National Grid plc: A High-Quality Stock Based on ROE?

National Grid plc (LON:NG.), a leading international electricity and gas company, has been under scrutiny by investors due to its recent performance. One key metric that investors often examine is the Return on Equity (ROE), which measures a company's profitability in relation to shareholder investments. In this article, we will analyze National Grid plc's ROE and determine whether it is a high-quality stock based on this metric.



National Grid plc's ROE has been fluctuating over the years, with a significant decline in recent years. As of February 2025, the company's ROE is 7.72%, which is a -11.02% change compared to the average of 8.68% over the last 4 quarters. This decline in ROE may affect the company's ability to maintain or increase its dividend payout.



National Grid plc's dividend policy is to maintain a stable and growing dividend over time. The company aims to pay a dividend that is sustainable and reflects its underlying earnings and cash flow. The company's dividend payout ratio is 66.56%, which indicates that the company is paying out a significant portion of its earnings as dividends. However, the company's dividend growth rate has been negative in recent years, with a -3.58% change in the annual dividend per share compared to the previous year.

The company's dividend yield is 5.74%, which is relatively high compared to other utility companies. This high dividend yield may be an indication that the company's stock price has declined, which could be due to the decline in ROE and the company's financial performance. However, the company's dividend payout and growth are ultimately dependent on its earnings and cash flow, which are influenced by its ROE and other financial metrics.



In conclusion, National Grid plc's ROE has a direct impact on its ability to pay and grow dividends. The company's dividend policy is to maintain a stable and growing dividend over time, but the company's dividend growth rate has been negative in recent years. The company's dividend yield is relatively high compared to other utility companies, which may be an indication of the company's financial performance. While National Grid plc's ROE has been declining in recent years, the company's dividend payout and growth are ultimately dependent on its earnings and cash flow, which are influenced by its ROE and other financial metrics. Investors should carefully consider these factors when evaluating National Grid plc as a potential investment.