When it comes to the old dilemma of choosing between share price growth and dividends, some companies just shout dividends.
Ive often said that when youre looking to build a long-term portfolio to provide you with steady cash a decade or more in the future, you should seek a mix of high current yields and strong dividend growth and those with high yields today should be growing them at least in line with inflation.
Heres what National Grids track record looks like:
Those are very high yields, and theyre keeping ahead of inflation, which means shareholders are getting real increases in their income each year. The yield is set to drop to 4.8% this year only because the share price has risen by 20% over the past 12 months, to 909p.
In fact, over five years the National Grid share price has climbed more than 70%, easily beating the FTSE 100 average at just under 40% and thats a nice bonus.
And even though National Grid shares have only recently set a new 52-week record, theyre still only on a forward P/E of 16.3 for the year to March 2015, dropping to 15.6 based on 2016 forecasts. For such a quality a company with a very low-risk future, that doesnt seem stretching at all.
Dividends at risk?
The energy sector is entering a bit of a troublesome period, with political and regulatory pressure making it pretty much impossible to raise prices in the near term. So how is that likely to impact dividend growth?
Well, when the company released its 2014 results in May, chief executive Steve Holliday said we continue to build a stronger business from which to deliver healthy returns, and good organic growth to support our commitment to sustainable dividend growth.
Ignoreat your peril
If youre aiming to build a solid income portfolio, I reckon youd be mad to overlook National Grid as a potential candidate and youre likely to get comfortable share price performance over the long term, too.
Whether or not you already own National Grid, if you’re looking for more companies that can genuinely provide rising dividends to fund future years of comfort, you should have a read of “The Fool’s Five Shares To Retire On” report. They’re all top FTSE companies, and between them they provide a nicely balanced selection.
The report is completely free, so click here to get your copy today!