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Primarily based on payouts over the previous 12 months, Harbour Power (LSE:HBR) is likely one of the finest dividend shares on the FTSE 250. Because of its beneficiant yield, it sits comfortably throughout the prime 10% of shares within the UK’s second tier of listed corporations.
And following the acquisition of property beforehand owned by Wintershall Dea, it’s now the most important oil and fuel producer within the North Sea. This transformational deal, which was accomplished in September 2024, means the group now has the monetary firepower to additional improve its dividend.
Certainly, the corporate intends to pay $380m to legacy shareholders over the following 12 months. At present (9 January) trade charges, this equates to 21.5p (26.4 cents) a share. On the time of writing, Harbour Power’s shares are altering arms for round 265p. This means a yield of 8.1%, greater than twice the FTSE 250 common.
However returns to shareholders are by no means assured, notably within the oil and fuel sector. Earnings could be risky, which implies dividends can fluctuate considerably from one interval to a different.
Nevertheless, in it’s brief existence as a listed firm, Harbour has a powerful document of steadily rising its payout (see desk under).
| Monetary 12 months | Dividend kind | Dividend per share ($) |
|---|---|---|
| 2021 | Closing | 0.11 |
| 2022 | Interim | 0.11 |
| 2022 | Closing | 0.12 |
| 2023 | Interim | 0.12 |
| 2023 | Closing | 0.13 |
| 2024 | Interim | 0.13 |
Extra earnings
Undoubtedly, this has been made attainable by spikes in wholesale oil and fuel costs, notably in 2021 and 2022.
However it is a double-edged sword.
In response to public stress, the earlier authorities launched a ‘windfall tax’, formally often known as the Power Income Levy (EPL). Not surprisingly, the corporate’s share worth has been steadily declining for the reason that Could 2022 announcement.
Subsequent will increase imply the group now faces an efficient company tax price of 78% on its earnings derived from the UK Continental Shelf.
Partly, this explains the acquisition of Wintershall Dea’s oil and fuel fields. None of those are in UK waters, subsequently the EPL doesn’t apply. And because of the deal, the group is now producing 90% greater than beforehand. This offers me some confidence that it could actually proceed to develop its dividend.
Commodity costs
Present laws means the EPL will stay till 31 March 2030. However there are provisions for it to be scrapped.
On the one hand, a falling oil and fuel worth would harm income. Nevertheless, if (for six consecutive months) the typical month-to-month oil worth falls under $71.40 — and the fuel worth goes beneath 54p a therm — the ‘windfall tax’ can be abolished.
However this seems unlikely to occur any time quickly.
Though Brent crude is falling, it nonetheless stays above the worth ground.
And I’m wondering if fuel costs will ever drop under 54p once more.
In my view, it appears as if the EPL is right here to remain.
My opinion
Regardless of this, I plan to maintain my Harbour Power shares.
That’s as a result of I feel diversifying away from the UK is an effective transfer.
And though it’s not possible to precisely predict future vitality costs, the extra earnings earned exterior of Britain’s waters ought to assist be sure that the group is ready to — not less than — keep (in money phrases) its beneficiant dividend.
