The yields from several FTSE 100 dividend shares are high right now. But for how long will the situation last?
I’m not hanging around to find out. Instead, I’m busy researching these stocks now before their prices hopefully rise. My aim is to lock those dividend income streams into my portfolio at the current attractive levels.
When looking for stocks to consider, one of the main attractions for me is a recently unsullied dividend record. There’s nothing more off-putting than red ink where dividend rises should be!
If a company has reduced its dividend in recent years, it makes me wonder whether it may do so again while I’m holding the shares.
Incremental dividend progress
Energy company National Grid (LSE: NG) is a good example of a promising dividend-paying stalwart. For a start, there’s a decent shareholder income available right now. With the share price near 1,049p (18 March), the forward-looking dividend yield for 2025 is running at almost 5.7%.
That beats the average of the wider market. The median rolling dividend yield for the FTSE All-Share index is around 4%.
Meanwhile, National Grid’s dividend record shows incremental increases over recent years. City analysts also expect further progress ahead, and the dividend’s compound annual growth rate (CAGR) is running at just below 4%.
So not only can shareholders expect a chunky income from National Grid shares, it’s set to be a growing one too.
However, positive outcomes are never certain when it comes to the stock market. One of the things that may get in the way of further dividend progress is the company’s big pile of debt.
The cash-flow balancing act
Big borrowings are one consequence of the capital-intensive nature of the firm’s regulated energy businesses on both sides of the Atlantic. For example, the company’s planned capital expenditure for the five years to the March 2026 trading year is running at about £42bn.
That’s huge. So there’s a balancing act for the directors to perform when it comes to allocating cash flow. Debt interest needs to be serviced and so do shareholders via dividends.
In recent years, the company has maintained its performance with shareholder payments. But there’s some risk the situation could change if regulatory demands become too onerous requiring even greater capital commitments.
Nevertheless, with interest rates easing, there’s a good chance the firm’s interest burden could be lessening a bit. The share price chart also looks quite perky to me, and that’s always nice if it backs up a positive view on the fundamentals of a business.
On balance, and despite the risks, I think National Grid is a FTSE 100 stock well worth consideration as part of a diversified, long-term portfolio right now.
