.
SSE said that it continues to expect that capital expenditure and investment will total around £2bn in 2021/22.
SSE remains committed to five year dividend plan
It also stated that it remains committed to the five-year dividend plan to March 2023, which targets RPI increases to the dividend.
SSE has been a beneficiary of the gradual reopening of the UK economy. It saw a sustained level of buying of shares in March and April. This took the share price up from a YTD low at around £13, to hit peaks at £15.42 and subsequently £15.78. Since then the stock has struggled to build any further momentum.
Probably of more concern to investors is the recent sell off in the last two sessions, which has seen SSE shares drop from £15.33. This has breached a key level at £14.75. The next level to watch is £14.35.
Tactical traders could be locking in SSE profits now
There may be concerns among some investors that the Delta variant may impact further economic growth in key SSE markets over the short to medium term. In addition tactical investors could be taking profits.Note however that we are entering a quiet period for the market. Net sales volumes in SSE shares are not high, as one would expect for late July. We are not seeing anything near the heavy selling the stock saw in late April / early May.
Investors will be reassured to see the dividend plan still in place but will obviously be looking for more detail on the clean energy strategy and how this will contribute to the bottom line in future updates from SSE.
