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United Utilities is no stranger to dividend cuts. The slump in 2008 led to a 30pc cut in the dividend to 33p, from 47p. The company got its sums wrong again in 2011, leading to a 12pc cut in the dividend. Analysts now think the new regulatory period will be tougher and predict a 20pc cut from 2015. Questor is therefore concerned that investors are overpaying for the security of a guaranteed inflation-linked dividend for the next two years. The shares, trading on 18 times 2013 forecast earnings, are looking expensive for a utility and the share price has reached a peak on a number of other measures.
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