Shares of National Grid climbed 1.1% to 1,295p in Tuesday morning trading in London, as markets reopened following the UK bank holiday. The utility’s stock moved ahead of its May 28 ex-dividend date, with investor attention also focused on declining gilt yields and the company’s ambitious grid investment plans.
The FTSE 100 index rose 0.63% in early trade, adding 65 points, as UK stocks rallied after the long weekend. Lower bond yields, which track returns on government debt, tend to boost the appeal of dividend-paying stocks like utilities, as they offer relatively attractive income streams.
National Grid’s ordinary shares are set to go ex-dividend on May 28, with a final payout of 32.14p scheduled for July 23. Investors purchasing shares after the ex-dividend date will not be entitled to the distribution, a factor that often influences trading activity around this period.
The company faces a balancing act: while investors seek predictable regulated returns, there are growing concerns about the capital requirements for large-scale grid expansion. National Grid’s net debt rose 7% to £44.2 billion, as annual capital investment hit a record £11.6 billion, an 18% increase from the prior year.
Hargreaves Lansdown analyst Aarin Chiekrie noted after the company’s recent results that there were no major surprises, and highlighted a boost from higher allowed revenues in transmission. Allowed revenue refers to what regulators permit network operators to recover from customer bills.
National Grid’s investment program is expanding rapidly, requiring significant capital. While spending on grid infrastructure grows the regulated asset base—potentially boosting future earnings—it also exposes the company to higher borrowing costs, construction delays, and regulatory decisions.
Despite falling short of profit forecasts earlier this month due to elevated storm-repair costs in its US operations, National Grid reaffirmed its 2027 target for adjusted earnings per share growth of 13% to 15%. Chief Executive Zoe Yujnovich told Reuters that US tariffs have had minimal impact, with about 90% of US procurement sourced locally, and that Middle East tensions are not expected to cause major supply-chain disruptions.
Water utilities also advanced, suggesting the move was not isolated to National Grid. United Utilities rose 1.4% to 1,379p, while Severn Trent edged up 0.19% to 3,134p.
Market analyst Daniela Hathorn of Capital.com cautioned that investor tolerance for negative headlines is shrinking amid ongoing Middle East talks and fluctuating oil prices. Bond yields could rise again, or energy tensions could reignite inflation worries, adding uncertainty to the outlook for utilities.
National Grid shares ended higher on Tuesday without any new company-specific news, reflecting its status as a defensive income play in a firm market. The next test for the stock will come after the dividend cut-off, as investors reassess the funding requirements for the company's major grid expansion in Britain.
