RBC upgrades National Grid on attractive risk/reward

RBC Capital Markets upgraded National Grid to ‘outperform’ from ‘sector perform’ and lifted the price target to 1,000p from 920p, saying it sees an attractive risk/reward opportunity.

“National Grid is the kind of utility that makes all other utilities jealous. It has an enviable combination of predictability, asset growth, a secure balance sheet and attractive dividends,” said the Canadian bank.

It said that all things being equal, the share price should increase along with growth in the underlying regulated capital value.

RBC said NG offers a secure and growing dividend with a starting yield of around 5%.

The bank said if interest rates in the UK and US rise at a faster trajectory than expected, this could have a negative impact on investor appetite for NG as a yielding instrument.

However, it reckons US and UK rate hikes will occur slowly and in small steps and it is unlikely that the pace of rate increases will be sufficient to cause a race to the exit on NG.

At 1523 GMT, NG shares were up 1.7% at 938.50p.