Does the National Grid (NG) share price make it the FTSE 100’s best buy now?

The National Grid share price has had one of its most bullish years in ages. But have I’ve missed the boat for snagging a top FTSE 100 dividend stock?

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The National Grid (LSE: NG) share price has climbed more than 30% over the past 12 months. It’s a company I regularly think of buying. But this year’s outperformance makes me ask whether I’ve missed the opportunity.

Before I despair over missed chances, it pays to look further back. Over the past five years, National Grid shares have gained only 5% over all. That’s only slightly ahead of the FTSE 100.

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So, on a short-term view, it might look like I’m too late. But the longer-term view keeps me thinking that maybe National Grid should still be a top dividend stock.

It has been through a tough patch, with earnings dipping for a couple of years. But for me, it’s all about the dividend yield, not the National Grid share price itself, and that has been stable.

The dividend yielded a very nice 5.7% for 2020-21. With the shares having climbed in the year since then, the same payment again would yield 4.1%. That’s not as attractive as it was, but it’s close to the forecast average for the FTSE 100.

Long-term gains

Right now, a 4.1% dividend yield might not look too attractive considering the soaring cost of living. But inflation will surely level off. And a yield like that, compounded over 10 or 20 years, could make for a very nice annual pension top-up.

And the National Grid dividend has not remained static. No, it has been lifted every year for the past 22 years. There’s no guarantee that will continue, so what’s the likelihood we’ll see a further increase in 2021-22?

Last year’s dividend wasn’t quite covered by earnings, which is a worry. But at the halfway stage this year, underlying earnings per share grew by 66%.

The interim dividend was lifted, but only by 1%. Still, the company did speak of maintaining its “sustainable, progressive dividend policy into the future“. That aim is helped by an average scrip dividend uptake of 25% per year, which reduces the demand for cash from earnings. It can however, lead to more dilution.

National Grid share price

The National Grid share price does still tempt me, but there are some downsides. One is the company’s debt.

At first-half results time, National Grid said it expected net debt to remain stationary at around £41.5bn by 31 March 2022. We’ll have to wait until final results are delivered on 19 May. But that is almost equal to the total market-cap of the company. And with interest rates rising, debt is becoming more expensive to service.

The company has been through a mix of acquisitions and disposals too, resulting in a new organisational structure. That raises uncertainty, and I’m wary of investing until I see its effectiveness.

So is the stock a top FTSE 100 buy for me right now? I’m torn between my long-term liking for the company’s dividends and today’s lower yield that results from the National Grid share price gains. And that huge debt does not thrill me.

I will wait until I see the 2021-22 results before I decide.

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