Strategies

Are National Grid Shares Worth Buying?

It’s been a tough year for National Grid (NG), the UK’s electricity and gas company. After rising by over 6%, its share price quickly came crashing down 10% in late May.

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NG’s stock has dropped 6% so far in 2024.

What happened?

In May, NG announced a five-year investment plan to strengthen its US and UK electricity networks. To fund the plan, the company is raising around £7 billion in fully underwritten rights issues of 645 pence per new share.

Overall, the investment is aimed at delivering energy infrastructure in the UK and US, though the scale of the raise did not go down well with investors. Many got scared away by this bold move.

Valuation

As of July 4th, 2024, NG’s market cap reached $43.71 billion. Let’s see what investment banks say.

JPMorgan claimed that NG’s valuation is currently attractive and maintained an Overweight rating on the stock.
Goldman Sachs upgraded NG to Buy from Neutral, raising the price target to 1,059p from 1,007p.
Citi also upgraded NG from a Neutral rating to Buy, emphasizing its appealing valuation.

Dividends

The current dividend yield stands at 6.21%, which will be influenced by the rights issue. This move will result in an increase in the number of shares and consequently dilute the returns for shareholders.

Nonetheless, even after the implementation of the rights issue, the predicted yield is still expected to be around 5.7%. The company’s board has expressed its intention to uphold its progressive dividend policy in the future, growing in line with the Consumer Prices Index including owner occupiers’ housing costs (CPIH).

A stock to buy?

When we buy stocks, we are hoping to find stocks that outperform the market. Is NG one of these stocks?

If you are not sure where National Grid shares will be in the future, you may trade stock CFDs. It enables you to go long or short on the price movement of the underlying stock without actually owning it.

UK stock exchange trading hours are: Monday – Friday (09:00 CET – 17:30 CET). Start to trade whenever you feel ready! All you have to do is create a trading account with a reputable broker.