National Grid share price: I think this is one of the best FTSE 100 stocks out there

Jabran Khan explores the National Grid share price and believes it is one of the best FTSE 100 stocks out there, especially based on its latest move.

| 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.

I believe that National Grid (LSE:NG) is one of the best FTSE 100 stocks out there. I class it as a defensive stock based on its position within the UK’s energy infrastructure. Furthermore, it has an excellent dividend yield to help me make a passive income. It’s latest move has solidified my stance too.

Makings moves

National Grid owns the electricity transmission network in England and Wales. In addition to this, it owns and operates the high-pressure gas transmission system in Great Britain too. I have always classed energy and infrastructure stocks as defensive as they are essential commodities required by everyone.

Last week National Grid announced it was buying the holding business of Western Power Distribution. Western Power Distribution is classed as the UK’s largest electricity distributor. The deal is worth a mammoth £7.8bn. Part of the deal sees NG selling one of its US division’s electricity businesses for $3.8bn. These deals are ensuring that National Grid’s UK arm is strengthening its grip on the electricity market in the UK. I believe such a big move makes NG a great FTSE 100 pick.

Should you invest £1,000 in Unilever 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 Unilever made the list?

See the 6 stocks

FTSE 100 opportunity

As I write, I can buy shares in National Grid for 855p per share. This is still 5% lower than this time last year. I consider its share price to be relatively cheap. To provide further context, in February 2020, shares were trading for over 1,000p per share. I believe these levels could be seen once more.

The average yield for a FTSE 100 company is 3%. Keep in mind that a higher yield isn’t always a positive. A high dividend yield could indicate a business in trouble. The yield could be high because the company’s shares have fallen in response to financial issues, and the struggling company hasn’t cut its dividend yet. I do not believe this is the case for National Grid.

As I write this, NG’s yield is over 5%. NG’s policy of raising its dividend per share by the retail price index (RPI) makes me believe that its dividend yield could be 6%-plus later this year. If this happens, I would class it as one of the best FTSE 100 dividends, and it would certainly be a top passive income opportunity too, in my opinion.

National Grid rewards aren’t without risk

National Grid is in a heavily regulated industry, which presents some risks. Regulators could enforce a profit cap which may affect investment viability. In addition to this, it could face massive capital expenditure in the face of repairs if anything significant were to affect its network. This expenditure can affect the bottom line and affect investor confidence too. The threat of nationalisation always looms in the background too.

Aside from the risks, I believe there is a lot to like about National Grid, which is why I class it as a top FTSE 100 pick. Its recent ambitious move, coupled with a cheap share price and a juicy dividend yield make me believe it could be a fruitful addition to my portfolio.

As a savvy investor, I like to diversify my portfolio. Here is another FTSE 100 stock I like that has fallen in price. 

Should you buy Unilever now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation 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.

Jabran Khan 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.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Investing Articles

How much do investors need in an ISA to earn a £2,500 monthly passive income?

Charlie Carman explores how investors could strive for £30k in tax-free passive income each year from a dividend stock portfolio.

Read more »

Investing Articles

How much would a 45-year-old need to invest in an ISA to earn a £1k monthly passive income at 65?

Harvey Jones looks at how much an investor would need to put away every month to build a steady passive…

Read more »

Investing Articles

3 things to do ahead of the new 2025-26 ISA year

It's time for us all to put on our investing boots and get to work on developing our plans for…

Read more »

Older couple walking in park
Investing Articles

Is £150,000 enough to generate £1,000 a month in passive income?

Stephen Wright takes a look at three UK stocks with dividend yields above 8% that passive income investors might be…

Read more »

Investing Articles

Aim to earn a £50k second income in retirement by investing just this much each month

Even with a small monthly investment, it’s possible to earn a £50k second income with a successful investment strategy and…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Down 22% in a month! Is this my chance to buy shares in this FTSE 100 outperformer?

Shares in InterContinental Hotels Group have outperformed the FTSE 100 over the long term. So is a chance to buy…

Read more »

Investing Articles

How much would Tesla stock be worth if it was valued like Nvidia?

The market seems to view Tesla as a tech stock rather than a car manufacturer. What could this mean for…

Read more »

Investing Articles

This ex-penny stock skyrocketed 900% in 2020! Is it about to surge again?

This subdued hydrogen penny stock was hot in 2020, but with demand for green hydrogen rising in Europe, can the…

Read more »