- Jefferies International has double-upgraded its investment rating on Drax [LON:DRX] and moved straight to buy (from underperform) on the expectation of an 18.5p dividend.

The broker said: "We believe Drax will announce a cash flow based dividend policy with a floor dividend of £75m or 18.5p/share at the June CMD.

"This dividend delivers a 6% yield and passes stress tests of -20% power prices and additional OCGT capex.

"We believe the current valuation places limited value on retail business Haven and the US assets, which have a book value of c.£280m."

The price target for the stock was upped to 400p per share from 305p.

Meanwhile, equity research analysts at Barclays Capital upgraded their recommendation to overweight (from equal weight), last week, believing the post-results stock weakness was unjustified.

The bank pointed out that the shares have fallen 20% since the results in mid-February, which it said was based on little more than disappointment that it didn't 'immediately' announce a new higher dividend policy.

Barclays said: "We understand Drax's consultation is a genuine attempt to balance priorities of growth capex and increased returns to shareholders.

"We thus see no justification for the scale of Drax's recent share price reversion, and upgrade to OW."

Its price target was increased to 410p per share (from 400p).

At 3:36pm: [LON:DRX] Drax Group PLC share price was -7.8p at 315.2p

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