Be Prepared for National Grid's Results

LONDON -- National Grid (LSE: NG) is due to announce its annual results on Thursday this coming week (16 May).

At the time of writing, the shares of the company, which runs the UK's gas and electricity networks and has power operations in the US, are trading at 818p -- close to their 52-week high. The shares are up 22% from a year ago compared with a 19% rise for the FTSE 100.

How will National Grid's businesses have performed in 2012/13 compared with the previous year? And will the results justify the strong performance of the shares? Here's your cut-out-and-check results table!

 

FY 2011/12

Forecast

FY 2012/13

Forecast

increase

Revenue

£13.83bn

£14.43bn

+4.3%

Adjusted profit before tax

£2.59bn

£2.75bn

+6.2%

Adjusted earnings per share (EPS)

51.3p

54p

+5.3%

Dividend per share

39.28p

41p

+4.4%

Net debt

£19.6bn

£21bn

+7.1%

In a year-end trading update issued during March, the company said that 2012/13 was"finishing well, with earnings forecast to be modestly ahead of National Grid's previous expectations". City experts are forecasting growth in mid-single digits right across the key numbers.

Dividend
National Grid, like most utilities, is attractive to big pension funds and private investors seeking income because of the long-term potential of real dividend growth; or, in other words, an income that won't be eroded by inflation.

Prior to the 2012/13 year, National Grid's target had been to increase the dividend by 8% a year. For 2012/2013, management set a 4% growth target, while awaiting the outcome of the U.K. regulator's proposals for the business for the period 2013-2021.

National Grid raised its 2012/2013 interim dividend by 4% to 14.49 pence -- right in line with the one-year target -- and management has guided that the final dividend will also reflect the 4% growth policy for the year.

If the final dividend increase is bang on 4% shareholders can expect to see a 26.36 pence per share payout, making 40.85 pence for the full year. I'm not sure why the analyst consensus (shown in the table above) is for a more optimistic 41 pence (+4.4%).

The regulator's proposals for 2013-2021 that I mentioned earlier have now been digested and accepted by National Grid, and the company has set a new dividend policy for 2013/2014 onward. Management's aim is "to grow the ordinary dividend at least in line with the rate of RPI inflation each year for the foreseeable future".

Don't expect to see anything more than a reiteration of the policy in the upcoming results, together with a repeat of the guidance that: "For the year ending March 2014 the interim dividend is expected to be 14.49 pence, thereafter it is intended that the interim dividend be determined as 35% of the previous year's full year dividend."

Finally, you may be interested to know that National Grid, which yields 5%, has been declared "The Motley Fool's Top Income Stock For 2013". To discover exactly why our leading analysts rate the company so highly, help yourself to this free in-depth report.

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