National Grid – International Utility Priced to Buy

National Grid plc (NGG) is a London-based utility company. It owns and operates of regulated electricity and gas infrastructure networks in United Kingdom (Wales and Scotland) and North Eastern United States (upstate New York, NYC, Long Island, Massachusetts, New Hampshire, and Rhode Island). It serves approximately 20 million consumers in the United Kingdom and the United States.

NGG is part of Mergent’s International Dividend Achiever Index and has been paying growing dividends since last 12 years. My objective here is to analyze if NGG continues to be a good dividend growth stock and how it will rate on my scale of risk-to-dividends.


Trend Analysis
Here I am looking at trends for past 9 years of corporation’s revenue and profitability. These parameters should show consistently growth trends. The image below shows the trend charts. continue reading rest of the article….

CBY – Stock Analysis for Dividend Growth Portfolio

cadbury_logoCadbury Plc (CBY), a UK-based Company, is world’s leading confectionery company. In year 2008, it divested its beverage business into separate entity. Now Cadbury Plc is solely a confectionery company. It offers chocolate, gum/mints, and candy products under various brand names, including Bubbaloo, Cadbury Creme Egg, Cadbury Dairy Milk, Clorets, Dentyne, Eclairs, Flake, Green & Blacks, Halls, Hollywood, Stimorol. It operates in 60 countries.

CBY is an international dividend achiever has been raising its dividends for last 11 years. The most recent dividend increase was in February 2009. CDY can play a role of international equity in a dividend portfolio. It can also be viewed as a hedge for dollar and emerging markets (20% revenue from emerging markets). My objective here is to analyze if CDY still continues to be a good dividend growth stock and how does it rate on my scale of risk-to-dividends. continue reading rest of the article….

NGG – Stock Analysis for Dividend Growth Portfolio

logo_national_gridThis article originally appeared on The DIV Net, on June 18, 2009

National Grid plc (NGG) is a London based UK utility company. It owns and operates of regulated electricity and gas infrastructure networks in United Kingdom (Wales and Scotland) and North Eastern United States (upstate New York, NYC, Long Island, Massachusetts, New Hampshire, and Rhode Island). It served approximately 20 million consumers in the United Kingdom and the United States.

NGG is an international dividend achiever and has been paying growing dividends for last 12 years. In one of my earlier post, I listed few companies that may have potential for international dividend growth investments. I had shortlisted NGG for more analysis. Keeping with that, my objective here is to analyze if NGG is a good dividend growth stock and how it will rate on my scale of risk-to-dividends.

Trend Analysis
Here I am looking at trends for past 8 years of corporation’s revenue and profitability. These parameters should show consistently growth trends. The trend charts and data summary are shown in images below. continue reading rest of the article….

International Equities in Dividend Growth Portfolio

I have discussed about my investing approach with respect to commodity asset class and investment vehicles. International developed/emerging equities are another asset class which dividend investors should include in their portfolios. I have spent some time to read and understand the characteristics of this asset class. In this asset class, i.e. international developed/emerging equities, there are three significant differences when compared to North American domestic equities. These differences are:

  1. Frequency of Dividends – Majority of the domestic equities pay dividends four times a year. The frequency of dividends paid by international equities is less than domestic equity class. At most, these equities provide two dividends per year (and only one in some cases). The implication is it slows down the dividend compounding growth of investments.
  2. Tax Structure – Depending upon the country, the taxation structure is different for each country. In most cases, the tax is deducted at source i.e. at the time of dividend payment. This tax deducted at source can be accounted during US tax returns. Nevertheless, the dividend payment is reduced by that amount. This again slows down the compounded dividend growth.
  3. Currency fluctuations – This is another factor that affects the dividend payment. The dividend may appear to be varying over a period of time, but could be due to currency fluctuations. For true reflection of dividend policy, individual investors should look at the company’s annual reports or dividend information section on website.

 

In general, as with any other asset class, here also I found the usual suspects of investment vehicles such as mutual funds, closed end funds, exchange trade funds, and individual stocks. The fund fees range anywhere from 0.3% to 1.1% (more in case of some mutual funds). One of the common issues that I found with most of these funds is that they use ADR listed on US-based exchanges. To put it mildly, I find this very perplexing, intriguing, and disappointing. If these institutional funds with large resources use the ADRs instead of actual currency in the corporation’s native country, then why should I pay unnecessary fees? What benefit do I have to buy their funds? In addition, in most cases, these funds consists of a more than 60 companies, which range from good to moderate to bad to worse. Investment in these funds essentially means covering the full quality spectrum.

 

Some funds from Wisdom Tree’s ETF portfolio are exception to above observations. Many of Wisdom Tree’s ETFs actually hold equity in corporation’s native currency. However, my concern about fees and capturing full spectrum of quality of corporations still remains.

 

At the time of this writing, I have investments in PID and AOD. While PID is meeting my portfolio requirements, I am not too happy about AOD. When I had initiated my position in AOD, it was an international focused (with 65%+) closed end fund. It changed its allocation to domestic stocks (65%+) over the period of last four months in 2008.

 

If I have to invest in ADRs, then why not invest in individual companies. The three characteristics that I have listed above remain same whether it is fund based investment or individual ADRs. As I mentioned in my earlier post at Dividend Tree, it is not necessary to invest in many corporations for diversification. The diversification can be achieved with few good quality individual equities also. Since the capital allocation to dividend portfolios are for 10+ years, investors should be willing to take relatively higher risk. For my dividend portfolio and individual investor looking for international exposure, I have a shortlist of following international equities (which pay dividends) for further analysis:

  • Unilever PLC (UL) and/or Unilever NV (UN)
  • Cadbury PLC (CBY)
  • ABB Limited (ABB)
  • National Grid PLC (NGG)
  • Nestle (NSRGY)
  • Siemens AG (SI)
  • Vodaphone PLC (VOD)
  • BT Group PLC (BT)
  • CPFL Energia S.A. (CPL)
  • China Mobile Limited (CHL)
  • ICICI Bank Ltd. (IBN)

Individuals should perform further analysis (based on their risk profile) to evaluate how above equities fit into their dividend portfolios. Individual investor’s end goal should be to invest in at least five to six good quality international dividend growth equities.

 

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