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<\/p>\nInvestors looking for passive income from dividend shares have a lot of choices. But National Grid (LSE:NG) has been doing well lately.<\/p>\n
The stock is up almost 20% in the last 12 months and the company just increased its dividend. So is now a good time to think about buying?<\/p>\n
Passive income <\/p>\n
Utilities stocks are often sensible choices for income investors looking for stability. Competition is limited and demand never goes away.<\/p>\n
That usually makes the companies some of the most predictable on the stock market. Despite this, they often have some attractive dividend yields.<\/p>\n
National Grid has just declared a 32.14p final dividend, taking the total for the year to 48.49p. So for \u00a31,000 a year, investors need 2,063 shares.<\/p>\n
The stock is trading at \u00a312.81, which means a dividend yield of 3.79%. That isn\u2019t bad \u2013 relatively predictable returns in other sectors often command higher prices.<\/p>\n
All of that means there are reasons to be interested in National Grid shares. But is \u00a326,427 to earn \u00a31,000 a year a good deal?<\/p>\n
Regulation <\/p>\n
For National Grid, limited competition comes at a cost. The amount the company is allowed to make is also restricted by regulations set by Ofgem.<\/p>\n
At the moment, the company is in something called RIIO-3. Basically, that\u2019s the regulation framework for the next five years.<\/p>\n
RIIO-3 allows National Grid a 5.7%\u20136.1% annual return on its rateable assets. That\u2019s not bad, but this isn\u2019t guaranteed beyond 2031.<\/p>\n
That means National Grid\u2019s profits aren\u2019t as predictable as they might seem at first sight. It\u2019s also worth noting that lower rates have meant lower dividends.<\/p>\n
For a relatively predictable business, the dividend has been quite choppy. And that\u2019s a reminder that every business goes through ups and downs<\/p>\n
<\/p>\n
Source: Fiscal.ai<\/p>\n
There are, however, potential opportunities ahead even beyond regulation. So, could these drive future growth and justify looking at the stock?<\/p>\n
What else do investors need to think about? <\/p>\n
National Grid isn\u2019t going to get a rate increase until (at least) 2031. But the firm can grow by increasing the asset base it\u2019s allowed to earn that return on.<\/p>\n
On the face of it, there are some promising opportunities here. Electrification is one and growing power demand from data centres is another.<\/p>\n
This could drive significant growth, but there are a couple of things to pay attention to. The first is how this is going to be funded.<\/p>\n
If it involves significant amounts of debt, that might mean higher borrowing costs cut into the allowed return. But there\u2019s also another issue.<\/p>\n
Analysts at UBS have pointed out that National Grid\u2019s enterprise value is well above its rateable asset value. And that creates another risk.<\/p>\n
Any delays due to planning approvals or supply chain issues could result in disappointing returns. That\u2019s something else investors need to consider.<\/p>\n
Final thoughts <\/p>\n
From National Grid\u2019s perspective, RIIO-3 is an improvement on RIIO-2. And there might well be meaningful opportunities ahead.<\/p>\n
The trouble is, the stock is already up quite a lot as a result. So my view is that there are more compelling opportunities to consider elsewhere right now.<\/p>\n
That, however, could change quickly in an uncertain world. Given this, I think it\u2019s worth keeping on the radar in case something dramatic happens.<\/p>\n
Stephen Wright does not hold any positions in the companies mentioned.<\/p>\n
The post How many National Grid shares does an investor need to earn \u00a31,000 a year in dividends?<\/a> appeared first on The Twelfth Magpie<\/a>.<\/p>\n More reading<\/p>\n Motley Fool UK 2026<\/p>\n","protected":false},"excerpt":{"rendered":"Investors looking for passive income from dividend shares have a lot of choices. But National Grid (LSE:NG) has…\n","protected":false},"author":2,"featured_media":49772,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[21249],"tags":[5716,2580,5691],"class_list":["post-49771","post","type-post","status-publish","format-standard","has-post-thumbnail","category-national-grid","tag-dividend-yields","tag-national-grid","tag-passive-income"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/116645450452209562","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/49771","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=49771"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/49771\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/49772"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=49771"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=49771"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=49771"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}