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Why SSE Plc (SSE) Beats National Grid Plc (ADR) (NGG) and Centrica PLC (CNA)

So which is best?
If I had plans to buy just one of these five, I think I’d rule out the two water companies — their valuations look just a little too rich, and I feel that the stronger future demand is going to be for energy. And even with possibly new regulatory and competition threats, the valuations and dividends across the sector still look attractive.

But which is it to be? Well, I don’t put too much store on year-by-year earnings growth figures, because they are erratic, and as there is no differentiation in the products, I’d expect long-term profitability to not vary very much across the industry.

It’s essentially all about dividends for me, and the higher dividend from National Grid plc (ADR) (NYSE:NGG) and SSE PLC (LON:SSE) needs to be contrasted with Centrica PLC (LON:CNA)’s better cover — though higher P/E.

My final pick goes to SSE PLC (LON:SSE), which I have actually just added to the Beginners’ Portfolio watchlist. A forecast dividend yield of 5.8% from shares on a P/E of just under 13 looks desirable to me, and I see no reason why the annual payout can’t be sustained at those levels.

The article Why SSE Beats National Grid and Centrica originally appeared on Fool.com.

Alan Oscroft has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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