Dividends remain at the forefront of my mind with inflation rising in recent months, which is why I’m taking a closer look at the investment prospects of National Grid plc (LON:NG) (NG.L) and Vodafone Group plc (LON:VOD) (VOD.L).
National Grid remains one of the most resilient income stocks in the FTSE 100 in my view. The company has a good track record of dividend growth and its business model has generally been robust. In fact, investors can sometimes increase demand for its shares during difficult periods for the stock market. If volatility remains high among Footsie 100 stocks then I wouldn’t be surprised if the company becomes more popular.
Although political risk remains at a heightened level, I feel National Grid’s 5% dividend yield suggests that it could offer a large margin of safety. This may provide its investors with a high income return today, while a forecast growth rate in dividends which matches inflation could make it a sound income stock for the long run.
Vodafone’s 6% dividend yield continues to surprise me. The company appears to have a solid outlook, with investment in its network helping it to grow its bottom line and also broaden its product offering. Acquisitions may also be acting as positive catalysts on the company’s performance, with it forecast to generate 20%+ EPS growth in the current financial year. This is above and beyond the forecast growth rates of many of its sector peers.
While the quad play space is relatively competitive, Vodafone seems to have a solid valuation through which to generate improving financial performance. Therefore, I remain bullish about its investment prospects for the long term. I believe it could begin to shake-off its status among many investors as a quasi-utility stock. This could lead to the potential for it to command a higher valuation than has been the case in recent years.