National Grid Investment Case

Investment Case: National Grid

Another retrospective account of why I purchase shares, this time in the regulated electricity and gas transmission / distribution firm, National Grid plc.


  • Dividend yield: ~5.3% trailing, versus 3.1% for FTSE100 and 4.6% for the sector;
  • Dividend expected to grow at approx. 4% per year, implying yield of 5.6% for y/e Mar-15;
  • Reasonable dividend cover (1.53x) given stability of cash flows;
  • Reasonable value at P/E 14.9x (Mar-14 est.).


  • Regulated gas & electricity transmission and distribution utility;
  • No competition (obviously regulated);
  • Stable regulatory environment in the UK, from which two thirds of profit generated;
  • Investment in (massive) infrastructure offers opportunity to deploy (and generate a return on) capital;
  • Best in class for debt funding.


  • Changes to regulatory environment;
  • Political interference (although mitigated by not being public-facing);
  • Unable to deliver asset base improvements below allowed regulatory plan.

Investment case:

  • Dividend
  • Dividend
  • Did I mention the dividend? (there will of course be huge egg on face when Nat Grid suddenly cuts its dividend…)
  • Highly-regulated utility with the opportunity to generate above-inflation return;


Another solid piece in the foundation of my portfolio.

BUY 128 shares at 769.3528p:

Consideration: £984.77

Commission:   £10

Stamp Duty:    £4.92

Net Cost:         £999.69 (781.01p per share)

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