“Britain’s greatest soft drinks company” — that’s how Britvic (LSE: BVIC) likes to describe itself. And with iconic brands like Robinsons, J2O, Tango and Fruit Shoot in their vast portfolio, I’d find it hard to disagree. The company also has exclusive agreements to make, distribute, and market global brands such as Pepsi and 7UP on behalf of US multinational PepsiCo.
That’s how I like it
In recent years this leading branded soft drinks business has enjoyed a period of strong growth, with pre-tax profits rising steadily from just £77.5m in 2012 to £152m last year, and annual revenues increasing by £175m, rising from £1.25bn to £1.4bn over the same four-year period. But what about the shareholders? Has the company been rewarding its loyal shareholders with dividends, or has it been retaining its profits to fund future growth?
The answer is a little bit of both. Looking back at the group’s earnings in recent years and comparing them to shareholder payouts, it seems as if Britvic’s management team are happy to distribute around half of the company’s underlying earnings to its shareholders, with the rest ploughed back into the company. Personally, that’s how I like it.
Cost control
In its last update, the Hertfordshire-based drinks maker reported a strong start to its new financial year and said that it remains confident of meeting market expectations. Management reported a 4.3% increase in first quarter revenue, up to £351m, underpinned by volume growth of 3.9%. Encouragingly, revenue growth was achieved in all its key markets around the globe.
I remain optimistic about Britvic’s long-term prospects as it makes progress with its three-year business capability programme, and continues to focus on cost control, which should deliver an additional £5m benefit this year. The shares remain attractive for income seekers, with an improving payout that yields 3.9% for the current year, rising to 4.1% for fiscal 2018.
Inflation proof
For income seekers looking to park their money in a more defensive sector, then perhaps a better fit would be gas and electricity supplier SSE plc (LSE: SSE). Formerly known as Scottish and Southern Energy, the company is one of the UK’s leading energy companies, involved in the generation, distribution and supply of electricity and in the extraction, storage, distribution and supply of gas. The Perth-based group is also the UK’s leading generator of electricity from renewable sources.
Earlier this month, SSE announced an increase to its standard GB domestic electricity prices from 28 April. The 14.9% price increase will mean a typical dual-fuel customer will pay £73 or 6.9% more each year. The company said that the price rises reflect the increasing cost of supplying electricity, and this being the case I would expect other suppliers to follow suit.
But with an inflation-proof dividend that currently yields 6.1%, I believe SSE could be a great way to profit from rising fuel costs, and perhaps offset some of our own energy bills.