LONDON (ShareCast) - UK water stocks Severn Trent, United Utilities and Pennon offer "low-risk returns", according to Deutsche Bank, which recommended investors to buy a basket of the three stocks despite their recent strong run.

The bank has raised its target price for Severn Trent from 2,000p to 2,150p and for United Utilities from 900p to 980p, but has left its 830p target for Pennon unchanged.

"With the share prices of UK water stocks rising strongly this year, our view that returns could converge down to those of UK and US peers as regulatory visibility improves has now somewhat played out," it said in a note on Friday.

"However, returns still look attractive in the current low yield environment and there is scope for bids after the completion of the review."

Deutsche Bank said that returns of 7-8% per annum are still above those of other low-risk peers.

BC

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