NG - National grid (NYSE:NGG)

[DividendDragon]

Hi guys this stock is looking attractive to me at the moment with a 5% dividend.

About the company:

National Grid Plc is an electricity and gas utility company. The UK Electricity Transmission includes high voltage electricity transmission networks in Great Britain.

Its UK Gas Transmission provides the gas transmission network in Great Britain and UK liquefied natural gas (LNG) storage.

US Regulated includes gas distribution networks, electricity distribution networks and high voltage electricity transmission networks in New York and New England.

Financials;


Slow annual growth rate of 1.3%

Debt to equity = 2.11 although this is down significantly from previous years.

3bn cash (debt = 25bn GBP of debt) so could really pay down much of this debt with
cash.

EPS - a general upwards trend fluctuating over the past 5years

value

Avarage p/e over 13years = 12.73
Current = 11.63

dividend

An increase every year (bar 2011 because of a rights issue) since 1996

Payout ratio = 66% (LSE)
Growth rate has slowed significantly recently to around 2.5% yearly.

What do people think about this stock?
On one hand I feel it's very safe, everyone needs electricity right, and the management seem very shareholder friendly with their approach to the dividend but the pressure on the dividend is also clear - A swelling payout ratio, slowing growth and too high a debt to borrow to maintain.

But then again I feel that the dividend yield of 5% represents/compensates for the risk along with the low p/e. I can also wait 30+ years for a return to health.

I think I'm going to give it a miss for now, the pressure on the dividend is too much for me. Slowing dividend growth and slowing growth is disappointing.

My only problem is I'm unable to take advantage of the opportunities on the US stock exchange ( JNJ is very tempting ) as the £ to $ rate at the moment is poor and would not represent value.

The reason for my posting is just to get everyones opinion on this. Again: I'm new to investing so please notify me on any key metrics that I've missed.

Lewys

[Kerim]

I've never explored National Grid as an investment because it is one of those companies that I am not allowed to buy due to my job. So I know very little about it. But your rundown looks pretty thorough, and I agree, a five percent yield from a utility helps with restful nights.

Maybe others will be able to offer more insight.

[rapidacid]

I've got the dividend yield at 3.7% with a per year div payment of $2.32 and a stock price of $63.14

The stock is very close to its 52 week low, but that's really the only "good" thing I'm identifying

I'd much prefer WEC which starts at 3.5% yield with a 5 yr avg bump of 16.1%, or SO which starts at 4.8% yield and a 5 yr avg increase of 3.7%

[Dividend Watcher]

Finviz has stats similar to rapidacid and a P/E of around 15. Lewys, is it trading on the LSE with different stats? I'm guessing not because of your concern about the exchange rate.

As to the company itself, a big part of its US operations is in upstate NY. NY has a very lousy regulatory environment and the economy is very weak except in isolated spots. In NY, the rates are among the highest in the US so you have consumer pushback on the regulators also. Rhode Island also has high rates but the regulatory environment is a little better. Not sure about the Massachusetts portion of the business but Eversource Energy (formerly Northeast Utilities) seems to be able to grow well despite the costs of doing business in New England.

I'm not sure how well the merchant power business is in the UK but it's a pretty volatile market here in the US. I've never looked at the business in the UK division.

Right now, the utilities in the US are at the high end of fair value if not overvalued at best. I would at least wait for them to drop further before making any major commitments to the sector -- especially with the exchange rates as they are.

[DividendDragon]

Thanks for the feedback and patience.

Unless my rookie-ness deceives me the current share price here in the UK is around 850p with an annual dividend of 42.25p

42.25/850 x 100 = 4.97%

Can someone help me out with the stats you're getting?

Thanks
Lewys

[rapidacid]

Looks like it's because NGG pays out twice a year at different amounts and not all sites calculate it correctly

http://www.nasdaq.com/symbol/ngg/dividend-history

The two payments in 2014 were:

1.1718
2.3107

2.3107 / 63.14 = 3.66%

( 2.3107 + 1.1718 ) / 63.14 = 5.5%