Martin Vander Weyer Martin Vander Weyer

Why British Gas’s owner is right to restore its dividend

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‘What’s worse, they’re paying the profits to shareholders,’ said a grey-haired woman ahead of me in the Co-op queue. ‘Bloody shareholders,’ her friend of similar age and class spat back. I guessed they were talking about Centrica, parent of British Gas, which at a time when domestic energy bills are rising 23 times faster than wages (as Frances O’Grady of the TUC puts it) has announced half-year operating profits of £1.3 billion, up from £262 million last year – and the restoration of a penny-per-share interim dividend after a three-year gap.

Both ladies looked likely to be beneficiaries of pensions nourished by dividends from the likes of Centrica, Shell and BP. But I resisted the temptation to interrupt them by quoting Centrica boss Chris O’Shea, who has said ‘You’ve got to restore [the dividend] at some point, you’ve got to give people a return – and I think our shareholders have been very, very patient’, while also acknowledging that ‘it’s difficult to see the word profits or dividends… when people are having a tough time’.

He’s right both ways. But this column has stood up often for the principle of dividends as a rightful regular reward for investors who risk their capital – rather than an unearned bonus for the already rich, as anti-capitalists claim. Dividend streams are particularly relevant to investors in utilities and banks that are unlikely to provide decent returns through share-price performance but which need a stable long-term shareholder base. So O’Shea is correct to assert the principle with his token penny payout. But he still needs to offer the ladies in the Co-op an explanation as to why his fortuitously fat ‘upstream’ profits driven by world oil and gas prices can’t be deployed to ease the pain of his downstream domestic customers.

Mystery pricing

My call to shame inflationary price-hike opportunists produced a bumper mailbag.

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