Utilities have long been a staple for income-oriented investors, as well as those looking to position a long only portfolio defensively. Typically, utilities, whatever other merits they possess, tend to offer little in the way of geographic diversification. One of the exceptions to this generalization is National Grid Plc (NYSE:NGG) which is among the world's 15 largest utilities, as measured by revenue.
This UK-based firm vaulted into the ranks of international utilities with the 2007 acquisitions of New York's Keyspan Corporation, as well as the Southern Union Company's (NYSE:SO) gas distribution network in Rhode Island. Although NGG's primary focus is in the distribution of both electricity, as well as natural gas, the firm also has interests in power generation, metering services, and LNG storage. The breakdown in customers is roughly 2/3s UK, and 1/3 US.
As I noted a few months ago, writing about the Southern Company, the regulatory regime under which a utility operates is what determines the profitabilty of the firm. Fortunately for NGG, while the situation in the US is not particularly favorable, that's not the case with the firm's UK operations.
NGG is currently yielding a most attractive 7.48% (per Morningstar, although Yahoo Finance pegs it at 7.60%). The potential income investor should also take note of: A) as is typical of many foreign firms, NGG pays the dividend semi-annually, rather than quarterly, and B) the dividend is paid in GBP, so currency fluctuations will effect the dividend received, in terms of the USD. Neither of these factors should serve as a "red flag" to the majority of investors.
NGG is trading near its 52 week high of 52.18 (it closed @ $50.80 on 8-29), and sports a PE of 9.9 (per Morningstar, although Yahoo Finance shows it at 9.76).
NGG is worth a serious look by income investors looking to add some international flavor to their portfolio.
- National Grid PLC website
- Yahoo Finance
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in NGG over the next 72 hours.