Electricity pylons in England and Wales can be double the height of Big Ben, and together connect enough cable to stretch from London to Mumbai. Despite the colossal scale of the network, however, the business that runs it – National Grid (NG.) – has typically kept a low profile compared with other utilities giants.
Unlike listed water companies with their sewage-dumping habits, National Grid has so far avoided public ire, and it is less associated with rising energy bills than the companies that produce and sell electricity. Shareholders also tend to take National Grid for granted. Its history of predictable and defensive returns has long made it a no-brainer for income investors. Dividends, which grow in line with inflation, have not been cut since 1996.
But are we getting complacent? Electrification will play a crucial part in cutting the world’s carbon emissions, and National Grid is stepping up its capital investment. It has set aside £40bn to invest between 2022 and 2026, of which £29bn is going directly into the decarbonisation of energy networks. This sounds like good news for net zero targets, but raises questions about the viability of future dividend hikes.