Scottish & Southern Energy has revealed its dividend will jump by over 20pc amid speculation the power supplier is a takeover target but there is a public outcry for the company to further cut household bills instead.
The final dividend for the year to March will rise 22pc to 32.7p after which the total annual payout will go up by 4pc a year until March 2010.
Chief executive Ian Marchant said: "SSE's core objective is delivery of sustained real growth in the in the dividend, and today's announcement means we will have doubled the dividend in just seven years."
SSE made no mention of the takeover speculation surrounding the company but analysts believe the hike in the dividend may be a defensive move. Barclays Wealth analyst Peter Caldwell said the higher dividend announcement could be "a potential pre-emptive bid-defence".
Germany's E.On is rumoured to be interested in SSE if its takeover bid for Spain's Endesa collapses.
E.On, which already owns Powergen in the UK, tried to buy Scottish Power in late 2005 but this has since been sold to Spain's Iberdrola. The higher dividend is also a blow to customers seeking further cuts to high gas and electricity bills. At the start of March SSE's 7.7m customers saw gas tariffs fall 12pc on average and electricity bills by 5pc.
However, many argue that bills should have been cut further and sooner after the sharp rises in 2005 and last year. Karen Darby, chief executive of SimplySwitch.com, questioned why SSE had to wait until March to cut prices when energy consumption starts to fall after the winter.
She said: "They have been a bit slow of the mark and have cut prices as people are starting to turn their heating off."
She added SSE's price cuts were "no where near enough" and said the higher dividends were about "protecting the shareholders and not the customers".
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