Nationwide Grid (LSE: NG) shares are a terrific supply of second revenue as they pay among the most dependable and rewarding dividends on your entire FTSE 100. As a regulated utility, its earnings stream is fairly strong. As a monopoly, competitors is skinny on the bottom.

Its most important job is distributing electrical energy to UK houses and companies, however it provides a little bit of sizzle by delivering vitality to a different 20m clients in New York and Massachusetts.

Few traders purchase it for share worth development, because it’s the dividend that issues. But over time, the inventory has finished fairly properly. The share worth fell 0.82% over 12 months, however it’s up 29.1% over 5 years. That simply beats the FTSE 100 as an entire, which grew simply 9.59% over the identical interval. 

It’s simple to see why traders love Nationwide Grid. This will not be essentially the most thrilling inventory on the Footsie. Nonetheless, it’s an awesome preliminary constructing block for a portfolio of direct equities.

Dividends and development

In the present day, the inventory generates revenue of 5.4% a yr. That beats the FTSE 100 as an entire, which at the moment yields a median of three.8%. It’s forecast to yield 5.68% in 2024 and 5.82% in 2025. That might give me a excessive and rising second revenue, assuming these forecasts come good (there are by no means any ensures).

Nationwide Grid’s payout is safer than most, even when it’s coated simply 1.2 occasions by earnings. It will possibly get away with comparatively skinny cowl due to the regulated nature of its earnings.

That additionally helps it maintain comparatively excessive ranges of web debt. That is forecast to climb to £44.8bn in 2024 and £48.9bn in 2025. That surpasses the inventory’s market cap of £38.2bn and would terrify me with every other enterprise. Nationwide Grid has to speculate a small fortune in sustaining crucial vitality infrastructure, and funding the swap to cleaner vitality.

Its revenues are removed from flat, regardless that they’re regulated. In 2021, they totalled £13.7bn. That climbed to £18.4bn in 2022 and £21.7bn in 2023.

Excessive and rising yield

FY24’s H1 working income fell. Nonetheless, that was anticipated, and was principally all the way down to non-recurring gadgets like property land gross sales within the yr earlier than. The board has additionally needed to enhance its regulatory capital funding by 10% to a document £3.9bn.

Nationwide Grid’s annual dividend per share has been tipped to climb from 55.44p in 2023 and to 57.5p in 2024. Utilizing the 2024 determine, I’d want to purchase 1,739 shares to generate revenue of £1,000 within the first yr of holding the inventory.

At right this moment’s worth of 1,025p, that might value me £17,825. Sadly, I can’t afford to speculate that a lot in a single inventory. It might swallow most of this yr’s Shares and Shares ISA allowance. I’d fortunately make investments £5k at right this moment’s valuation of 16.1 occasions earnings. It’s not often any cheaper.

If I needed to go all-in on only one single FTSE 100 firm for all times I’d in all probability select this one. However I’m not in that place. I’m already personal a dozen UK blue-chips, so now I wish to bag just a few super-high-yielders as a substitute, ideally with much more development potential than Nationwide Grid provides. I’m betting the market will rally sooner or later this yr, and I need my portfolio to be main the cost.