There are things to love and loathe about most companies. Today, I’m going to tell you about three things to loathe about Centrica (LSE: CNA) (NASDAQOTH: CPYYY.US).
I’ll also be asking whether these negative factors make this FTSE 100 utility company a poor investment today.
Recent shareholder returns
As the table of annualised figures below shows, Centrica has delivered a better total return (share price appreciation plus dividends) than fellow FTSE 100 megacap utilities National Grid and SSE over the past five years, and the second-best return over 10 years.
However, Centrica hasn’t done so well for its shareholders in more recent times. The company’s three-year return of 8.9% lags far behind the 15.2% delivered by both National Grid and SSE.
| Company | 3 years | 5 years | 10 years |
|---|---|---|---|
| Centrica | 8.9 | 8.0 | 10.3 |
| National Grid | 15.2 | 5.4 | 8.1 |
| SSE | 15.2 | 6.9 | 13.6 |
Current P/E
Despite its three-year underperformance against National Grid and SSE, Centrica’s price-to-earnings (P/E) ratio hasn’t moved to a bargain level relative to these peers. The earnings-per-share (EPS) and P/E numbers in the table below are forecast 12-month figures.
| Company | Recent share price (p) |
EPS (p) | P/E |
|---|---|---|---|
| Centrica | 396 | 29.0 | 13.7 |
| National Grid | 741 | 54.2 | 13.7 |
| SSE | 1,551 | 125.9 | 12.3 |
As you can see, Centrica’s P/E is no more attractive than National Grid’s for value investors, and less attractive than SSE’s.
Dividend yield
Utilities are popular investments for income seekers, but Centrica’s dividend yield is even less appealing relative to its peers than its earnings rating. Again, the numbers in the table below are forecast 12-month figures.
| Company | Recent share price (p) | Dividend per share (p) | Yield (%) |
|---|---|---|---|
| Centrica | 396 | 17.9 | 4.5 |
| National Grid | 741 | 42.4 | 5.7 |
| SSE | 1,551 | 88.6 | 5.7 |
It will take Centrica many years of superior dividend growth from a starting yield of 4.5% to catch up with the 5.7% starting income offered by both National Grid and SSE.
A poor investment?
Centrica currently appears reasonably good value relative to the FTSE 100 as a whole where the forecast P/E is around 16 and the dividend yield 3.3%. However, against its sector peers, Centrica looks less appealing, particularly for investors seeking a high income.