Stock of the Week: National Grid

VIDEO: Grid operator is pledging to be the FTSE's greenest investor in the coming years

James Gard 23 May, 2022 | 9:00AM
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James Gard: Welcome to Morningstar. Our latest stock of the week is National Grid, which runs gas and electricity networks in the U.K. and the U.S. Profits rose to £3 billion for the year to the end of March. But in this update, the company made a very bold claim. It said it would become the FTSE's greenest investor. To this end, it's planning to spend 24 billion pounds over the next five years by promoting investment in renewable energy generation. But what are National Grid's green credentials.

Morningstar Sustainalytics rates the company as having a low carbon and ESG risk. It also rates as a leader in corporate governance. National Grid shares have been on a strong run since 2021 as ESG focused fund managers have bought into utilities. The shares have also come into focus as an inflation hedge. While the market is highly regulated, utilities are legally allowed to pass on prices to customers. With a recession potentially looming National Grid's defensive qualities could also come into play. These drivers are however priced into the shares already, according to Morningstar's, Tancrede Fulop. From an income point of view that shares yield just over 4% and the company has just announced it will pay a full year dividend of just over 50p.

For Morningstar I'm James Gard.

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James Gard  is senior editor for Morningstar.co.uk