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.
- 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:
Stamp Duty: £4.92
Net Cost: £999.69 (781.01p per share)
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