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LONDON — The shares of National Grid climbed 8 pence to 759 pence during early London trade this morning after the FTSE 100 member revealed its new dividend policy.

National Grid, which operates the country’s electricity transmission system, said its annual payout from 2014 onwards would rise at least in line with the Retail Prices Index measure of inflation.

Earlier this month, the Office of National Statistics revealed RPI inflation was running at 3.2%. The new dividend policy replaces National Grid‘s existing strategy of lifting the payout by 4% a year.

Steve Holliday, National Grid‘s chief executive, said: “I am pleased to confirm a new dividend policy that supports our long-term ambition to target a secure dividend in real terms for our shareholders while enabling the Group to sustain the strong balance sheet needed to fund the business.”

Holliday also said funding for further business growth would be sourced from retained profits and additional net debt.

In addition, he claimed any dividend increases above inflation would be supported by “sustained outperformance” and would have no impact on the group’s long-term credit ratings.

National Grid confirmed its final dividend for the year to March 2013 would reflect the existing 4% growth policy, which indicates a forthcoming final payout of 26.36 pence per share, a full-year dividend of 40.85 pence per share and a potential 5.4% income from the shares.

However, assuming RPI inflation stays at 3.2%, National Grid‘s dividend for the year to March 2014 should rise to 42.16 pence per share, which would push the share’s potential yield to 5.6%

Of course, whether the new dividend policy, a possible 5.6% income and the general prospects for the regulated electricity sector all combine to make National Grid a buy right now is something only you can decide.

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The article National Grid May Still Yield 5.6% After Revealing New Dividend Policy originally appeared on Fool.com.

Maynard Paton has no position in any stocks mentioned. The Motley Fool recommends National Grid plc (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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…read more
Source: FULL ARTICLE at DailyFinance

By G. A. Chester, The Motley Fool

Filed under: Investing

LONDON — ISA season is upon us again! If you haven’t yet used this year’s £11,280 allowance for a stocks and shares ISA, you only have a short time left before the April 5 deadline.

Remember, you don’t pay any tax on share gains held within an ISA or any additional income tax on dividends — giving a significant boost to your investment returns. (For more information about ISAs, click here.)

Today, I’m going to tell you why I believe utility SSE is a bright choice for your stocks and shares ISA.

Name of the game
Scottish & Southern Energy has shortened its name to SSE since the last ISA season, but don’t let that worry you. The name of the game with the company is still dividends.

SSE describes its “key financial objective” as “the delivery of annual above-inflation increases in the dividend paid to shareholders.” This focus means SSE is now one of just five long-serving FTSE 100 companies to have delivered above-inflation dividend increases every year since 1998, the year the company was formed.

Why does SSE concentrate so resolutely on dividends? Among other reasons, “receiving and reinvesting dividends is the biggest source of an investor’s return over the long term.”

As I mentioned earlier, canny investors who shelter the shares in an ISA will pay neither additional income tax on the dividends, nor tax on the long-term capital gains those reinvested dividends are likely to produce.

Change at the top
At the start of this year, SSE‘s chief executive, Ian Marchant, decided that after leading the company for ten years the time had come to step down. It’s always a bit of a jittery time when a boss who’s been as successful as Marchant decides to move on.

However, I don’t believe the risks of succession in a regulated business are as great as in other industries. Furthermore, the new leader, Alistair Phillips-Davies, already knows SSE inside out: he’s the current deputy chief executive and has been with the company since 1997. Just for good measure, there’s further continuity in the shape of finance director Gregor Alexander, who’s been with the business even longer — since 1990.

Dividends and more dividends
I expect it to be business as usual at SSE — and that means dividends and more dividends.

The board has already indicated, in an interim management statement during January, that it expects to announce a full-year dividend of around 84 pence per share when the firm’s annual results are published during May. The forecast payout meets SSE‘s 2012-13 target of “at least 2% more than RPI inflation” and shareholders can look forward to more ahead-of-inflation increases in the years to come.

The 84 pence per share dividend for the current year gives an income of 5.8% at a share price of 1,450 pence — which looks pretty sparky to me with the expectation of further annual growth ahead of inflation in the future.

I think SSE is one of a number of great …read more
Source: FULL ARTICLE at DailyFinance

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