- Severn Trent serves about 8 million people across the Midlands and Wales
- The firm said its performance for the year ending 23 January ‘remains on track’
Severn Trent intends to increase its annual dividend payments amid rising consumer bills and controversy over sewage spills and its accounting practices.
The water company, which serves about eight million people across the Midlands and Wales, expects to pay a 126.02p per share dividend to shareholders in the 2025/26 financial year, compared to 121.71p per share the previous year.
The rise is based on the consumer prices index including owner occupiers’ housing costs (CPIH) index as of November 2024.
In early December, Ofwat gave the green light to Severn Trent’s five-year plan to invest £15billion in improving water health and infrastructure.
Severn plans to replace about 1,400 kilometres of water mains to cut leakages by 16 per cent, reduce pollutions by another 30 per cent, and become operationally net zero by 2030.
To help pay for these upgrades, Ofwat will allow the firm to increase average annual customer bills by 47 per cent to £583.
Shareholder payouts: Severn Trent intends to increase its annual dividend despite controversy over sewage spills and its accounting practices
Severn announced the dividend hike as the FTSE 100 company revealed its financial performance for the year ending 23 January ‘remains on track’.
It expects to achieve a result in line with guidance, including more than £100million in outcome delivery incentives in 2017 prices, a measure used by regulator Ofwat to monitor water companies’ performance.
Severn said on Friday that it would still have the second lowest bills in England and be giving £575million in financial assistance to help around one in six households with their bills.
Russ Mould, investment director at AJ Bell, said: ‘Severn Trent has to tread carefully if it is to avoid a flood of negative publicity given the reputation of water utility firms is in the mud with the British public.’
Last month, the BBC’s Panorama programme claimed Severn Trent artificially inflated its balance sheet by valuing an investment at approximately £1.7billion when, in reality, it had no value.
A Severn Trent spokesperson strenuously denied the allegations, describing them as ‘completely inaccurate, misleading, and misrepresentative of how we operate as a UK-listed and highly regulated business.’
Severn Trent has also come under fire for its environmental record, having been fined £2million in February 2024 for ‘reckless’ pollution of the River Trent near Stoke.
In October, analysis by campaign group Windrush Against Sewage Pollution (Wasp) said the company made over 800 suspected illegal sewage spills in 2021 and 2022.
This was despite the Environment Agency awarding the firm a four-star rating for its environmental performance in 2023, the highest possible grade available.
Severn has cited this rating for continuing to pay investors massive dividends, which have totalled over £1.2billion since 2020.
Mould said: ‘It’s clear that Severn Trent is pleased about the price increases Ofwat has agreed to let it push through – although the company will be keen to avoid any hint of smugness.’
But he added that the business ‘needs to ensure it delivers if it is to avoid renewed pressure from regulators and politicians.’
Severn Trent shares were 0.85 per cent lower at £24.63 on Friday morning, taking their losses over the past three years to around 15 per cent.
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