As promised, here’s the first in the series of investing research posts. A look at the pros and cons of buying part of Unities Utilities.
What they do
United Utilities are a water and sanitation provider for the north west of England, they provide water pipes leading into 7 million homes and run 539 waste water plants.
Nice Boring Company – Not usually a criteria for most people when investing in shares but a boring company is less likely to have large swings in its value as it develops new technology or something major happens in its sector. The water requirements of people is unlikely to drastically change any time soon so a good company who meets these needs should keep generating profit.
Profitable – The last 5 years have been profitable for the company.
Dividends – The dividends have been rising for the last 5 years.
Net Assets – The company has positive equity.
Market Cap/Book Value – United utilities have a market cap of £6 Billion and a book value of £2.7 Billion giving it a ratio of 2:2
Good Customer Service – Its a company I use myself and have never had a bad experience with them. Setting up my account and dealing with payments has been far better than other utilities providers.
Directors Buying Shares – Always a good sign when people high up in the company invest their own cash. A non-executive director recently bought £30k worth of shares at £9.91/share.
Directors Selling shares – Even though the most recent transaction was a buy, the previous 16 were sell orders. However most of these were partial sell orders where the person selling still kept a portion of their holdings.
New Laws – In April 2017 new laws will give all businesses the power to choose their water provider (previously this only applied to larger companies). United Utilities will need a good plan in order to not lose too many profitable clients.
Regulator – The company is carefully watched by Ofwat. Regulators are usually a good idea for the customer (especially for markets with little competition) however it always leaves open the possibility of an unexpected law change that could cost the company a lot of money to adhere to.
A good company at a good price. I don’t expect anything major to happen to the share price over the next few years but it should grow slowly as the UK population grows and more houses get built in the Northwest. I’ve bought 114 of these shares at 870p with the plan to hold them “forever” and enjoy the dividend income.
Disclaimer – Not sure if I need this here or not but just in case anyone is confused, I am not a financial advisor and this post is not investment advice to anyone. It is simply a summary of the research I did myself when looking for shares to buy myself.