National Grid


National Grid is UK’s sole operator of the electricity transmission grid in England and Wales, from which it, along with about half of the gas pipeline network – both as a monopoly – earns almost 70% of its profits. The group’s other major operations is based in the USA where it generates and distributes electricity in New England and New York.

In April, 2011, we released an in-depth Dividend Income Report covering National Grid Plc which you can download Here.


Click Here To See National Grid News and Updates


Value Table

Dividends must have been paid long enough for several cycles of share price undervalue and overvalue to be established, in order that extremes of high and low dividend yield can be observed.

The Value Table shows the dividend yields at which a company’s share price is at historic undervalue levels – low share price (LoPr) with high yield (Hyld%) – as well as at historic overvalue levels – high share price (HiPr) with low yield (Loyld%).

Share prices are Undervalued or Overvalued when they are within a ten per cent range of their historic levels of high dividend yield (Hyld%) or low dividend yield (Loyld%).

The numbers in the share price columns (LoPr and HiPr) are the equivalent share prices to the dividend yields shown in the respective undervalued and overvalued dividend yield columns.

The color coding in the Status (‘S’) column of the table indicates the current share price valuation of the company. The column will be green when the company is historically undervalued, orange when the company is historically overvalued and white when the company is trading between historically undervalued and overvalued.

Yield Chart

Share prices are Undervalued (Green) or Overvalued (Orange) in the Yield Chart when they are within a ten per cent range of their historic levels of high or low dividend yield.

Highs (Blue) and Lows (Red) are shown based on the monthly high and low share prices.

To reduce the period under consideration drag to the right the “slider” below the chart.

Dividend History

From the years collated National Grid has a track record of:

Years Dividend
Paid
Years Dividend
Increased
Years Dividend
Increased >7.5%

A long period of uninterrupted dividends will show us how companies and their management teams have performed going through several business and economic cycles.

Dividend growth is the hallmark of a high quality company. Dividends will not be maintained or raised if future earnings are in doubt.

A company that is making profitable progress should be able to boost its dividend by 7.5% or more at least five times in a 12-year period.

Compound Annual Growth Rate

For illustration purposes, we show the 5 year dividend CAGR and 12 year dividend CAGR for National Grid:

Note: CAGR is a pro forma number that provides a “smoothed” annual yield, so it can give the illusion that there is a steady dividend growth rate even when the annual dividend increases can vary significantly.

CAGR is used as a measure to evaluate how well one dividend paying company performed against other dividend paying companies in the same sector.

We are particularly interested in companies with a dividend CAGR of 8 per cent or higher for both the most recent five and twelve year periods.

Financial Strength

The Financial Strength of a company is a weighted composite score of quantitatively analysed metrics taken from the Balance Sheet, Income Statement and Cash Flow Statement.

The top score is an 8. A score of 7 and above is considered to be financially strong. A score of 5 and above is considered to be financially okay. A score of 3 and above is considered to be financially poor. A score of below 3 is considered to be a bankruptcy possibility.

Disclosure

Steven Dotsch, the managing editor of Dividend Income Investor.com, owns shares in National Grid via the Dividend Income Portfolio.

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