The threat of ever-growing inflation has been sending markets into a frenzy and hammering growth shares around the world. Despite this, a high-yield FTSE 100 energy share should be able to help ease my inflation-related fears while also offering solid growth prospects.
Scottish-based FTSE 100 energy giant SSE (LSE: SSE) is one company performing well at the moment. For example, it recently raised its full-year earnings guidance to 90p per share from 83p per share. This was the result of strong performance from its gas-fired power stations, which have made up for poor renewables performances that resulted from a dry and still summer. Alongside the current strong performance, energy utilities have been shown to fare well and often profit off rises in inflation while other sectors suffer. I believe this puts SSE in good stead to deal with inflation uncertainty over the next few months.
A FTSE 100 share for the long run?
SSE is not just a share for the short term. It’s committed to paying out a consistently high dividend with a current yield of 5.3%, and it saw an incredible 39% return on equity in the last financial year. Alongside all this, SSE’s CEO Alistair Phillips-Davies has pledged a £12.5bn increase in renewables investment over the next five years. This will shift the company towards net zero and safeguard its future in an evolving UK energy market. As the second largest UK energy supplier, SSE already has an established position in the market and can build on this over the next few years as it continue its shift towards renewables.
Despite all this promising news, the shares are down 4% year-to-date. The disparity between the company’s performance and its share price could mean that it’s ready to surge in the near future. This is especially true as investors continue to migrate away from higher-risk FTSE 100 growth shares in the wake of inflationary pressures.
Future concerns?
SSE’s shift towards renewable energy has been the result of pressure from activist hedge fund Elliot Management. There is some concern that SSE is divesting from profitable areas of its business to fund the renewables shift. In the summer of 2021, it sold its stake in Scottish Gas Networks, an asset that would’ve performed well over recent months considering the performance of gas-fired power stations. SSE will also likely be forced to lower dividend pay-outs slightly over the next few years to finance investments into new wind farms.
Despite these worries, I believe that the shift to renewables is an important step in adapting to the UK’s future energy demands and is worth any drop in dividend pay-out or divestment in gas power plants. Its current high earnings, positive outlook, and ability to thrive under inflationary pressures make this FTSE 100 share one I’m strongly considering for my portfolio with my next available chunk of savings.
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Finlay Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
