Jefferies downgrades National Grid on valuation

Jefferies downgraded National Grid to ‘hold’ from ‘buy’ but lifted the price target to 950p from 900p.

It said that following the strong share price performance in recent months the shares are now at fair value.

Still, it continues to believe National Grid will outperform against its current regulation in the UK and offer a secure and growing dividend to investors.

It pointed out that National Grid's policy is to deliver dividend per share in line with RPI inflation.

“But with RPI expected to be only around 1.0% this year, can National Grid be more generous? We conclude that above RPI dividend growth is perfectly feasible while maintaining their current financial metrics.”

Jefferies said the price target increase was largely the result of rolling forward its valuation for National Grid’s UK regulated assets to 2016/17.

Based on the revised price target, National Grid offers a potential 8% total shareholder return.

At 1413 GMT, shares were down 1.9% at 909.50p.