This week Trina Yates of NW Brown Wealth Management looks at the electricity and gas utility company National Grid following the recent release of its half year results.
Stocks in Focus: National Grid
For the six-months to 30 September 2019, the utility company continued to deliver strong organic growth and saw an increase in underlying operating profit by 1%. This was driven largely by the US, which now makes up over 60% of revenues.
The group also announced a net zero target for its own emissions by 2050, which supports the groups aim to meet the long-term sustainable demands of its consumers and lead the industry towards cleaner energy. In order to grow in the decarbonisation area, National Grid has been investing heavily in greener energies including the recent acquisition of Geronimo, a leading developer of wind and solar generation in Minneapolis. This acquisition, along with additional investment in developing and maintaining gas and electricity infrastructure increased capital investment to £2.7bn for the year so far. This continued investment in the business aims to deliver growth and value to shareholders over the long term.
The recent shift within the energy sector towards renewables has opened up new areas for companies such as National Grid to look to grow the business both organically and through acquisitions. However, unlike fuels such as gas and coal, renewable energies are far more weather-dependent and structural questions will need to be answered before they become more reliable.
Looking forward, management appear to be positioning the group well and are focusing on diversifying the business. Despite high levels of regulation facing utility companies, management are confident that they can maintain an attractive annual asset growth rate between 5 to 7% whilst shareholders benefit from an attractive dividend yield.
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