How to appease angry shareholders? Multiply dividends by five, according to Drax

Lucy White
Drax increases dividend
Drax has increased its dividend by more than five times since last year (Source: Getty)

If you can't beat them, join them. At least that's what Drax's shareholders might be thinking, after the power company announced a £50m dividend just months after shareholders rebelled over executive pay.

In its trading update this morning, Drax said it “expects to recommend a dividend of £50m with regards to the 2017 financial year” – five times more than the £10m it coughed up last year.

Just in case the word “payoff” popped into any shareholders' heads, the multi billion-revenue company added that the dividend is “sustainable” and that it expects to increase it from this level.

"Through our operations in retail, generation and biomass supply we expect to deliver a significant increase in high quality, visible, contracted earnings for the group,” said chief executive Dorothy Thompson.

"We are confident in the strategy and our ability to deliver high quality earnings, growth and value for shareholders, supported by a strong financial model and clear capital allocation policy, including a sustainable dividend that we expect to grow from a level of £50m in 2017."

Drax added that “if there is a build-up of capital in excess of the group's investment needs”, then the board must consider the most “appropriate” way to return this to shareholders.

​Read more: Drax Group share price falls as company slashes final dividend while profits for year ended December 2015 tumble

The trading update follows a revolt by shareholders in April at Drax's annual general meeting (AGM).

A third of shareholders voted against a report which assigned chief financial officer Will Gardiner an annual pay of £971,000.

Just over 20 per cent of shareholders also voted against a new remuneration policy.

In today's announcement, Drax also said that it plans to generate earnings (before tax, depreciation and amortisation, or Ebitda) of £425m by 2025.

At the end of 2016, Ebitda was down 17 per cent at £140m.

Drax's share price has dipped by 3.19 per cent on the news, but it is still trading substantially higher than it was following the AGM.

Related articles