National Grid PLC: The ultimate low-risk dividend stock?

If you ask most people what the UK national grid is, they’ll probably say something about it being the electricity grid.

What they’ll have in mind is a network of pylons, cables, transformers and other such infrastructure which enables the transmission of power from power stations to homes and businesses around the country.

I think that’s a reasonable description and National Grid PLC is the company that owns and operates that infrastructure. If you also include the transmission and distribution of gas in that description, as well as a significant and similar business in the US, then you’ll have a fair summary of what National Grid PLC does.

As you might expect, building, maintaining and managing the electricity and gas network is a very defensive business. Booms and busts may come and go, but people still need to cook, heat their homes and boil their kettles. So it should come as no great surprise that the financial crisis had relatively little impact on the company or its progressive dividend.

That progressive dividend, combined with its recent near-5% dividend yield, is why I decided to take an in-depth look at National Grid.

What I found was a very unusual company operating as a state-appointed monopoly, and you can read my full review in the January issue of Master Investor magazine.

National Grid - Master Investor 2017 01 Cover
Click to read (PDF)

Is National Grid the ultimate low-risk dividend stock?

Author: John Kingham

I cover both the theory and practice of investing in high-quality UK dividend stocks for long-term income and growth.

5 thoughts on “National Grid PLC: The ultimate low-risk dividend stock?”

  1. Hi John,

    An interesting article.

    I don’t fully understand how secure the Smart Grid will be in the future. I read somewhere (can’t find the source right now, sorry) that the cost and performance micro-generation renewable energy (such as solar and wind) and batteries are improving with each new technology generation, and in time it will be cheaper and easier to make and store energy at home. Once the cost of making power with domestic solar roof panels and storing it in batteries at home (or in the car) is less per unit than the cost of power transportation on the grid, then centralised generation will cease to be cost effective, and become redundant. Okay, so there will be some heavy industry requirements, but the domestic market could reduce significantly. The crunch is if this will ever happen, and if so when.


    1. Hi Ric, the smart grid is a fascinating topic, but I don’t think we’re going to remove the need for a national grid anytime soon. Even if we all have super-efficient solar panels on our roofs combined with battery storage, extreme energy efficiency and an electric car (which can double as your battery storage) we’ll still need some outside sources of energy since rooftop solar alone is unlikely to ever be enough to power a house and two or three cars.

      That outside source of energy will come from wind, waves and community and utility-scale solar, but the electrons still need to whizz around from one place to another, hence the need for a national and international grid (and even interplanetary if you want to beam energy down from solar panels in space). So yes, I think the capacity of the grid will reduce in the second half of this century, but I don’t think that reduction will be significant much before the end of this century.

      However, I do think BP, Shell and the rest of big oil could easily be almost gone within that timescale, unless they find significant new uses for oil and gas other than burning them as fuel.

  2. Hi John

    I could take issue with your times scale of “… before the end of this century”. Think about how much things changed between 1900 and 2000; we went from horse power to nuclear power. I suspect we’ll need much less time to make the next disruptive transition. Nevertheless I totally agree otherwise, and still hold current technology energy related shares. However a few months back I did scale back a very little bit, and will continue to do so over the next few decades.

    All the best, Ric.

  3. Date Total left shares price each dividend received
    National Grid NG. 18/11/2011 992.26 578 1.716712803 2005.28

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