Nationwide Grid (LSE:NG.) shares are enduringly widespread amongst British buyers. With dependable money flows, excessive dividend funds, and monopoly energy over the electrical energy community, it’s simple to see why this enterprise is a FTSE 100 favorite.

However, because the Nationwide Grid share price climbs inside just a few share factors of an all-time excessive, I’m questioning whether or not this blue-chip inventory remains to be an inexpensive purchase proper now.

Let’s have a look at the funding case in the present day.

A turbulent yr

Nationwide Grid shares are sometimes lauded for stability, however 2024 has been an unusually risky yr. The main occasion was a £7bn fairness increase by way of a rights difficulty in Might, which triggered a pointy fall within the share price.

Naturally, many shareholders had considerations about dividend dilution and ballooning capital prices. The corporate plans to hike capital funding to £60bn throughout the UK and the US over 5 years.

On prime of this, the enterprise completed FY24 with £43.6bn in web debt. Nationwide Grid enjoys a excessive diploma of regulatory safety that insulates it from some dangers confronted by different debt-heavy corporations. Nonetheless, the steadiness sheet isn’t precisely in a lean form.

Nevertheless, let’s not neglect that the final huge rights difficulty within the UK inventory market was performed by Rolls-Royce throughout its pandemic struggles in 2020. Since then, the engineering large’s share price has loved explosive development.

Certainly, Nationwide Grid shares themselves have already pared again virtually all of the losses they endured within the wake of Might’s fundraising.

Dividend stability

One impact of accelerating the share rely by 29% is the rebasing of Nationwide Grid’s dividend payouts. This can be a potential fear for buyers contemplating excessive distributions have been central to the inventory’s long-term attraction, particularly for retirees looking for common passive revenue.

That mentioned, it’s vital to not overlook the spectacular dividend historical past. The inventory has constantly yielded between 4% and 6% for the previous decade. The board’s ambition is for dividends to develop consistent with CPIH inflation going ahead and the present yield is a beautiful 5.5%.

However it’s additionally price acknowledging that the closely regulated setting through which Nationwide Grid operates poses dangers to dividend sustainability. Ofgem workout routines important management over the agency’s revenue potential.

In the end, regulatory choices might put a cap on future share price development and dividend payouts. A closing framework choice for the subsequent price management interval — April 2026 to March 2031 — received’t be made till late subsequent yr.

Progress prospects

Regardless of buying and selling close to a 52-week excessive, I believe there’s nonetheless good worth within the Nationwide Grid share price. A ahead price-to-earnings (P/E) ratio of 14.7 appears cheap, which bodes properly for future returns.

A key benefit of the rights difficulty is the added flexibility it provides to deal with long-term development alternatives. Nationwide Grid expects to ship 10% annual group asset development till 2029. If achieved, the enterprise would have £100bn in group belongings on the finish of the interval.

In the end, the utility large appears well-positioned to capitalise on the inexperienced power transition. Granted, there are many potential pitfalls in delivering large infrastructure upgrades and regulatory dangers to remember. However total I’d be pleased to purchase Nationwide Grid shares if I had spare money to speculate.