A FTSE 100 stock I’d buy alongside the National Grid share price today

For strong, progressive and safe dividends from the FTSE 100 (INDEXFTSE: UKX), I think these are hard to beat.

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I’m a big fan of utilities companies when it comes to investing for dividends, and United Utilities (LSE: UU) has been one of the FTSE 100‘s long-term winners.

A steadily progressive dividend reached a yield of 5.1% for the year ended March, and the above-inflation rise predicted for the current year would yield 4.9% — down a little because the share price has appreciated over the past 12 months.

First-half results Wednesday saw a modest gain in underlying pre-tax profit, leading to a 3% lift to the interim dividend. Nicely ahead of inflation, that’s in keeping with full-year expectations.

Outlook

Chief executive Steve Mogford said: “We are well prepared for the next regulatory period and are already moving forward with our implementation plans. This, together with the sustainable improvements in performance, gives us confidence that we will continue to create long-term value for all our stakeholders.”

One thing I like about water firms is they’re not as open to competition from the smaller providers that have been making inroads into the electricity and gas business. I’ve had my share of sales people at the door trying to get me to switch energy suppliers, but I’ve not yet had anyone making me an offer I can’t refuse for my sewage.

There are fears over how far Labour’s nationalisation plans might go if they’re elected, and we could be forgiven for thinking they might try to take over everything. But even assuming they can gain power, they’re talking about way more than they could realistically achieve even with several consecutive victories.

So, as always, I say ignore politicians and just look at the businesses.

No competition

Though I’d buy United Utilities, my favourite utilities firm has to be National Grid (LSE: NG), which also has a strong defence against competition. While others fight it out over who gets to collect the gas and electric bill money, it’s all delivered over National Grid’s distribution network and its shareholders get their cut.

National Grid’s six months figures showed a modest fall in pre-tax profit of 4%, but EPS picked up 2% and the company lifted its interim dividend by the same 3% as United Utilities. At the same time, the company reiterated its “policy of aiming to increase dividend per share by at least RPI for the foreseeable future,” and just keeping ahead of inflation is all that’s needed to grow your income stream to impressive proportions over the decades.

International

As further defence against pressures in the UK, both regulatory and political, National Grid also has its US operations, and those activities accounted for more than half of its £2.7bn of capital investment over the period. The company says it expects “to deliver good financial performance in our US business following the agreement of a number of regulatory filings.”

National Grid’s dividend has been yielding a little higher than United Utilities, with around 5.5% expected for the current year and next — and I reckon that’s one of the best dividends on the market. It’s not the highest, though it’s ahead of the overall 4.8% expected from the FTSE 100 this year. But with clear forward visibility, I reckon it’s among the most reliable.

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.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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