National Grid (NGG): High Yield, Stable Growth

Posted Jul 26th 2010 12:00PM by Steven Halpern
Filed under: International Markets, Newsletters, Commodities, Stocks to Buy

"National Grid (NGG) is Britain's largest utility, and is also a major player in the Northeast U.S. as the result of its 2007 acquisition of Keyspan," says Gerald Appel, an advisor and technician who is best known for developing the well-known MACD indicator.

The editor of Systems & Forecasts explains, "Much of its business is in regulated markets, offering stability in sales and proﬁts. The company more than earns its current dividend, and is expected to continue to do so.

"National Grid issued new shares this year to fund capital expenditures. This diluted future earnings, and contributed to this year's 26% sell-off in the stock.

"Analysts are not excited about this stock because of the low growth potential, but nor are they alarmed.

"Sales and proﬁt growth are expected to be modest according to Standard and Poors. Valuations are typical for the utility sector.

"The appeal of the stock is that even if the price goes nowhere, you can still earn the 7.7% dividend.

"Moreover, government regulators help make sure that the company remains proﬁtable. However, nothing is guaranteed.

"National Grid's share price has lost 26% this year. However, its chart suggests that a bottom is at hand.

"Volume has jumped as the stock stabilized around the $37 support area. The same thing happened (with a smaller volume spike) in March 2009. In addition, the MACD pattern is positive.

"This is a risky stock given the recent price hit, but potentially rewarding as a long-term holding for the dividend income. Investors who can stomach the risk can buy NGG at $39 or lower. "

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