Investment in utility companies like SSE is gaining attention as the energy sector adapts to changing market dynamics. Traditionally viewed as defensive investments, utility shares offer stability during economic downturns, making them appealing for dividends rather than capital growth. However, SSE is positioning itself for potential growth with a significant £33 billion investment programme aimed at expanding its renewable energy capacity and upgrading its electricity-transmission network.
SSE, which provides electricity across southern England and Scotland, is embarking on an ambitious strategy that includes enhancing its infrastructure to connect renewable energy producers to the national grid. This approach aligns with the ongoing transition towards a low-carbon economy, which SSE anticipates will encourage consumers to pay more for renewable energy.
Investment Focus and Growth Potential
Approximately two-thirds of SSE’s investment will target the upgrade of its electricity-transmission network. By improving this network, SSE aims to facilitate the delivery of renewable energy to consumers, thereby positioning itself for financial gains from this essential service. If SSE can execute its infrastructure projects on schedule and within budget, it stands to earn a high return on its investments.
Nevertheless, this strategy introduces a degree of risk. SSE’s success hinges on stable energy prices and sustained demand for green energy. Yet, the potential for significant returns exists, particularly as sectors demanding electricity, such as data centres and electric vehicle industries, continue to expand.
SSE’s recent performance indicates that its strategy is yielding positive results. Between 2021 and 2025, the company’s revenue surged by nearly 50%, and normalised earnings per share doubled during the same period. Management projects continued growth, estimating an annual increase in earnings per share of 7%-9% over the next five years, which would support a dividend increase of up to 10% annually.
Market Performance and Investor Sentiment
Despite these optimistic forecasts, SSE’s shares are currently trading at just 14 times the estimated earnings for 2027, with a solid dividend yield of 2.8%. This valuation has captured the interest of investors, contributing to a 26% rise in SSE’s share price over the past six months and a remarkable 44% increase over the last year. The shares are also trading above their 50-day and 200-day moving averages, signalling positive momentum in the market.
Given the current price of 2,596p per share, some analysts suggest a long position with a cautious approach. A stop-loss could be set at 1,600p, allowing for a manageable downside of £996.
SSE’s ambitious plans reflect its commitment to adapting to the evolving energy landscape, making it an intriguing option for investors seeking both stability and growth potential in the utility sector. As the demand for renewable energy intensifies, SSE’s proactive strategy may well position it for long-term success.
