An interest rate rise could put pressure on National Grid’s (LON:NG) shares, analysts at Hargreaves Lansdown have said. The comments follow the FTSE 100 group’s half-year results yesterday.
Investors reacted negatively to the update, sending National Grid’s share price tumbling 2.60 percent to 904.20p, underperforming the broader UK market, with the benchmark FTSE 100 index ending the session 0.61 percent lower at 7,484.10 points. The group’s shares have lost more than 18 percent of their value over the past year, and are down by just under 13 percent in the year-to-date.
Hargreaves Lansdown weighs in on results
Hargreaves Lansdown commented in National Grid’s results yesterday when the FTSE 100 company posted a drop in operating profit for the half-year ended September 30, from £1.47 billion, to £1.27 billion. The group, however, lifted its payout to shareholders by 2.1 percent.
Citywire quoted the broker’s analyst George Salmon as commenting that National Grid’s shares were ‘as steady as they come’ and that the revenues from the US business were valuable to UK investors given weak sterling.
“The black cloud on the horizon is a possible uptick in interest rates,” he pointed out. “Low rates have depressed yields in the bond market, leading some investors to switch out of bonds. National Grid’s dependable revenues and attractive yield, currently 5.1 percent, have proven a popular destination.”
Salmon noted that a faster pace of interest rate rises “could see the great bond migration reverse’ and ‘if this proves to be the case, National Grid would likely come under pressure”.
Other analysts on National Grid
The 17 analysts offering 12-month price targets for National Grid for the Financial Times have a median target of 1,036.36p on the shares, with a high estimate of 1,243.64p and a low estimate of 860.00p. As of November 4, the consensus forecast amongst 20 polled investment analysts covering the blue-chip group advises investors to hold their position in the company.