Why National Grid plc & Pennon Group plc Are The Perfect Partners For Tullow Oil plc & Premier Oil PLC In Your Portfolio

A mix of National Grid plc (LON: NG) and Pennon Group plc (LON: PNN) alongside Tullow Oil plc (LON: TLW) and Premier Oil PLC (LON: PMO) could boost your portfolio returns. Here’s why.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Although there are many facets to investing, with many investors identifying themselves as being more focused on growth, value or income, a balance between all three seems to be a sensible middle ground. Certainly, it may mean that the potential rewards in the long run are limited somewhat, but it also equates to less risk and reduced volatility, which should help you to sleep much easier at night.

Utilities

Of course, the utility sector is very much an income and low volatility play. While the likes of National Grid (LSE: NG) (NYSE: NGG.US) and Pennon (LSE: PNN) may not provide astounding growth potential as a result of their rather ‘slow and steady’ business models, they offer tremendous income prospects, low volatility and a relative certainty that your capital will not be in too much danger over the medium to long term.

For example, National Grid and Pennon both have betas which indicate that their shares should offer reduced volatility and resilience during challenging periods for the wider market. In fact, National Grid’s beta of 0.87 and Pennon’s beta of 0.61 show that if the market were to fall by 1%, then (in theory at least) their share prices should fall by just 0.87% and 0.61% respectively. And, with the outlook for the FTSE 100 being relatively uncertain as a result of the prospect of the UK leaving the EU over the next couple of years, it may be prudent to add more defensive companies to your portfolio.

Should you invest £1,000 in Harbour Energy Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Harbour Energy Plc made the list?

See the 6 stocks

In addition, National Grid and Pennon also offer excellent income prospects. For starters, they currently yield 5.1% and 4.1% respectively and, looking ahead, are expected to increase their dividends at a healthy rate. In Pennon’s case, dividends per share are forecast to rise by 6.8% next year, while National Grid is committed to increasing dividends by at least as much as inflation. Certainly, with inflation being a negative number at present, this may not appeal so much. But, with a loose monetary policy likely to drive it upwards, National Grid’s aim could become a very appealing prospect over the medium to long term.

Oil

Of course, the oil sector offers growth potential that utilities simply cannot match. For example, Tullow (LSE: TLW) and Premier Oil (LSE: PMO) are expected to increase their bottom lines by 57% and 24% respectively next year. That’s many, many times faster than the wider index growth rate and, despite this, both stocks offer an excellent margin of safety, with Tullow having a price to earnings growth (PEG) ratio of just 0.4 and Premier Oil’s PEG ratio also being appealing at 1. In fact, both stocks could be all set for stunning share price growth, and now could be a great time to buy them.

Looking Ahead

While none of the four stocks here are balanced in terms of offering growth, income and value potential in one place, a mix of the four should provide your portfolio with a boost in all three areas. As such, a mix of National Grid, Pennon, Tullow and Premier Oil seems to be a logical step – especially if you think the oil price will rise in the long run, and that there could be challenges over the next few years for the FTSE 100.

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of National Grid and Pennon Group. The Motley Fool UK has recommended Tullow Oil. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Stack of British pound coins falling on list of share prices
Investing Articles

Why hasn’t its 9.9% yield boosted the Phoenix share price?

Phoenix Group has a dividend close to double digits, but saw a weak share price performance in recent years. Christopher…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio

Some of the best passive income gems can be found on the UK's smaller indexes like the FTSE 250 and…

Read more »

A coin being dropped into a piggy bank
Investing Articles

As the Barclays share price tanks 19% in 2 days, is this a great buying opportunity?

As a trade war sends the Barclays share price into a tailspin, Andrew Mackie steps back to look at the…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is Fundsmith Equity still a good choice for a Stocks and Shares ISA in 2025?

Many Britons hold the Fundsmith Equity fund in their Stocks and Shares ISAs. Is this still a good move? Edward…

Read more »

Investing Articles

Nvidia stock is down 24% this year. Time to buy the dip?

Christopher Ruane has been eyeing Nvidia stock as a potential addition to his portfolio for a while. Is a recent…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Down 25% since January, this resilient dividend stock’s catching my eye

Maintaining the UK’s rail, water, and energy infrastructure isn’t the most exciting business. But it has made this a solid…

Read more »

Investing Articles

Prediction: Unilever to outperform the FTSE 100 over the next 12 months

The FTSE 100 has made a strong start to 2025, but Stephen Wright thinks a popular dividend stock could be…

Read more »

Investing Articles

I just bought this legendary S&P 500 tech stock for my ISA, 27% off its highs

This S&P 500 stock has tanked over the last month and Edward Sheldon has snapped it up for his portfolio…

Read more »