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Buy National Grid on new dividend policy

National Grid, the largest listed utility in the UK, announces a new dividend policy that will rise with inflation for the foreseeable future
Buy National Grid on new dividend policy

National Grid (NG.) said its dividend will rise at least in line with the rate of retail price inflation (RPI) each year for the foreseeable future. Investors breathed a sigh of relief on the announcement as there were fears that finances were being squeezed under a tough new settlement from regulator Ofgem. The shares rose by 27p, or 3.5 per cent, to 778p and now offer a forecast dividend yield of 5.2 per cent.

IC TIP: Buy at 778p

National Grid added that the year was finishing well and that earnings forecasts will be modestly ahead of previous guidance. Analysts at Deutsche Bank expect adjusted pre-tax profits of £2.71bn, giving EPS of 52.9p (from £2.58bn and 51p in 2012).