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Foreign dividend stocks can be a little confusing for U.S. investors. Investors are used to looking up a dividend rate and yield on the financial web sites to get a pretty good picture of how well a stock pays. In contrast to U.S. companies, foreign companies often pay dividends of varying amounts on different schedules. The result is published dividend yield numbers do not always give a clear picture of international income stocks. Income investors should take a look at a clear picture of U.K. based National Grid PLC (NYSE:NGG). They might like what the see.

National Grid is a $38 billion public utility company providing electricity and natural gas services in the U.K. Plus the company owns several public utilities serving New York, Massachusetts, New Hampshire and Rhode Island. For the first half of the company's 2012 fiscal year, 21 percent of total operating profits were generated from the U.S. operations.

National Grid pays dividends twice a year. The fiscal year interim dividend has a record date on or near December 1 each year and is paid in the third week of January. The final dividend has a record date near the first of June and is paid in mid-August. The company's fiscal year closes at the end of March. The most recent interim and final dividend amounts per American Depositary Share were $1.0967 and $1.9005 for an annual total of $2.9972 - $3.00 per share. At the current ADS price of $55.87, the dividend yield calculates to be 5.36 percent. The most recent year's worth of dividends is 6.7 per cent higher than the previous combination of interim and final dividends. The ADS dividend rate will be dependent on the conversion from British pounds to U.S. Dollars. That said, both the interim and final dividends have been increased each year since 2008.

To compare the 5.3 percent yield to U.S. regulated utility stocks, the current distribution yield on iShares Dow Jones U.S. Utilities ETF (NYSEARCA:IDU) is 3.55 percent. Even after adding back in the 0.47 percent fund expenses, the yield from National Grid is significantly better than investors can expect from the typical U.S. utility stock.

The major risk currently facing National Grid is the pending acceptance by U.K. regulatory authority of the company's submitted long-term capital and investment plan. If the company is not approved for the planned levels of return on equity, the dividend growth rates may be slowed. During the 2012 first half conference call, CEO Steve Holliday discussed that the company understood how very important the dividends were to investors. A stronger dollar in relation to the pound could result in lower dividends for ADS holders.

Over all, National Grid is an attractive investment candidate for an income stock portfolio. A greater than 5 percent yield and good potential for future dividend growth. Dividends from National Grid would qualify for the lower tax rate and there is not foreign tax withholding.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Top Utility Stock Pick: U.K.-Based National Grid PLC