However, it can be difficult for a novice to know where to start, especially with limited savings. Here are a few pointers to help an inexperienced investor aim for a healthy six-figure sum from the UK stock market.

Where to start?

Personally, I think a Stocks and Shares ISA is a brilliant thing. With its attractive tax advantages – all capital gains and dividends can be earned tax-free — it’s likely to grow more quickly than some other investment products.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

And by reinvesting dividends it’s possible to benefit from compounding. If all goes to plan, this means the gains keep on getting bigger and bigger.

It’s also important to ensure that an ISA holds a mix of stocks. Diversification is important when it comes to spreading risk.

Finally, I think it’s necessary to invest for the long term. With an investment horizon of decades rather than years, there’s no need to get distracted by short-term price movements.

But even if you haven’t started yet, there’s no need to give up hope. It’s never too late. Just don’t hang about any longer!

The best time to plant a tree was 20 years ago. The second-best time is now.

English proverb

How much?

In my opinion, the best advice is to invest as much as you can afford.

Of course, there are no guarantees that an ISA will grow in value. That’s why you should always aim to have some spare cash available to help cope with life’s emergencies. Some people could be in a position to start with a lump sum. Others might prefer to save little and often.

Those who bought National Grid (LSE:NG.) shares 20 years ago, have done very well. A £1,000 investment on 25 May 2006, would now be worth £1,939. That’s a 94% return, equivalent to 4.7% a year.

But had all dividends been reinvested in buying more shares, the initial stake would now be worth £4,314. That’s a total gain of 332% or 10.6% a year.

A return like this — along with a regular monthly investment — could see an ISA grow very quickly. After 20 years, £100 a month would be worth £73,592.

My view

I think National Grid is the sort of share that would be a good candidate to consider for a Stocks and Shares ISA.

As we’ve seen, history has shown it to be a reliable performer. It’s the sort of stock that could be tucked away in an ISA and forgotten about. Others are likely to be more exciting but that’s not the point.

As a regulated business, the majority of its revenue is predictable. As long as it meets its obligations to customers, it will know with a reasonable degree of accuracy how much it’s going to earn.

However, there are risks. Energy infrastructure is expensive and the group has borrowed heavily to invest. In May 2024, it surprised investors with a £7bn rights issue.  

But it doesn’t have to worry about finding new customers, it pays a dividend (no guarantees) that’s higher than the FTSE 100 average, and it has an excellent track record of delivering shareholder gains.

Should you invest £5,000 in National Grid Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if National Grid Plc made the list?

James Beard does not hold any positions in the companies mentioned.

The post Starting with very little, here’s how to target £367,965 from the stock market appeared first on The Twelfth Magpie.

A realistic view

One major reason for optimism is the enormous investment required to modernise electricity infrastructure. In the UK, we’ve made a push towards renewable energy and electrification, but it’s still in its early stages. Fortunately for National Grid shareholders, the firm sits right at the centre of this transformation.

In the latest full-year report earlier this month, its CEO said the “National Grid is embarking on the largest investment programme in our history, committing at least £70bn over the next five years to modernise and expand energy networks.”

This spending isn’t just wasted money. In simple terms, the more infrastructure it builds, the larger its regulated asset base becomes. Over time, that can translate into higher profits and growing cash flows.

I don’t believe the size or scale of this is fully factored into the current share price.

I also think investors are increasingly appreciating the defensive nature of the business. It’s true the FTSE 100‘s close to record highs, but economic uncertainty’s still very high. The conflict in the Middle East isn’t over, and we have our own worries here in the UK.

If these increase, people could start loading up on defensive stocks like National Grid. After all, it operates essential infrastructure that households and businesses rely on regardless of the wider economy.

Income attraction

Another positive factor that should help the stock rally is the dividend. At 3.92%, the dividend yield is above the index average. Beyond the yield, people will note that National Grid has a long history of paying dependable dividends. Management recently reiterated the commitment to progressive payouts, so it’s still clearly in focus.

Of course, there are risks investors shouldn’t ignore. Some flag that the recent rally has made the stock overvalued. I’m not convinced, as the price-to-earnings ratio of 16.28 is just below the index average.

However, one concern is the company’s sizeable debt pile. Net debt in the latest results increased 7% from the year before, to £44.2bn! Utilities often borrow heavily to finance infrastructure projects, but higher borrowing costs can still pressure profitability.

Even with that concern, I think the trend for the stock will continue to be higher as investors realise the potential for higher long-term profits from the infrastructure build-out. With the added potential boost from any possible market wobble, I believe it’s still a stock for investors to consider for their portfolios.

Should you invest £5,000 in National Grid Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if National Grid Plc made the list?

Jon Smith has no positions in the shares mentioned.

The post Close to record highs, here’s why the National Grid share price still has room to surge appeared first on The Twelfth Magpie.

The stock is up almost 20% in the last 12 months and the company just increased its dividend. So is now a good time to think about buying?

Passive income

Utilities stocks are often sensible choices for income investors looking for stability. Competition is limited and demand never goes away. 

That usually makes the companies some of the most predictable on the stock market. Despite this, they often have some attractive dividend yields.

National Grid has just declared a 32.14p final dividend, taking the total for the year to 48.49p. So for £1,000 a year, investors need 2,063 shares.

The stock is trading at £12.81, which means a dividend yield of 3.79%. That isn’t bad – relatively predictable returns in other sectors often command higher prices.

All of that means there are reasons to be interested in National Grid shares. But is £26,427 to earn £1,000 a year a good deal? 

Regulation

For National Grid, limited competition comes at a cost. The amount the company is allowed to make is also restricted by regulations set by Ofgem. 

At the moment, the company is in something called RIIO-3. Basically, that’s the regulation framework for the next five years.

RIIO-3 allows National Grid a 5.7%–6.1% annual return on its rateable assets. That’s not bad, but this isn’t guaranteed beyond 2031.

That means National Grid’s profits aren’t as predictable as they might seem at first sight. It’s also worth noting that lower rates have meant lower dividends.

For a relatively predictable business, the dividend has been quite choppy. And that’s a reminder that every business goes through ups and downs

Source: Fiscal.ai

There are, however, potential opportunities ahead even beyond regulation. So, could these drive future growth and justify looking at the stock?

What else do investors need to think about?

National Grid isn’t going to get a rate increase until (at least) 2031. But the firm can grow by increasing the asset base it’s allowed to earn that return on.

On the face of it, there are some promising opportunities here. Electrification is one and growing power demand from data centres is another.

This could drive significant growth, but there are a couple of things to pay attention to. The first is how this is going to be funded. 

If it involves significant amounts of debt, that might mean higher borrowing costs cut into the allowed return. But there’s also another issue.

Analysts at UBS have pointed out that National Grid’s enterprise value is well above its rateable asset value. And that creates another risk.

Any delays due to planning approvals or supply chain issues could result in disappointing returns. That’s something else investors need to consider.

Final thoughts

From National Grid’s perspective, RIIO-3 is an improvement on RIIO-2. And there might well be meaningful opportunities ahead. 

The trouble is, the stock is already up quite a lot as a result. So my view is that there are more compelling opportunities to consider elsewhere right now.

That, however, could change quickly in an uncertain world. Given this, I think it’s worth keeping on the radar in case something dramatic happens.

Stephen Wright does not hold any positions in the companies mentioned.

The post How many National Grid shares does an investor need to earn £1,000 a year in dividends? appeared first on The Twelfth Magpie.

The stock has risen 17.5% in the past year and has traded above £10 per share for more than a year, giving many value-hunters pause.

Dividends remain broadly similar to 2022 levels, so income investors aren’t seeing a big jump in yield. That begs the question: are the shares worth buying at today’s price?

Why the price rise?

A lot of the move is down to the company’s investment story. National Grid’s running what management describes as a multi‑year programme to expand the network.

Recent company commentary and press coverage reference a near‑term programme in the region of tens of billions to 2029 and beyond. This is aimed at nearly doubling parts of the transmission network to handle more power and new loads such as data centres. 

Regulators have also put in place the RIIO‑T3 price control framework that allows higher returns and therefore higher permitted revenue for transmission businesses.

CEO Zoë Yujnovich recently highlighted ongoing work to expand electricity transmission lines. She said the company is addressing £12bn in costs tied to curtailment arrangements with wind and solar developers to manage excess generation.

That goes some way to help explain why investors are willing to pay more. But will it keep delivering growth?

What the numbers say

Financially, the business appears to be doing well. Underlying earnings grew 14.7% last year, and management guidance points to earnings growth of between 13% and 15% in 2027.

But with the shares now trading on a price‑to‑earnings (P/E) ratio of 19.65, they’re higher than the FTSE 100 average.

Dividends-wise, a payout ratio of about 74% supports payments, and the company’s 32‑year track record of payments certainly adds trust. However, the yield’s near its lowest levels in five years, at just 3.8%.

Those figures show a regulated utility with steady earnings growth and a long dividend record. But with a valuation higher than long‑run averages, it seems the market’s already pricing in a lot of the growth. 

What are the risks?

Large infrastructure builds rarely come without delays or cost pressure, and higher investment also raises leverage through regulatory gearing. That can ramp up debt even if the balance sheet looks healthy today.

There’s also a real question about whether cash flow fully covers both debt servicing and dividends once the heavy capex years hit. Regulated earnings mitigate these risks to some degree, but don’t remove them altogether.

So is it still worth considering?

For someone chasing rapid growth, National Grid’s unlikely to thrill in 2026. And for income investors seeking high yields, 3.8% looks modest relative to other income options.

But for a cautious investor who wants defensive, regulated earnings, it’s still a reasonable holding to consider. That’s why I intend to keep holding the shares for years to come. The regulated model and the company’s role in the energy transition provide a strong foundation to reduce volatility in a portfolio.

Should you invest £5,000 in National Grid Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if National Grid Plc made the list?

Mark Hartley owns shares in National Grid.

The post At almost £13 each, are National Grid shares still a bargain for dividend income? appeared first on The Twelfth Magpie.

Over time, though, could shifts in temperature potentially be bad news for the power grid operator?

Predictability, predictability, predictability

I think they could.

The simple reason for that is because when running a large-scale distribution grid, transparency and predictability are the goal.

The more potential there is for surprise, the greater the possible need to adapt the grid and make contingency plans. That can add cost, eating into profits.

National Grid’s been racing to keep up

In fact, National Grid has been wrestling with this for years already.

For example, the expansion of wind farm usage in recent decades has represented a significant shift in where energy comes into the grid and where it has to be connected.

On the other side of the demand equation, there have also been big changes in where people use energy.

Hotter weather could see shifts in usage patterns, such as more demand for air conditioning. That comes on top of wider changes in usage location, such as the potentially huge need for energy from data centres.

What has that got to do with the National Grid dividend? After all, couldn’t higher energy usage actually be good news for a power distributor?

Yes, it could. But it can also be bad news, because it means that on top of the huge sums National Grid needs to spend maintaining its extensive network, it also needs to spend more to adapt it to shifting patterns of generation and use.

I’m avoiding this one

Of course, that is true of many businesses. Trends shift and their business needs to adapt in response.

National Grid is a bit different to many other businesses, though. It provides a vital service and in many cases has a monopoly, so it is regulated. That caps the potential for price rises.

Also, National Grid aims to grow its dividend per share each year at least in line with a leading measure of inflation.

That can be attractive for investors, as it helps to maintain the real value of the dividend even in an inflationary environment. But it adds a further spending burden to the business.

National Grid already has net debt of £44bn, 7% up from last year. Capital investment remains huge — £12bn last year alone.

Last year saw National Grid cut its dividend per share by a fifth.

Its groaning balance sheet, ongoing capital expenditure needs, and evolving landscape for where power is generated and where and when it is used could mean its balance sheet look worse not better over time.

The share offers a 3.7% dividend yield. But I will not be buying it.

Fortunately, there are lots of other dividend shares in the market that I like the look of right now.

Should you invest £5,000 in National Grid Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if National Grid Plc made the list?

Christopher Ruane does not hold any position in the companies mentioned.

The post Could soaring temperatures be bad news for the National Grid dividend? appeared first on The Twelfth Magpie.

What actually makes passive income sustainable?

Sustainable passive income typically comes down to five key factors:

• Earnings support
• Cash flow strength
• Payout discipline
• Sector structure
• Balance sheet resilience

At first glance, many income investors focus on the dividend yield. But each of these factors plays a more important role in determining whether that income can be maintained — and potentially grown — over time.

Earnings support is the foundation. Dividends are ultimately funded by profits, not share prices, and inconsistent earnings tend to lead to inconsistent income.

Cash flow strength matters just as much. Even profitable businesses can struggle to convert earnings into distributable cash, which creates hidden pressure on dividends.

Payout discipline determines flexibility. Companies that distribute too high a proportion of earnings have less room to absorb shocks when conditions deteriorate.

Sector structure also plays a role. Some industries naturally generate more stable revenue streams, while others are highly cyclical and more exposed to downturns.

Finally, balance sheet resilience provides protection when conditions weaken. High debt levels can force dividend cuts even when the underlying business remains profitable.

Taken together, these factors show that passive income is less about maximising yield, and more about identifying businesses capable of sustaining payments through different market conditions.

Quality income stock

One stock I believe fits the bill of a quality income stock is National Grid (LSE: NG.).

As a regulated utility, earnings are largely determined by long-term investment plans and regulatory frameworks rather than short-term economic conditions. That creates a high degree of visibility over future cash flows, which is central to income reliability.

Importantly, the demand backdrop is also changing. Electricity networks are increasingly being shaped by structural trends such as AI-driven data centre growth, electrification of transport, and rising power demand across industrial systems. These are not cyclical drivers in the traditional sense, but longer-term shifts in energy usage.

That matters because regulated utilities typically earn returns based on the size of their invested asset base. As demand for grid capacity increases, investment tends to rise, which in turn expands that asset base over time.

In simple terms, growth in demand feeds through into more predictable earnings rather than volatility.

Of course, risks remain. Higher investment requirements can increase leverage, and rising interest rates can affect financing costs and regulated returns. There is also ongoing regulatory oversight that ultimately determines allowed earnings.

Bottom line

No income portfolio will ever tick every box all the time. Some stocks offer higher growth, others offer more stability, and very few deliver perfect consistency across all five criteria.

That’s why passive income investing is ultimately about balance rather than perfection — combining different types of businesses to create a portfolio that can hold up across different market conditions.

Here are also other passive income ideas worth exploring that show how different approaches can work in practice.

Should you invest £5,000 in National Grid Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if National Grid Plc made the list?

Andrew Mackie owns shares in National Grid.

The post ISA passive income: the biggest mistake investors make when building income portfolios appeared first on The Twelfth Magpie.

As a regulated utility, its earnings are largely shielded from economic cycles. Instead, they are driven by long-term infrastructure investment and regulatory frameworks. That gives the business strong visibility. In today’s uncertain macro environment, that matters more than ever.

But the investment case may be shifting. This is no longer just a defensive income story. Electricity networks now sit at the centre of two major structural trends: the rise of artificial intelligence and the rapid electrification of industry and transport.

That changes the narrative. The question is no longer just about stability. It’s whether the market fully recognises the company’s role in powering the next wave of demand growth.

Electrification

What is changing is not the regulatory model, but the demand placed on it. Electricity networks are no longer supporting a stable, mature system — they are becoming the constraint in a rapidly electrifying economy.

AI infrastructure, data centres, and the shift towards electric transport and heating are all driving a step-change in power demand. Crucially, that demand does not spread evenly across the system. It concentrates around grid capacity, turning networks into a critical bottleneck.

That has important implications. When capacity becomes scarce, investment follows — and for regulated operators, that feeds directly into a growing asset base and higher allowed returns over time. In effect, demand growth translates into earnings visibility rather than volatility.

Seen through that lens, National Grid looks less like a passive income stock and more like core infrastructure for a structurally expanding electricity system.

Accelerating demand

That demand story is not theoretical — it’s already feeding through into investment plans.

The company is currently working to connect up to 19GW of additional electricity demand in the UK by the early 2030s. Strikingly, roughly half of that is expected to come from data centres alone — a clear signal of how quickly AI is reshaping electricity consumption.

To support that, investment is ramping up at pace. More than £5bn was deployed in the first half alone, with full-year spending expected to exceed £11bn. Over the longer term, a £60bn programme is set to expand the regulated asset base, driving roughly 10% annual growth.

That matters because, in a regulated model, higher investment feeds directly into future earnings. What looks like a stable utility on the surface is, in reality, gearing up for a sustained period of demand-led expansion.

What’s the verdict

Of course, there are risks. National Grid’s growth depends on heavy investment, which means higher debt. If interest rates stay elevated, borrowing costs could rise and put pressure on returns and the share price.

At the same time, as a regulated business, allowed returns are not entirely within management’s control, creating some uncertainty over how quickly higher costs can be passed through.

That said, in my view, the scale of demand now building across electricity networks is easy to underestimate. As investment translates into a larger asset base and more predictable earnings, I see this as a business with both defensive qualities and long-term growth potential — which is why I view the stock as one to consider.

The post National Grid shares: a classic sleep-well stock for uncertain markets? appeared first on The Twelfth Magpie.

That might not sound too explosive compared to some US tech stocks, but for a utilities business, this level of growth’s pretty extraordinary. Don’t forget that for most of the last decade, this FTSE stock has been flat.

So what’s going on? And will this momentum continue in 2026?

Why’s it rising?

There are a lot of factors influencing National Grid shares today. However, two of the most consequential are a £60bn infrastructure investment programme and a transformational regulatory uplift.

The goal’s to nearly double the size of the group’s transmission network by 2029. Beyond significantly boosting its capacity to support new AI data centres, the enormous investment programme also allows the company to increase its regulatory asset base (RAB), directly translating into more permissible revenue by regulators.

The timing of this comes as the new five-year RIIO-T3 price control framework comes into effect. Compared to RIIO-T2, the updated framework’s far less restrictive, enabling National Grid to earn higher regulated revenues and better fund its infrastructure investment plans.

Subsequently, the group’s underlying earnings for its 2027 fiscal year (ending in March) are now expected to grow 13%-15%. And this rate of expansion of a regulated entity is practically unheard of.

With that in mind, it’s no wonder that National Grid shares are on the rise. But is this growth now baked into its share price?

Is it too late to buy?

While National Grid’s 2027 fiscal year looks like it’s on track for a gangbusters year, future growth will likely slow. And the general consensus points towards 6%-8% earnings growth on a compounded annualised basis between now and 2031.

That’s still impressive. But it’s important to recognise this is dependent on management successfully executing its £60bn investment programme – something that’s far easier said than done.

Even if internal operations run flawlessly, external supply chain disruptions for transformers, cables, and substations could create expensive delays. And with other countries seeking to upgrade their own infrastructure in 2026, equipment shortages have already started to crop up.

With the forward price-to-earnings ratio now standing at 14.3, this growth does indeed appear fully priced in. And when combined with the emerging risk factors, it’s why a number of institutional analysts have started updating their recommendations from Buy to Hold.

As such, it seems unlikely the National Grid share price will deliver another 30%+ jump over the next 12 months. However, that doesn’t mean there isn’t a valid investment case to be made here.

For growth investors like me, National Grid’s most likely a bad fit in April. But for conservative investors looking to build a defensive portfolio of mission-critical companies with stable cash flows and long-term structural demand, National Grid might still be worth a closer look.

The post What on earth’s going on with the National Grid share price? appeared first on The Twelfth Magpie.

A new year means a fresh £20k contribution allowance for tax-free investment into a wide range of assets, including stocks, bonds, and commodities.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

When building towards a passive income stream, this tax relief can make a huge difference.

But don’t take my word for it — check out these calculations.

The road to £10k a year

Whether aiming for returns from growth or income, bringing in £10,000 a year will require a significant investment.

You won’t be able to achieve it in just one year, but rather grow towards it through compounding. This means regular contributions and reinvested dividends.

For example:

• Start with a £20k lump sum.
• Invest a further £300 per month.
• Aim for an average yield of 6%.
• Assume average capital growth of 4%.

Based on my calculations, that ISA could grow to £171,270 within 15 years. Assuming the average yield held, it would pay out £10,276 a year.

By boosting the annual contributions to £500 a month, you could slash four years off that timeline.

Of course, these are just projections based on historical market averages. They’re neither a best-case scenario nor worst, but the actual result could vary wildly.

So how can we better ensure reliable, regular returns?

The low-risk, reliable portfolio

One thing’s for sure: when aiming for long-term, stable income, it’s best to play it safe. This means avoiding speculative growth stocks, overblown hype stories, and short-term gains.

Rather, focus on steady returns from defensive shares with long and established dividend track records.

An easy way to spot these shares? Just think of the most boring company you know — for example, National Grid (LSE: NG.).

Here’s why…

Predictable returns

As the UK’s largest utility company, it keeps the lights on and the gas flowing. That’s a pretty critical and high-demand service, but it’s not exactly exciting.

Exciting can be fun but it usually means volatility and unreliability — the opposite of what we’re looking for.

National Grid’s earnings come from regulated assets, meaning returns are set by regulators. That makes revenues stable and relatively predictable, even during economic downturns.

It pays a realistic, well-covered dividend that often results in a lower yield (3%-5%). But it reduces the chance of having to pause payments, which it hasn’t done for 31 years.

Recently, it has invested heavily into a green energy transition, upgrading the grid for renewables like wind and solar. That forced a 13.69% dividend reduction.

Ideally, the move should help reduce costs in the long run but there’s a always a risk it doesn’t pay off. If regulatory changes hit profits, it may have to cut dividends further.

The bottom line

When investing with a 10-20 year outlook, focusing on reliable companies usually works out better than betting on the latest fad.

Aside from utilities like National Grid, which is worth considering, retail and healthcare stocks are also good options. Think GSK, Tesco, or Unilever.

But don’t be too careful — a few growth stocks like 3i Group or Diploma can also be helpful to get the momentum going. And that’s just a few of the options I’ve explored lately…

The post How to turn a Stocks and Shares ISA into £10k of annual passive income appeared first on The Twelfth Magpie.

Could that make it the sort of passive income generator I would like to have in my portfolio as a way to try and mitigate the potentially harmful impact of inflation on my dividend income?

This business has some compelling characteristics

Before getting into the dividend, let me explain why I like the National Grid business.

People need power and, over time, consumption looks set to grow, not decline. Moving power from where it is generated to the point of use will therefore continue to be big business.

Not only is it big business, but it is also one that is costly and difficult to get into. The sort of networks that National Grid has built over decades are impossible to replicate in many cases. Even if a rival could do so, it would likely be prohibitively expensive.

That gives National Grid strong pricing power – potentially so much, in fact, that the government regulates many of its prices. That can be seen as bad for profit potential, but it does help provide some transparency about possible future pricing levels.

But there’s something I don’t like about National Grid

So far, so good.

However, while the company has a lot of strengths, its chosen area of business also exposes it to a significant challenge. That is keeping the network operational and fit for purpose.

That is not just about sending a couple of engineers out in vans on a stormy night (important though that can be). It also involves the enormous task of maintaining and reshaping the grid to meet changing patterns of energy generation and consumption.

Such infrastructural work is expensive.

How expensive? Put it this way: in the first half of its current financial year alone, the company spent £5bn on capital investment.

That is a lot of money even for a business with a market capitalization of £63bn. Indeed, ongoing capital expenditure helps to explain why National Grid has amassed a net debt of £42bn.

The dividend has been cut before – and could be again

So what, you may ask.

National Grid’s high ongoing revenue generation potential could surely help fund such capex requirements?

In reality, the funding is an issue. Revenue in the first half was £7bn. So that £5bn of capex is substantial.

It makes sense that a power network operator spends a lot of money on maintaining and updating the network. However, National Grid has other things it needs to fund too, from paying interest on that large debt pile to employee wages.

A dividend cut could be one solution to its spending needs and indeed, it already reduced the dividend per share last year despite its stated aim of growth.

I fear that could happen again in future, so I have no plans to invest.

The post Could National Grid shares offer me a dividend that won’t be hurt by inflation? appeared first on The Twelfth Magpie.