If I invest £15,000 in National Grid shares, how much passive income would I receive?
If I invest £15,000 in National Grid shares, how much passive income would I receive?
For investors looking to increase their passive income, the London Stock Exchange is ideal. It has an abundance of dividend shares to choose from, with many carrying high yields. I’d look nowhere else.
One of the more popular income payers in the FTSE 100 is National Grid (LSE: NG). It is the owner/operator of the electricity transmission system in England and Wales, meaning it has been granted regulated monopoly status. This has helped it pay rising dividends to shareholders for over 25 years now.
Here, I’ll take a look at how much passive income I could expect to get if I put £15k in the stock today.
Flowing dividends
Right now, the National Grid share price is 1,047p (or £10.47 per share). That’s around 25% higher than five years ago, which might not sound overly impressive.
But this isn’t a Silicon Valley tech stock, remember. It’s a regulated utility whose purpose from an investing standpoint is to pump out dependable and steadily rising dividends.
In this regard, it’s been doing its job, as we can see below.
The current share price gives the stock a forward-looking dividend yield of 5.54%. This means I could expect to get about £831 in dividends for the year.
If the forecast yield for 2025 comes to fruition, which isn’t guaranteed, I’d get £853.
Excluding any special dividends, the stock pays out twice a year (in January and August).
Speaking personally, I’d rather spread £15k around 5-10 stocks instead, for diversification purposes.
Massive green investments
In its first-half earnings in November, the company reported an underlying operating profit of £1.8bn.
That was down from the year before when it was helped by a number of one-off transactions. The full-year results are due to be published in May.
However, what’s clear is that the firm continues to make huge capital investments as part of its obligation to decarbonise the energy network. Consequently, net debt increased from £41bn to £43.9bn at the halfway point.
This is worth monitoring in the years ahead, especially if financing costs rise to alarming levels. It’s an ongoing risk to dividend growth over the long term, I’d argue.
On a positive note, the Viking Link is now enabling the sharing of clean electricity between the UK and Danish power grids. Stretching 475 miles, this is the world’s longest onshore and subsea high-voltage (DC) interconnector.
National Grid said: “There will be huge benefits for UK consumers including cheaper, greener power and increased energy security, as the UK can call on additional power from Denmark when needed”.
Once operating at full capacity, the Viking Link will power up to 2.5m UK homes, according to the firm.
The firm aims to increase the dividend at a rate that aligns with the Consumer Prices Index including owner occupiers’ housing costs (CPIH). I like that element of steadiness in my portfolio.
While no dividend is set in stone, I see this as one of the most reliable around. That’s why I continue to hold it for passive income.
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Ben McPoland has positions in National Grid Plc. 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.