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National Grid PLC ADR NGG

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Morningstar’s Analysis

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National Grid Maintains Its Dividend Policy, Shrugs Off the Likely Credit Rating Downgrade

Tancrede Fulop, CFA Equity Analyst

Analyst Note

| Tancrede Fulop, CFA |

We maintain our fair value estimate of GBX 800 per share along with our no-moat, stable trend ratings after National Grid announced that it will continue to increase its dividend in line with inflation and said it was comfortable with the likely credit rating downgrade it will entail. The expected dividend on fiscal 2021 is GBX 0.5, implying a 6% yield. The company will also appeal the RIIO-2's cost of equity to the competition and markets authority, the CMA. Shares appear fairly valued. For investors seeking a regulated utility paying high dividend, we would recommend undervalued Red Electrica.

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Company Profile

Business Description

National Grid owns and operates the electric and gas transmission system in England and Wales. In 2019, it divested its U.K. natural gas distribution business. In the Northeastern United States, it serves 7.1 million electricity and gas customers combined in three states. It also owns regulated transmission and electricity generation in the United States, metering services, merchant transmission lines in the U.K., and the Grain (U.K.) liquefied natural gas facility.

1-3 Strand
London, WC2N 5EH, United Kingdom
T +44 2070043000
Sector Utilities
Industry Utilities - Diversified
Most Recent Earnings Mar 31, 2008
Fiscal Year End Mar 31, 2021
Stock Type
Employees 23,057