National Grid is well placed to deliver another good year

National Grid (LON:NG)  appears to be well placed to deliver another good year after posting a small improvement in underlying profit at the half-year stage. Underlying profit before tax for the six months ended 30 September rose 2% to £953m from £938m - in fact up 19 percent excluding the impact of timing 'differences' and the impact of Hurricane Irene -; however, that was below the £985m the market had been expecting. Reported profit before tax fell from £971m to £941m on a like-for-like basis, while revenue also fell, to £6.31bn from £6.44bn for the same period a year previous. The 6% decrease in first-half operating profit, was driven by losses in its U.S. regulated business, but the company said it was on track to meet its targets for this year.

"The restructuring of our U.S. business is now largely complete and is delivering operational and financial," the company said. National Grid has been restructuring its U.S. business after unveiling plans in January to cut 7 percent of its direct workforce in the country, for annual cost savings of about $200 million.

Earnings attributable to shareholders was £795 million versus £760 million last year. On a per share basis, profit stood at 22.2 pence compared to 22.9 pence a year earlier. Adjusted profit was £697 million or 19.5 pence per share versus £656 million or 19.8 pence per share in the year ago period.

Dividends

The board has approved an increase in the interim dividend to 13.93p per ordinary share, in line with its policy of targeting 8% dividend growth until March 2012. The interim dividend will be paid on 18 January 2012 to shareholders on the register as at 2 December 2011. A scrip dividend alternative will again be offered.

The existing dividend policy expires in the current financial year and so applies to the interim dividend to be paid in January 2012 and the final dividend to be paid in August 2012. National Grid intends to announce a one year dividend policy in January 2012 to cover the year 2012/13. During 2013, the company expects to announce a dividend policy to run from 2013/14 onwards.

Value?

Shares in National Grid are now sitting at their highest level since December 2008 although they are still significantly below the peak of 776p hit in October 2008. The main reason to hold these shares is the dividend and the yield remains attractive in comparison to other utilities. However, at these price levels National Grid's shares are not near enough their historically undervalue levels to warrant a purchase.

Disclosure

The Dividend Income Portfolio, operated by Dividend Income Investor.com holds shares in National Grid.