Frustrated By Low Savings Rates? National Grid plc, SSE PLC And Centrica PLC Could Be The Answer

With savings accounts still at rock-bottom, National Grid plc (LON: NG), SSE PLC (LON: SSE) and Centrica PLC (LON: CNA) could hold the key for investors

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

gasringDespite the UK recovery seemingly gaining strength, with the IMF recently upgrading forecasts for annual growth to a not inconsiderable 3.2%, the Bank of England seems reluctant to increase interest rates. Indeed, a lack of wage growth seems to be holding them back and, as such, interest rates could stay low for a good while yet.

With this in mind, National Grid (LSE: NG), SSE (LSE: SSE) and Centrica (LSE: CNA) could prove to be useful weapons in an investors’ arsenal. Here’s why.

Dividend Growth

National Grid reported today that it is on track to meet full-year expectations and, perhaps more importantly, that its long-term dividend plan remains intact. Indeed, National Grid is aiming to keep the rate of growth of its dividend per share payments at least in line with inflation, a target also adopted by SSE. This aim could turn out to be a major asset for investors, since it provides a degree of protection against high levels of inflation that, after all of the quantitative easing that has taken place, could become a reality over the medium to long term.

While sector peer, Centrica, does not adopt the same aim with regard to its dividends, the company is expected to increase them by 3.4% this year and by 3.2% in the following year. Both of these figures are likely to be ahead of inflation, which means that investors could benefit from above-inflation growth in their dividends.

Yield, Yield, Yield

Of course, dividend per share growth means little if the yield is inadequate. This is where National Grid, Centrica and SSE really come into their own. Indeed, partly as a result of uncertainty surrounding the future of electricity supply and distribution, the sector has suffered from weakened market sentiment, although this has dampened somewhat in recent months.

Still, the three companies trade on superb yields of 5.6% (Centrica), 6.1% (SSE) and 5% (National Grid), all of which easily beat the FTSE 100’s yield of around 3.5%. Furthermore, they are above and beyond the best high-street savings accounts, which offer little more than 1.5% unless you are willing to tie-up your money for several years.

Looking Ahead

Certainly, all companies come with risk and, as mentioned, for the utilities this is mainly political and results from uncertainty surrounding their futures. However, current yields appear to adequately price this in, making National Grid, Centrica and SSE appealing alternatives to low savings rates that understandably are a source of great frustration for investors and savers alike.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Centrica, National Grid, and SSE. The Motley Fool has no position in any of the shares mentioned.

More on Investing Articles

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »