Monday, 20 April 2015

National Grid – potential FTSE 100 Dividend Stock for my portfolio

I really want to invest in some more dividend stocks and I feel like I should be selecting several stocks from the FTSE 100; they are the biggest companies in the UK after all. Selecting a variety rather than several from the same industry sector seems to be the way to go. I am particularly interested in banking and supermarket stocks but one other stock that has always been in my head is National Grid.

National Grid is in the gas, water and multiutilities sector. It concentrates on providing an essential service and therefore it currently is a useful stock to have in my portfolio. This stock is currently trading at under £9 a share. It is twice as expensive as my Royal Mail shares BUT it pays more than twice the dividend so it is something I am definitely interested in. I will of course reinvest all my dividend income and since the stock will be in my tax free stocks and shares ISA I will be exempt from paying tax on any gains so it is a win win situation.

Before I dive in and make an investment I want to research the dividend history of National Grid. If I do invest it is likely to be a small investment to get me started and ensure that I am inline for the next round of dividends which I believe are due to be paid during the summer months. I get paid in just under a fortnight and I would invest around this date. I am thinking my investment is likely to be around £400 which would get me 43 shares minus trading costs. I did some overtime at work so I might be able to stretch this to £500 but I shall have to wait and see what my payslip says.

The 2014/2015 preliminary results are released on the 21st of May and I believe this will dictate the dividends for this year. The ex dividend date is on the 4th June so I would need to buy this stock before then if I want to get the dividend payment in August. The dividend payments have been rising these past few years. In 2010 the total dividend was 38.49p per share, whilst it was 42.03p per share in 2014. This is a small rise in payments but a rise is better than a loss. However the dividend yield used to be over 6.7% and is now just over 5%. This is a higher rate than any bank account will offer.

My opinion on the future of National Grid and possible obstacles to its growth.

NG seems to be relatively stable right now. Of course any power outages or disruptions to the network could temporarily result in a fall in capital growth. The thing that concerns me is renewable energy sources such as those provided by solar and wind energy. I think these may take over and might reduce electricity usage in the future. If this happened I think it would impact negatively on the share price of National Grid and stop the company growing. However I do not think this will happen in the next few years as alternative energy sources have expensive start-up costs.

2 comments:

  1. I'm hoping to get some NG shares at some point. I'm not sure why I didn't buy them recently, instead opting for Centrica, just before they announced a cut in dividend...doh! Hoping they will recover at some point, so I'm not worrying.

    If you're looking for shares with good track records in dividends, have you ever checked out Dividend Life's 'Dividend Champions' list - the latest one is here: http://dividendchampions.uk/

    Here, you can see companies which have increased their dividends year after year. It's a handy list to use when checking out what shares to buy, although of course, you should do your own research too.

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  2. You win some, you lose some as I always say. I am disappointed to see the National Grid share price rising again before I have got a chance to buy in. This always happens to me!! In saying that I still have to wait until next Tuesday before I get money to invest!

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