Do these three things make National Grid plc (LON:NG) a good investment?
There are things to love and loathe about most companies. Today, I'm going to tell you about three things to love about FTSE 100 utility group National Grid (LSE: NG) (NYSE: NGG.US).
I'll also be asking whether these positive factors make National Grid a good investment today.
Out of sight, out of mind
National Grid has a monopoly on the UK's gas pipelines and electricity wires. As you'd expect when a company is in charge of such essential infrastructure, there is regulation by a government body.
However, National Grid is unique among the FTSE 100 utilities in that it doesn't interact directly with energy consumers. Perennial public ire is directed at the companies -- and their 'fat-cat' bosses -- that drop rising bills on the doormat. National Grid is out of sight and out of mind so, in its case, there is less public and political pressure on the regulator.
National Grid also contrasts with most utilities on the London stock market in that it isn't at the mercy of a single regulator. In addition to its UK businesses, National Grid has transmission assets and a number of power plants in the USA.
The UK/US split of total group revenue is around 50/50. This geographical diversification means that investors are more-or-less buying into two companies in the sense that each operates under a different regulatory regime.
Dividends are the big attraction for many investors in utilities, and National Grid is on a juicy prospective yield of 5.9% at a recent share price of 690p.
National Grid's yield is markedly higher than fellow FTSE 100 utilities Centrica, Severn Trent and United Utilities, all of which offer less than 5%. In fact, the only utility that can match National Grid on yield is SSE (formerly Scottish & Southern Energy).
A good investment?
National Grid's shares have gained 7% over the past year, in line with the FTSE 100, but have underperformed the market over six months and three months as investors have become keener to embrace more cyclical companies.
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> G A Chester does not own shares in any of the companies mentioned in this article.