Questor share tip: United Utilities is a buy for income Of course, assets such as water companies are attractive for investors seeking relatively solid, long-term returns. United Utilities has around 7m customers in its catchment area - and this year is expected to make a pre-tax profit of more than £350m. That's why these utility groups are attractive for income investors. However, a share should never be bought on bid hopes alone. It is the fundamental prospects for the business that matters. In the first six months of the year, revenue is expected to be higher than last year, reflecting the regulated price increase allowed by regulator Ofwat. However this increase is slightly below the allowed regulated price rise, principally reflecting the ongoing impact of customers switching to meters and continued lower commercial volumes. The rise in revenues is also likely to be counteracted by a rise in depreciation and higher infrastructure renewals expenditure. Analysts are pencilling in a 1pc rise in operating profit. Price rises in the water sector are linked to the retail price index (RPI). Recently, the Office for National Statistics (ONS) said it would review the way it calculates RPI, which is a potential risk for future regulated returns. The ONS is to consult on whether to move the calculation of RPI closer to the calculation of the, generally lower, consumer price index (CPI). This is known as the "formula effect gap." When the review was unveiled, Deutsche Bank undertook a worst-case scenario calculation in which it assumed the full 1 percentage point gap was closed between RPI and CPI and there was no offset for this allowed by Ofwat at its next price review. The German bank suggested that such a move could negatively impact equity values by 14pc for Severn Trent, 12pc for United Utilities and 9pc for Pennon. Although a full gloomy scenario such as this is probably unlikely, this is a risk for the sector going forward. The shares have turned in an impressive performance this year. However, they are still yielding 4.8pc, which is attractive from an income point of view. The company's debt remains in the middle of Ofwat's targeted range. Questor continues to believe that the best way to structure a portfolio is have the core as income shares, which provide dividends that can be reinvested. This compounding effect boosts returns significantly, although the strategy takes time. United Utilities shares are trading on a 2013 earnings multiple of 17.8 falling to 16.4 times. They were last tipped as a buy at 609p in February and they are up 20pc since then. They remain a buy.