Investor appetite for UK shares remains pretty flat as we begin February. There’s not much dip-buying going on following recent slumps across London stock indexes.
It’s not just continuing fears over Covid-19 that is prompting share investors to sit on their hands. The bloody battle between amateur investors and Wall Street — seen the exploding GameStop share price — is also spooking investors. Retail investors have targeted volatility in the silver market over the weekend in a fresh blow to market confidence.
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Taking a long-term or defensive view
These issues aren’t enough to dent my appetite in UK shares, however. This is because I’m a long-term investor who buys stocks with a view to holding them for a decade. Over this sort of time frame, share buyers can reasonably expect to make big returns irrespective of temporary volatility. Data shows that long-term stock investors make an average yearly return of 8% to 10%.
Secondly, I’m not overly concerned by the prospect that the anticipated 2021 economic recovery could disappoint. There are sectors and industries (like e-commerce and cybersecurity) that should grow strongly this year whatever happens to the broader economy. And UK share investors also have the chance, of course, to invest in firms with defensive operations that remain stable during upturns and downturns. Companies in this category include healthcare suppliers, food retailers, and non-life insurance providers.
National Grid (LSE: NG) is one such non-cyclical UK share I’m thinking of adding to my own Stocks and Shares ISA this month.
Powering up my ISA
Utilities companies like this aren’t completely without their share of risk. Companies like this always have the threat of severe regulatory action (and possible even nationalisation) hovering in the background. This FTSE 100 power grid operator also has large capital expenditure bills and huge weather-related costs to contend with.
I still think National Grid is a good buy though. Its services are essential regardless of the state of the broader economy. And to me, this makes this UK share a sterling buy for these uncertain times. It is also growing its asset base by mid-single-digit percentages in the UK and US to deliver terrific long-term earnings growth.
A dependable UK dividend share
Today National Grid carries a chubby 5.7% forward dividend yield. This is based on City analysts’ expectations of a 49.5p per share dividend. That forecasted dividend would be up from the 48.57p reward of the previous financial year (to March 2020). A forecast is never certain, but it is also in line with the company’s stated aim of raising yearly dividends in sync with the retail price index (RPI) gauge of inflation.
What’s more, National Grid’s defensive operations mean that City analysts predict similar dividend growth all the way through to financial 2023. Consequently, this UK income share’s yields look likely to march all the way up to 6% for the next couple of years. This makes the business one of the most exciting dividend stocks on the FTSE 100.
