The National Grid (LSE: NG) share price jumped 2.8% this morning (15 May) after it released a solid set of full-year results, offering a welcome lift for long-term shareholders.
For years, the energy transmissions giant has been seen as one of the FTSE 100’s most dependable stocks. A core holding for cautious investors seeking stability, steady growth and reliable dividend income.
As a regulated utility, it doesn’t often excite the market, but that’s part of the attraction, I suppose. I’ve never been excited enough to buy it myself.
Today’s full-year results to 31 March see the group powering on. Statutory operating profit rose 10% to £4.93bn, while the underlying figure climbed 12% to £5.36bn.
Earnings and profits
Underlying profit before tax increased 20% to £4.07bn, and underlying earnings per share (EPS) edged up 2% to 73.3p.
The group is pressing ahead with plans to invest £60bn across the next five years in both the UK and US, targeting decarbonisation and grid modernisation.
Chief executive John Pettigrew, who’s set to hand over to Zoë Yujnovich in November after almost a decade at the firm, described 2024/25 as a year of “delivery and growth”. But I have a quibble.
The rebased dividend is up 3%, with a payout of 46.72p per share. However, last year investors got 58.52p, so in practice this is a 20% cut.
For years, the stock has yielded north of 5.5%.
Income has been cut
In 2025, investors can only expect a yield of around 4.57%. This will creep up to 4.67% in 2016, but it’s a bit of a blow.
It’s possible to get yields of between 6% and 9% elsewhere on the FTSE 100, from companies that are supposedly riskier, but haven’t rebased their shareholder payouts.
Typically, National Grid’s price-to-earnings ratio stands at around 15, pretty much in line with fair value. Today, it’s notably cheaper at 12.1 times. Some investors may see that as a tempting entry point.
In my view, National Grid isn’t quite the cast-iron stock it used to be. That rights issue came as a jolt, although the shares swiftly recovered.
Net debt is hefty at £41.4bn on 31 March 2025, although thanks to the right issue and some disposals, the board has trimmed that by £2.2bn.
Stormy weather
Today’s high interest rates have driven up financing costs, although that could ease if interest rates fall further.
National Grid has suffered a £303m impairment on its New York offshore wind project. Delays and political uncertainty have forced a pause.
It’s a reminder that infrastructure investments are rarely straightforward, and delays or overspends can knock long-term projections off course. Net zero is now caught up in the culture war, which doesn’t help.
The 12 analysts serving up one-year share price forecasts have produced a median target of 1,151p. If correct, that’s a solid increase of more than 10% from today. Combined with that yield, this would give investors a total return of more than 15%. Forecasts cannot be relied upon.
National Grid is worth considering for those seeking a passive income stream and potential growth over time. But with so many juicy income stocks on the FTSE 100 today, I’ll seek mine elsewhere.
