RBC Capital Markets has downgraded National Grid (NYSE: NGG) from ‘Outperform’ to ‘Sector Perform’, citing limited upside potential and looming regulatory headwinds. The downgrade reflects growing caution around valuation levels and the potential impact of the upcoming RIIO-T3 draft determination in the UK.
📉 National Grid shares have climbed significantly over the past year, pushing valuations to levels where upside appears constrained. RBC analysts believe that much of the optimism is already priced in, leaving little room for error or external shocks.
🔌 The regulatory environment adds another layer of uncertainty. With the RIIO-T3 draft determination expected in late June, followed by a final ruling in December, investors face a waiting game. Previous regulatory cycles have sometimes resulted in reduced allowed expenditures, and any indication of similar moves could weigh on future earnings growth.
💰 Dividend Snapshot:
🟢 Current dividend yield stands at 2.70%, offering steady income for long-term investors
🟢 Annual dividend payout is $2.02 per share
🟢 Payout ratio is a conservative 30.7%, supporting sustainability even in volatile conditions
🟢 The stock goes ex-dividend on May 30, with the next payment expected on July 28
Despite the downgrade, National Grid remains a consistent dividend payer with solid utility fundamentals. However, until there is clarity on the regulatory outlook, near-term performance could be muted.