London-listed utility firm Drax Group (LON:DRX) is a dividend yielding utility stock that accounts for 6% of UK power generation. The company is known to have historically drawn its power from coal-fired plants, but is currently adopting rigorous low carbon targets with the incremental deployment of biomass.
In 2017, the Group had a 65% to 35% biomass to coal generation ratio, and its recently appointed Chief Executive Officer Will Gardiner says he is fully committed to gradually phasing out coal in his pursuit of a greener company.
In an exclusive ReachX podcast with our editor Gaurav Sharma, the Drax Group boss makes investors a compelling preposition. “We are not just a yield play, but rather a yield play combined with growth.”
To listen to Will Gardiner’s podcast on SoundCloud click here.
The group has converted four of its six coal-fired units to burning biomass wood pellets, a fuel medium that it often sources from its own holding facilities in the US.
At its most recent market update, Drax left its full-year earnings forecast unchanged after having posted a 16% drop in first-half earnings for the six months to 30 June to £102m, down from £121m for the same period in 2017. Much of it was down to two unforeseen outages in the company’s fiscal first quarter, an issue the company has moved on from.
Drax Group recently raised its interim dividend to £22.4m, or 5.6p per share, from 4.9p last year. Gardiner adds: “We remain focused on safe and efficient operations and returns to shareholders and expect to declare a full-year dividend of £56m for 2018."
He also forecasts growth in “all three” of Drax Group’s existing business streams – power generation, B2B power sales and supply, and wood pellet production stateside.
And the former investment banker turned corporate boss predicts a bleak future for coal both in the “UK and the wider world” as the global economy inexorably transitions to a low carbon future.
