A FTSE 100 dividend stock I’d buy and hold for the next 50 years
Is there a better share out there for those seeking earnings growth in the decades ahead than National Grid (LSE: NG)?
I’m sure I don’t need to explain why, but for new readers unfamiliar with the business, National Grid is responsible for the country’s network of wires, substations and pylons which keep electricity running through all of our homes, shops and factories.
Are we always going to need electricity? Yes. So are we always going to need the FTSE 100 firm’s services? Absolutely. The only real threat to National Grid’s profits outlook is the possibility of regulatory changes to end its monopoly on our national power network. I would argue, though, that this threat is baked into the company’s cheap forward P/E ratio of 14.6 times.
Now National Grid isn’t immune to the odd hiccup due to the colossal costs attributed to its operations, as well as the impact of rare weather events on its infrastructure. But over the long-term, the future looks extremely bright for strong earnings expansion.
The network operator is fantastically boring and it is often these types of firms which can be relied upon to deliver decent shareholder returns.
However, the indispensable nature of National Grid’s operations is not the only reason to expect solid profits growth over its year ahead because of its geographic expansion programme — National Grid operates on the Eastern Seaboard of the US as well as the UK and it is taking steps to expand its presence on the other side of the Atlantic Ocean.
Just last month it made regulatory filings in Massachusetts which, in addition to seeking an increase in electricity distribution rates to boost revenues, included plans to invest $167m over a five-year period to build electric vehicle charging points and an extra $50m for energy storage units. It made a capital investment request with regulators in New York too, to build 1.7m Advanced Metering Infrastructure (AMI) electric meters and 640,000 gas modules at a cost of some $650m.
Yields march towards 6%
Things look extremely rosy for National Grid’s bottom line in the years ahead, and this means that City analysts are predicting that the business will keep raising dividends for the fiscal year to March 2019, despite an estimated 5% profits fall.
Last year’s 45.93p per share dividend is expected to rise to 47.4p in the present period, representing a gigantic 5.7% yield.
And the Footsie firm is expected to recover with a 4% earnings rise in fiscal 2020, meaning that the dividend is unsurprisingly predicted to rise again to 48.8p per share, a figure which yields a stunning 5.9%.
National Grid is, in my opinion, a brilliant share to buy if you want to give your investment portfolio a little bit of extra protection. Whether you’re worried about Brexit, a sharp economic slowdown in emerging markets, or any one of the many other fears circulating in investors’ craniums right now, you can take comfort from the fact that the power play looks to be in great shape to deliver decent shareholder returns regardless of what geopolitical and macroeconomic troubles we face in the years ahead.
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Royston Wild 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.