National Grid (LSE: NG.) released full-year results Thursday (15 May) and the share price gained 3% on the day.
CEO John Pettigrew said: “We’ve made significant progress in the first year of our five-year financial framework, with record capital investment of almost £10 billion, 20% higher than 2024.“
The rebased dividend’s up 3%, ahead of inflation. So the dividend train’s on track and going full steam ahead, right? We need a closer look.
The elephant…
For years, investors expected National Grid to just keep on paying out progressive dividends year after year. It turns out they were a bit naive on that score. And if anyone feels I’m offending them, I include myself. National Grid was always ‘the best dividend stock I never bought’, and I kept meaning to rectify that.
Keeping energy networks running takes capital expenditure. And in these days of changing energy technology, that can mean even more cash.
National Grid shocked the market by launching a new stock issue to raise £7bn last May, at the time of 2024 full-year results. It meant it would spread future dividend cash across more shares, with each one getting less per share.
So the rebased rise means that this year there’s more dividend cash per share than there would have been last year had the extra shares already been in issue. Confusing? To put numbers on it, the actual 2024 dividend was 58.52p per share, and 2025’s is 46.72p. That’s 20% lower.
What now?
What do I think about National Grid as a dividend stock now? Well, I think the reality of the change was unavoidable. I wish though, that the company had been more candid about the actual dividend payment this year instead of boasting of this rebased rise thing.
It still represents a 4.6% yield. And forecasts suggest rises at around, or slightly above, expected inflation over the next two years. That’s pretty decent if the company does keep up with a renewed long-term progressive plan.
There’s a new reality though. It’s possible we might see further equity issues in future if more capital expenditure cash is needed. But then, investors in most companies can face that same risk, so why should National Grid be different?
Cash management
Looking at National Grid’s net debt sounds my alarms a little. It reduced 5% in 2025 to £41.4bn after the new equity issue. But hang on, £41.4bn? The company’s market-cap‘s only around £53.5bn. And forecasts suggest debt will be rising again in the next two years.
Does it make sense to carry heavy debt, pay high dividends, and have to issue new shares to fund capital expenditure? I’m not a company accountant, but it doesn’t sound like ideal cash management to me.
Still, if it can keep up the annual cash handouts, just sitting back and taking the cash has to be a strategy worth considering. And there’s a nice monopoly here. Brokers are bullish, with a fairly strong Buy consensus. They might be right.
Me? I think it’ll remain a dividend stock I never bought for a little while longer. I just don’t like the debt.
