With major indices going through lows, investors need dividend income while they wait for the bull run to start. Picking the right dividend stocks is a tricky situation. One should not only consider the higher dividend amounts but also look at the stability of those payments.
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Keeping that in mind, we have used the TipRanks UK Shares Screener tool and picked up two stocks that are a part of the FTSE 100 Index and have a fair dividend game. Utility company National Grid (GB:NG) and technology player RELX (GB:REL) have higher dividend yields than their respective sector averages. Moreover, the stocks also get a thumbs up from analysts on a potential rise in their share prices.
The screener tool is a great way to choose stocks based on different parameters such as dividend yields, analyst ratings, target prices, and more.
Let’s discuss the stocks in detail.
National Grid
National Grid is a UK-based utility company engaged in the transmission and distribution of electricity. Being in the utility sector, the company has the advantage of stable demand and earnings. This makes it quite resistant to recessionary pressures.
In its half-yearly results for 2022, the company posted a 50% increase in its operating profits of £2.2 billion. This was mainly driven by higher sales at inflated prices in the UK electricity distribution. The company also achieved £225 million in cost-efficiency in 2022, which has helped it mitigate the inflationary pressures on its business as well as those of its customers. Entering the second half, the company now expects its earnings growth to be in the range of 6-8%.
National Grid is continuously making investments toward its goal of an energy transition. It made a record £3.9 billion investment in clean energy infrastructure. The company has also increased its investment to £40 billion in critical infrastructure over a period of five years, from 2022 to 2026.
Moving on to dividends, the company not only has an above-average dividend yield of 5.07% but is also one of the most stable dividend payers in the market. In its first half, the company rewarded its shareholders with a 4% increase in its interim dividend of 17.84p per share.
National Grid Share Price Forecast
According to TipRanks’ analyst rating consensus, NG has a Moderate Buy rating. This is based on four Buy and four Hold recommendations.
The average NG share price forecast is 1,081.5p, which shows a change of 6.6% on the current price level.
RELX Plc
RELX is a technology company that develops analytical tools to guide customers in more than 180 countries. The company operates in four different sectors: risk, scientific, technical and medical, legal, and exhibitions.
RELX is now showing signs of recovery after being hit by the COVID-19 pandemic. The company’s exhibition business was hit hard, but it has now reported 85% underlying revenue growth in 2022 in its third-quarter trading update.
Earlier in its half-yearly results for 2022, the company posted a 13% increase in its total revenue of £3.9 billion, depicting a strong momentum across all its business segments. As the company enters its final quarter for 2022, the comapny expects its full-year profits to surpass historical levels.
Along with a strong financial performance, RELX announced a 10% increase in its interim dividend of 15.7p per share. It has a dividend yield of 2.42%, as compared to the sector average of 0.56%. Even though the yield may not seem compelling, the dividends are well supported by the earnings and have remained stable over the years.
Is RELX Stock a Good Buy?
RELS has wide coverage from 11 analysts on TipRanks with eight Buy and three Hold recommendations. Overall, it has a Moderate Buy rating.
Recently, J.P. Morgan, UBS, and Credit Suisse have reiterated their Buy ratings on the stock and are confident in the potential upside to the share price.
The REL average target price is 2,822.5p, which is 21.3% higher than the current price level. The target price has a high forecast of 3,336p and a low forecast of 2,209.2p.
Conclusion
Both National Grid and RELX understand the importance of rewarding their shareholders and have adopted progressive dividend policies. These could be a safe addition to an investor’s portfolio looking for some extra income.
