National Grid (LSE:NG) is a favourite stock for many income investors. The company has been paying out constant dividends for the past decade. With the yield during this period ranging from around 4% to 6%, it might not set the world on fire, but it has been steady cash to bank each year. In addition, the future looks bright when considering the National Grid dividend forecast.
Where we stand at the moment
The business announces two dividends during the year. This ties in with the half-year and full-year results (usually in May and November). Therefore, when I assess the current dividend yield, I use the dividend per share figure from May and November 2022. This totals 51.6p (the sum of 17.84p and 33.76p).
Based on the current share price of 1,061p, it gives me a yield of 4.86%. By comparison, the FTSE 100 average yield is 3.86%. If I owned the stock at the moment, I’d be comfortably above the average.
I do have to account for share price movements as well. Over the past year, the stock has fallen by 5.45%. This is a risk with dividend investing, in that my capital loss can offset the gains made from the income received. As a long-term investor, I aim to reduce this risk by holding stocks for a considerable period.
Rising yield
Next up will be full-year results in May. The dividend forecast is 35.5p, with 19.7p later in the year, totalling 55.2p for 2023. This is a jump from 2022, and if realised, could offer a juicy yield for me.
Although it’s impossible to know my exact yield until I lock in the share price, if the stock was at the same price, my yield would be 5.2%.
For 2024, analysts are forecasting a total year payment of 58p. This could increase the yield to 5.46%.
From my perspective, the increase in dividend payments isn’t unrealistic. In the last financial year, it had an operating profit margin of 24.6% and a net profit margin of 14.1%. This bodes well for paying out cash to shareholders, as it mostly comes from the profit from latest earnings.
How the stock could work for me
I understand that for some people, the numbers on offer aren’t exciting enough. Yet I go back to my original point, focused on sustainability. I’d much rather own a stock with a good track record of paying than invest in a high-yield idea that could cut the payment in the near future.
In order to try and get the best of both worlds, I’m considering buying National Grid shares to help diversify my portfolio. Let’s assume I hold one stock with a yield of 7%. If I add National Grid with a yield of 5%, I lower my risk by holding two stocks and get a blended yield of 6%. This is how I see the company fitting in to my investment pot in the future.
