National Grid plc Could Help You Retire Early

Retirement may not be so long away for shareholders in National Grid plc (LON: NG). Here’s why…

| 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.

national grid

National Grid (LSE: NG) (NYSE: NGG.US) continues to be a relatively attractive stock for income-seeking investors, since it offers a yield of 5.2%. This is almost 50% higher than the yield on the FTSE 100, so it’s clear to see why.

Indeed, with interest rates not set to go up over the short to medium term and inflation still being a threat as a result of the vast scale of quantitative easing, a decent yield could remain a high priority for many Foolish investors.

Furthermore, the pace at which dividends per share are set to increase in future may, in actual fact, prove to be more important than a relatively attractive yield. Certainly, a great yield helps but a dividend that is set to increase at a rate that is lower than inflation could, over the longer term, lose its appeal.

That’s where National Grid makes its case as an attractive income play, since management have set a target to increase dividends per share at a rate that is higher than inflation for the foreseeable future.

This means that National Grid not only comes with a yield that is nigh on 50% better than that of the wider index, but it also comes with a decent growth rate, too. This could make it a highly attractive income play.

In addition, National Grid continues to offer defensive qualities that could come in useful should the market have a disappointing 2014. This could occur for any number of reasons, but one possibility may be a disappointment with regards to growth in profitability during 2014.

That’s because the stock market has rerated upwards many companies on the basis that they look set to deliver improved bottom-line figures in 2014. Were they to disappoint, the market could conceivably de-rate them, leaving companies such as National Grid in greater demand due to their innate defensive properties.

For instance, over the last five years National Grid has delivered, on average, earnings per share (EPS) growth of 6% per annum. While the range of EPS growth in each year can be fairly wide, the fact that National Grid’s pricing is set through a regulator means that the company (and its shareholders) should receive a relatively attractive return.

This provides stability to the business and, during challenging market conditions, it could prove to be very useful. Furthermore, a slow and steady approach could make a contribution to helping you retire early.

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 owns shares in National Grid.

More on Investing Articles

Investing Articles

9.4%+ yields! 3 proven FTSE 100 dividend payers I’d buy for my Stocks and Shares ISA

Our writer highlights a trio of FTSE 100 shares with yields close to 10%. He'd happily pop them into his…

Read more »

Mixed-race female couple enjoying themselves on a walk
Investing Articles

Are Raspberry Pi shares a once-in-a-lifetime chance to get rich?

With Raspberry Pi shares surging after a successful IPO, could this UK tech startup offer a long-term wealth creation opportunity…

Read more »

Newspaper and direction sign with investment options
Investing Articles

Huge gains and 9% yields: why now’s an amazing time to be a stock market investor

The stock market’s generating fantastic returns in 2024. Whether you're looking for gains or income, it’s a great time to…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

This steady dividend payer looks like one of the best bargain stocks in the FTSE 100

A yield of 4.7% and a consistent dividend record make this FTSE 100 company look like good value in an…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

£9,000 in savings? That could become passive income of £19,175 a year

It's possible to invest affordable sums of money into building a big passive income stream. Here's how I'd go about…

Read more »

Black father and two young daughters dancing at home
Investing Articles

Legal & General shares: a once-in-a-decade passive income opportunity?

Is a dividend yield at its highest level in a decade, combined with a strong record of increasing payouts, a…

Read more »

Investing Articles

With a 7% yield and 4.1 P/E, is this the best passive income stock on the FTSE 350?

Millions of Britons invest for a passive income. While our writer isn't buying this stock yet, he believes it's worth…

Read more »

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

This amazing FTSE 250 has a 8.8% dividend yield and trades at just 4x forward earnings!

Our Foolish writer believes this FTSE 250 stock is worth keeping a very close eye on. However, he's not keen…

Read more »