National Grid has just revealed its results for the year to March 2016, and once again the company’s predictable business meant that shareholders knew pretty much exactly what to expect — they saw a 6% rise in adjusted operating profit and a 19% rise in adjusted earnings per share to 63.5p.

That led to a 1.1% rise in the full-year dividend to 43.34p, which might not sound a lot but it’s ahead of inflation. It was actually slightly down on predictions and is possibly the reason behind the 2.7% fall in National Grid shares on the day so far, to 972p, but it would still yield 4.5% on the current share price.

Set for growth

Chief executive John Pettigrew reckons that National Grid is “well positioned to deliver asset growth in 2016/17 and beyond“, and I don’t think many would disagree given the company’s track record.

Dividend growth has been going on for years, and the only reason the yield has dropped a little in recent years is the steady rise in National Grid shares. Over the past five years, the price is up 58% to 977p, and when we add total dividend cash of 166p over that period, we’re sitting pretty on a total return of nearly 85% — and if the dividend cash had been reinvested in more National Grid shares, it would be even higher!

The whole business of supplying energy is a very profitable one, and at Centrica (LSE: CNA) we’re seeing another good example of a solid dividend-paying company — though in this case, a fall in the share price could be providing us with a very nice recovery prospect, too.

Centrica’s dividend yield for the year to December 2015 came in at 5.5%, and there’s a nice hike to 6% currently forecast for 2016, even though there’s a 12% fall in EPS expected — but there’s a 3% recovery on the cards for 2017.

Falling shares

So why have Centrica shares fallen by 37% over the past few years, to 201p? Well, Centrica did have to turn to an equity issue earlier this month to raise a bit of cash as its debts have risen to £4.4bn. Some of the cash raised, however, was to fund the firm’s continued acquisition plans, and only this week we heard of the purchase of ENER-G Cogen International Limited for £145m.

The equity issue was fully placed with institutional investors, and they clearly don’t seem worried about it. And with the shares on a forward P/E of around 13 and those big dividends looking good, I don’t think we should be either.

Although the total return from Centrica shares over the past five years, including dividends, has only come to 37%, I still see the owner of the British Gas and Scottish Gas brands as a good long-term investment.

The post National Grid plc and Centrica plc are still great investments! appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Earnings per share have been a little erratic in recent years, but after a 9% increase in the year to March 2015, the company was able to pay a 5% dividend yield. With National Grid’s policy of lifting its ordinary dividend each year at least in line with the rate of RPI inflation, there’s a rise of around 2% predicted for the year just ended, with the interim payment already raised by that level. With National Grid shares having put on 11% in the past 12 months, to 988p, it would yield 4.4%.

National Grid shares are good for those who wish to reinvest dividends too, as the company runs a scrip dividend scheme so you can take new shares instead of cash — and to offset the dilution effect, it regularly buys back some of its own shares.

A forward P/E of around 15.5 is fractionally ahead of the FTSE average, but for such dependable income, I reckon that’s good value.

Retail recovery

After years in the wilderness, Marks & Spencer (LSE: MKS) could be back on track. The high street stalwart is, admittedly, still struggling to get its clothing onto the backs of younger shoppers — in its fourth quarter update it revealed a 1.9% fall in Clothing and Home sales. But M&S.com is doing well with an 8.2% rise in sales, and the shift to online selling is vital if M&S is to compete successfully with the likes of Next, ASOS, and the rest.

How those sales will translate into profit is something we’ll hear on 25 May, when the company is due to release full-year results — and there’s a modest EPS rise expected. M&S shares could certainly do with a boost, after shedding 25% over a year to 412p, and gaining just 4% over the past five years.

With EPS forecast to rise gently over the next two years, and with the dividend expected to yield 4.4% this year and predicted to rise to 5% by March 2018, we’re looking at a current P/E of around 12 and set to drop to under 11 in two years. That makes M&S shares look like decent value to me.

Reliable utility

A day later, on 26 May, we should have full-year results from United Utilites (LSE: UU), and that’s another bedrock of many a long-term portfolio. After three years of double-digit rises in earnings per share, there’s a fall back of 10% expected for the year to March 2016, but the company’s progressive dividend policy should still see the annual payment rise at least in line with inflation — as confirmed at interim results time back in November.

United Utilities shares have had a pretty flat 12 months, and the current price of 942p suggests a likely dividend yield of 4.1%, which is pretty respectable. On a P/E of around 20, United Utilities shares are the priciest of these three, but that’s the premium the market is happy to pay for super reliability.

The post 3 hot shares for May: National Grid plc, Marks and Spencer Group plc & United Utilities Group plc? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The companies that provide our gas, water and electricity enjoy a very predictable business. Demand doesn’t vary too greatly, and by taking on long-term energy contracts they can avoid surprises on the cost front, too. And that makes steady predicable dividends that much easier.

Look at National Grid (LSE: NG). It’s been lifting its annual dividend year after year, and offered shareholders a yield of 5% last year. Earnings are expected to only grow slowly over the next few years, but we still have steady dividend increases on the cards that would yield 4.6% for the year to March 2016, with forecasts lifting that to 4.8% by 2018 — the yield has dropped a little because the share price has risen 12% over the past 12 months, to 963p.

Those yields would be covered around 1.4 times by earnings, which is pretty strong for the utilities sector, and National Grid says it should be able to boost its annual cash payment at least in line with RPI inflation for the foreseeable future.

Biggest dividend

Over at electricity supplier SSE (LSE: SSE), we’re looking at even better dividends, with a yield of 5.9% paid in 2015 and with 6.3% forecast for this year on shares priced at 1,457p. That would be a little less well covered at 1.25 times, but it’s still reasonable for a utility firm. The share price hasn’t done much over the past five years, putting on just 17%, but that’s still ahead of the FTSE and those 6% dividends are around twice the long-term FTSE average.

SSE has the same dividend policy as National Grid, too, and at interim time told us it expects to increase its 2015/16 full-year dividend at least in line with RPI inflation — and it is targeting the same thereafter.

Water firm United Utilities (LSE: UU) actually has a couple of years of falling earnings forecast — 11% this year and 2% next. But analysts are expecting an 8% uptick for the year to March 2018, and in the long term the firm’s earnings should be solid. Perhaps unsurprisingly, United Utilities also has the same target of at least matching RPI inflation with its dividends, and in its first-half update said it expects to manage it at least until 2020.

With the shares at 894p, that would mean yields of 4.2% this year, rising to 4.4% by 2018, with cover of around 1.2 times. It’s looking like the weakest dividend of the three, but by way of compensation the share price has put on 57% over the past five years, easily beating the FTSE’s meagre 6%.

Long-term wealth generation

You’re not going to get the white knuckle ride that turns a lot of potential investors away from shares (and, on the other hand, excites a good few too), but safe investments like these three should help your ISA perform very well over the decades — and putting the cash into shares will almost certainly beat the pants off any cash ISA.

The post National Grid plc, SSE PLC And United Utilities Group PLC Could Be Good For Your ISA appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Super yield

Look at SSE (LSE: SSE), which is a big favourite among high-yield investors. It’s been offering up dividend yields of close to 6% for years, and for the year to March 2016 there’s a 6.5% yield forecast, with similar on the cards for the next two years — a share price that has dropped 16% since May last year to 1,433p has helped boost that percentage.

The problem is, there’s a 9% fall in earnings per share predicted for this year, followed by zero change for each of the next two years. In 2015 we saw dividend cover of 1.4 times, but that would drop to just 1.25 times on this year’s forecasts, and a shade less by 2018.

In its January trading statement, SSE reiterated its intention of “targeting an increase in the full-year dividend for 2016/17 of at least RPI inflation, with annual increases thereafter of at least RPI inflation“.

So we’re probably safe for this year and next, but if earnings don’t start picking up again, it won’t be sustainable for ever.

More erratic

Dividends at gas supplier Centrica (LSE: CNA) have been less stable, with a couple of years of falling earnings leading to a 21% dividend cut in 2014 followed by another 11% in 2015. There’s a further 9% decline in earnings currently forecast for the year to December 2016, yet the City folk are expecting the dividend to be lifted a little to yield 5.8% on today’s 226p shares — and with only a 1% EPS gain penciled in for 2017, they’re expecting a further dividend boost to 6%.

That would give us dividend cover of around 1.3 times this year, dropping to 1.26 times next. Again, I find that cutting it a bit fine, and Centrica has made less of a commitment to dividend growth having merely said in February’s full-year report that its progressive dividend policy is “tied to confidence in underlying operating cash flow“.

Again, probably safe, but by no means certain.

The safest?

The National Grid (LSE: NG) share price has bucked the trend, being the only one that has gained in the past 12 months — albeit a modest 8% to 947p. The potential dividend yield is the lowest of the three, with a relatively modest 4.5% (still way ahead of the FTSE 100 average) expected for the year to March 2016, blipping up a little to 4.7% by 2018.

But the nice thing is that National Grid’s dividend should be a bit better covered than the other two, with the 5% EPS rise forecast for this year taking it to 1.4 times. Admittedly, the next two years with a suggested EPS rise of only 2% in total would drop that cover to 1.35 times, but that would still be ahead of the pack.

National Grid’s dividend is probably the safest of the three, but the lesson that we should not be complacent is a welcome one.

The post How Safe Are Dividends At SSE PLC (6.5%), Centrica PLC (5.8%) And National Grid plc (4.5%)? appeared first on The Twelfth Magpie.

More reading

• Down 15%! Is National Grid’s share price really a bargain right now?
• 3 British dividend stocks to consider for passive income this summer
• How UK shares could build a £339,849 ISA
• How much could a £25,362 Stocks and Shares ISA be worth in 10 years?
• 2 juicy income shares with big exposure to AI

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.