National Grid (LSE: NG.) has, for years, been among the most popular stocks to buy for long-term income investors.
Global conflict has however, hit National Grid shares along with so many others. And at the time of writing, they’re down from their 52-week high in early March. But we’re still looking at a rise of around 50% over the past five years.
Volatile rise
Checking back 10 years and more, it looks like the ride’s been a bit volatile for National Grid shareholders. On the bright side, during a price dip, the dividend yield rises for new investors. And what really counts is the total return, including both dividends and price gains.
The forecast dividend is currently at a fairly modest 3.7%. That’s essentially in line with the FTSE 100 average. And over five years, the National Grid share price has come in slightly below the Footsie. In fact, it hasn’t been a great decade for the stock compared to the wider stock market.
But if we look back as far as the company’s original entry into the FTSE 100 in 1995, the share price has soared by over 400%. Over the same timescale, the FTSE 100 has managed less than half that.
What does it mean?
If National Grid can repeat its 30-year performance over the next three decades, I think it could make it a slam-dunk buy for a Stocks and Shares ISA. But we shouldn’t assume that, with one key trend broken in May 2024.
That’s when the company launched a surprise new £7 billion rights issue. It was to fund a five-year infrastructure upgrade plan. And at the time, it was the biggest such issue in the UK since 2021. It came as a particular shock to shareholders, who really hadn’t expected it. No, the company was renowned for nothing much changing year after year, and just steadily paying a progressive annual dividend.
It meant the per-share dividend actually fell, diluted by the new shares in issue. Many investors had simply assumed that could never happen.
The question now is whether National Grid is still a solid stock, with a strong safety margin, to consider buying today. And I’d call that a yes.
Safety first
For me, a Stocks and Shares ISA should ideally be based on a bedrock of safety. And looking at National Grid, I just don’t see how anyone else could be remotely likely to breach its moat and get a serious foothold in the UK-wide energy distribution network. Oh, and there’s American infrastructure to add a bit of excitement too.
We need to forget the old ways though. The world’s changed, and National Grid along with it. And the energy business being a regulated one also adds risk.
What about a forward price-to-earnings (P/E) ratio of 16, dropping to 13 by 2028 forecasts? And a dividend predicted to edge up 7.5% in the next three years? That makes it worth considering for a long-term ISA, I reckon.
