Hargreaves Lansdown reckons that Centrica (LON:CNA) has set the stage for a dividend cut, Citywire reports. The comments came after the British Gas owner updated investors on its first-quarter performance yesterday, saying that the trading environment had been challenging due to a string of factors, including the negative impact from the UK default tariff cap, warmer than normal weather and falling UK natural gas prices.
Centrica’s share price, however, rose in the previous session as investors responded positively to the update, gaining 3.02 percent to close at 95.40p, outperforming the broader market, with the UK benchmark FTSE 100 index giving up 39.61 points to close 0.55 percent lower at 7,163.68. This morning, the shares have built on gains, having added 0.46 percent to 95.84p as of 08:17 BST, as compared with a 0.54-percent gain in the Footsie.
HL weighs in on Centrica
Citywire quoted Hargreaves Lansdown analyst George Salmon as commenting yesterday that Centrica’s good cost control meant that the group’s latest “update isn’t as bad as it could have been, but with a strategic review now pencilled in, the stage is set for a dividend cut”.
“The silver lining is that even if Centrica halved the payout, it’d still be paying an above market yield, and there would probably be room for the dividend to grow from that materially lower base,” he pointed out.
Other analysts on group
City A.M. meanwhile quoted Russ Mould, investment director at AJ Bell, as commenting that the British giant has ‘lost its way’ and must find a new path to ‘revive’ earnings.
“British Gas used to be a trusted brand – now its reputation has been tarnished by talk of sub-standard customer service and expensive bills,” he pointed out, adding that “with so much choice in the energy market, Centrica cannot afford to fail on service and cost which means it is going to have to reinvent itself”.
According to MarketBeat, the British Gas owner currently has a consensus ‘hold’ rating, while the average price target for the Centrica share price stands at 122.27p.