United Utilities: Confirms Fiscal 2024 Guidance; Shares Fairly Valued

We maintain our GBX 1,000 fair value estimate after no-moat United Utilities confirmed its fiscal 2024 guidance in a trading update, although it tweaked its outcome delivery incentive guidance from over GBP 50 million to GBP 40 million because of adverse weather, namely heavy rains and storms. Fiscal 2024 results will be published on May 16. Shares look fairly valued, but can be appealing to income investors due to a fiscal 2024 dividend yield of 4.8% by our estimates and a policy to grow the dividend in line with inflation that we expect to be extended to the next five-year regulatory period called AMP8 for the U.K. water sector, starting in April 2025. The U.K. water watchdog Ofwat will release its draft decision regarding AMP8's features in June. The final determinations will be released in December. In early 2025, United Utilities will unveil its dividend policy for AMP8.