At the time of writing, shares in the UK's largest listed utility, National Grid(LSE: NG), were changing hands at around 954p, that's 16% below last summer's peak of 1,130p. Traders would consider that a very substantial retracement given the electricity and gas distribution firm's reputation for stability and low volatility.
A cursory glance at the group's share price chart makes it an obvious pick for traders looking to buy the dips in an uptrend. But of course we're not traders looking to make a quick buck from short-term price movements, we're here to build long-term wealth based on sound fundamentals and common sense. So the question remains, could this be our last chance to buy National Grid for under £10 per share?
First and foremost we must look at why the utility giant has remained a favourite among investors looking for stability in their buy-and-hold portfolios. The utility giant has no competition whatsoever, no one else can provide its services here in the UK, resulting in a virtual monopoly, making it ultra-low-risk. Secondly, the company's dividend policy continues to attract long-term income seekers with its aim to grow the dividend at least in line with the rate of RPI inflation each year for the foreseeable future. In other words, a steady reliable growing income - what's not to like so far?
Third and perhaps more surprisingly, National Grid does have attractions for growth investors. Over the last four reporting periods, the firm's revenues have increased by £1.3bn, with pre-tax profits up £473m, and underlying earnings per share rising by 27%. The result is a 56% increase in the share price since 2012. Not bad for a boring utility with little opportunity for growth.
Nevertheless, the main attraction is still the progressive inflation-proof dividend and low-risk profile, but that in itself attracts buy-and-hold investors in it for the long haul, which of course leads to further share price appreciation. Analysts expect the full-year dividend payout to be hiked by 1.07p per share to 44.41p for the current period to the end of March, with further increments to 47.32p by FY2019, giving a chunky prospective yield of 5% at current share price levels.
But that's not all folks! Last month National Grid announced that it was to sell a 61% stake in its gas distribution business to a consortium of investors led by Macquarie, the world's largest infrastructure manager, for £3.6bn in cash by the end of March. The company will also receive £1.8bn in additional debt financing as part of the deal.
Of the total £5.4bn proceeds from the sale, National Grid will return around £4bn to shareholders by way of a special dividend, perhaps as early as the second quarter of this year, together with a share buy-back programme. If all goes well, shareholders could be in line for a sizeable windfall.
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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.