British Gasoline proprietor Centrica (LSE: CNA) noticed its share price rise 10% when markets opened on Thursday (20 February), after the corporate unveiled a powerful set of outcomes.

Centrica has lagged the broader FTSE 100 over the past 12 months, after a powerful restoration from 2021 to 2023. However at present’s numbers recommend to me the enterprise stays on monitor to make sustainable progress. I believe this might open the door to additional share price positive aspects.

Earnings down, dividend up!

Centrica’s working revenue fell 43% to £1,552m in 2024. Regardless of this, the corporate unveiled a ten% dividend improve, lifting the payout to 4.5p per share. That’s a yield of about 3.1%, on the time of writing. Shareholders also needs to profit from an additional £500m share buyback. My sums recommend this could present good worth for cash at present ranges.

I wouldn’t usually reward an organization for growing its payouts when earnings have fallen sharply. However that is an uncommon scenario. Centrica’s earnings are returning to regular after windfall positive aspects in 2023, when the corporate’s place as a giant gasoline producer meant it profited from greater power costs.

The power group’s accounts present clear assist for the dividend and buyback. This enterprise generated almost £1bn of surplus money in 2024 and ended the 12 months with internet money of £2.8bn.

Investing for long-term development

I believe Centrica CEO Chris O’Shea is aware of he’s struck fortunate. Not so way back, this group was fighting flagging earnings and a heavy debt burden.

O’Shea has deliberate a £4bn funding programme that’s supposed to assist long-term earnings, enhance buyer satisfaction and place the corporate for a gradual shift in direction of internet zero. For instance, the corporate put in almost half 1,000,000 good meters final 12 months.

Centrica additionally agreed to construct two 100MW “flexible hydrogen-ready” gaspower vegetation in Eire and prolonged the lifetime of its 4 UK nuclear energy stations.

Are the shares nonetheless low-cost?

There are nonetheless some dangers right here. For me, the largest concern is that Centrica generated almost half its underlying earnings final 12 months from gasoline manufacturing and power buying and selling on worldwide markets. These companies will be way more worthwhile than being a regulated UK utility. However earnings can be way more risky, relying on commodity market situations.

On steadiness, I believe it is a threat value taking. In my opinion, these companies could possibly contribute considerably extra engaging returns for shareholders than British Gasoline may do alone.

Centrica’s enormous money pile additionally signifies that it’s in a position to put money into long-term alternatives from a place of power. If it’s managed properly, I believe this needs to be a giant alternative.

Even after this morning’s positive aspects, the shares are solely buying and selling on 10 instances 2025 forecast earnings. Shareholders also needs to be capable of stay up for a 3.5% dividend yield for the 12 months.

This appears to be like undemanding to me. My valuation estimates recommend Centrica shares could possibly be value extra, even when earnings degree out. I believe this power stalwart’s value contemplating.