The Nationwide Grid (LSE: NG.) share price fell arduous on FY outcomes day on 23 Could.

It had slipped a number of days earlier too, and on the time of writing it’s down 24% since a 52-week excessive on 17 Could.

Inventory dilution

Nothing has gone flawed, however the agency’s newest transfer has shocked the market. It’s all a few new inventory difficulty, aimed toward elevating £7bn in new capital.

What’s all of it for? CEO John Pettigrew spoke of “vital alternatives for Nationwide Grid at present, over the following 5 years and for many years to return.“

He added that the board’s “new five-year funding plan will ship long-term worth and returns for our shareholders, help over 60,000 extra jobs, and speed up the decarbonisation of the vitality system for the digital, electrified economies of the long run.“

Dividend and valuation

There was speak of the dividend being rebased in step with the brand new shares, and the ‘R’ phrase is one thing that earnings traders actually don’t like.

However what does the valuation appear like now?

Present shareholders will have the ability to purchase seven new shares for each 24 they presently personal, for simply 645p every.

Anybody who purchased on the shut price the day earlier than the outcomes would have paid 991p per share. In the event that they then take up the brand new rights difficulty, they’ll finish up with a median purchase price of 913p.

That’s about 5% above the share price as I write. So if we purchase now, we might get a greater deal.

An inexpensive purchase?

So is it value shopping for Nationwide Grid shares at present? I feel it’s value contemplating.

It’s legitimate for the price to have fallen to permit for the brand new, cheaper shares. However I reckon the market has overreacted, because it so usually does.

A part of it will likely be down to those that simply needed a quiet stream of passive earnings with out all this fuss. I can’t blame them. I feel promoting and transferring the money elsewhere is a wonderfully rational response for somebody in that place.

However even with the rebasing, I feel Nationwide Grid could be a fair higher long-term dividend funding now.

Dividend forecasts

Forecasts present the anticipated dividend dip in 2025, however we’d nonetheless be a 5.3% yield. And past that, the Metropolis expects it to get again to progress and attain 5.8% by 2027.

We additionally see a price-to-earnings (P/E) ratio of 12.5 for 2025, dropping beneath 11 by 2027.

That’s all on at present’s fallen price. So do we have to get in now, earlier than it recovers any of the losses?

Nicely, I see a danger that the share price might be in for a weak spell now. In any case, the image of a boring-but-steady earnings inventory that by no means causes waves has been shattered.

The inventory difficulty

So sure, it’d take a while for confidence to return.

I don’t personal any Nationwide Grid shares, although they’ve been on my record of prospects for a very long time. However a member of the family owns some, and I count on he’ll be taking up the difficulty. I do know I might.