The initial market reaction to the Midlands based Severn Trent´s interim results last week was not positive. The group´s revenues rose 2.1% to £886m while pre-tax profit fell 35.4% to £65.3m. However, the water company´s results were hit by several exceptional items and the bulk of the underperformance was within its non-regulated business, highlights the Sunday Telegraph´s Questor team. On the other hand, the firm´s regulated business saw a 4.7% rise in turnover thanks to regulatory allowed price increases. Furthermore, the firm´s dividend policy, for the current regulatory period to 2015, is for it to rise by the retail price index plus 3 percentage points. No less important, Severn´s balance sheet is described as strong and its shares trade at a "certainly good" estimated 2012 dividend yield of 5.2%. That yield however is lower than competitor United Utilities, at 5.6%, while Pennon´s Viridor waste operation has a fantastic growth opportunity. Questor believes that United Utilities and Pennon are "buys" with the rating on Severn being "hold".

The Financial Mail on Sunday´s Midas column takes a look at the ´Dogs´ of the Footsie strategy, which tracks current high-yielding dividend picks, and looks at how they are faring and what might be in store next for income shares. The portfolio based on this strategy consists of the ten FTSE 100 shares with the highest prospective yields. This autumn, seven of them are financial stocks and some of their yields have rocketed. Shares in hedge fund manager Man Group, for example, are yielding nearly 11% while insurers Aviva, Resolution and RSA all offer more than 8.5%. Interestingly, National Grid and Vodafone have slipped out of the portfolio as sentiment towards them has become more favourable and their share prices have risen. In their place come broker and dealer Icap, satellite group Inmarsat and Admiral. Nonetheless, and as Midas points out, the yields have risen to such high levels because these companies' share prices have fallen sharply in the past few months. "Income provides some consolation, but these Dogs really need to start racing in the New Year if they are to have any hope of catching up with the blue-chip index," Midas concludes.

The "Big Six" utilities simply do not have the cash required to replace old coal and gas-fired plants with swish new nuclear reactors and giant offshore wind farms, which is why Beijing and private Chinese investors are being wooed by the sector. For The Sunday Times, which cites a research note from HSBC, "Energy companies are faced with a monumental bill for the much ballyhooed low carbon makeover. They are vilified by politicians, despised by their customers, and hamstrung by uncertainty over how the government's radical subsidy regime needed to turn Britain green is going to take shape. The upshot is that utility shares, usually seen as boring and, in uncertain times, safe, have performed accordingly. Despite that, just last week HSBC raised its price targets on these companies, pointing out that, "shares trade at a price-to-earnings discount of about 12% to the past decade and the punishment is overdone, including for the remaining British players, Scottish and Southern Energy and Centrica - British Gas' parent." The Sunday Times, however, adds that, "The fundamentals, after all, are sound and the peak winter months are upon us. Nonetheless, it is a brave investor who bets on British utilities."

AB

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Pennon Group (PNN) share price