If you are interested in cashing in on National Grid plc’s (LSE:NG.) upcoming dividend of £0.15 per share, you only have 3 days left to buy the shares before its ex-dividend date, 23 November 2017, in time for dividends payable on the 10 January 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into NG.’s latest financial data to analyse its dividend attributes. Check out our latest analysis for National Grid
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Is it able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How does National Grid fare?
The current payout ratio for NG. is 98.88%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 71.69%, leading to a dividend yield of 5.38%. Furthermore, EPS should increase to £0.61, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of NG. it has increased its DPS from £0.32 to £0.48 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock. Compared to its peers, National Grid produces a yield of 5.35%, which is high for multi-utilities stocks.
What this means for you:
Are you a shareholder? With National Grid producing strong dividend income for your portfolio over the past few years, you can take comfort in knowing that this stock will still continue to be a robust dividend generator moving forward. But, depending on your current holdings, it may be beneficial exploring other dividend stocks to increase diversification, or even look at high-growth stocks to complement your steady income stocks. I recommend continuing your research by checking out my interactive free list of dividend rockstars as well as high-growth stocks to potentially add to your holdings.
Are you a potential investor? Keeping in mind the dividend characteristics above, NG. is definitely worth considering for investors looking to build a dedicated income portfolio. As with all investments, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Another aspect to consider for NG. is how much it’s actually worth. Is NG. still a bargain? Check our latest free analysis to find out!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.