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National Grid (LSE:NG.) shares have long been a popular pick among British income investors for their steady and consistent dividend growth. In fact, until recently, shareholders had been consistently enjoying a slight dividend bump every year for over 25 years.
This continuous hiking streak came to an end in 2024, following a strategic reset by management and the unveiling of a massive £60bn investment plan. But even with dividends getting cut, National Grid shares still offer a fairly robust 4.5% yield that trumps the FTSE 100‘s 3.3%. As such, the stock continues to be popular among income investors.
So let’s say someone owns 1,000 National Grid shares. How much passive income does such an investment generate? And is now a good time to think about adding this business to a portfolio?
Calculating income
In 2025, each National Grid share pays out 46.72p in dividends. That means an investor who has 1,000 shares in their portfolio today is earning around £467.20 a year. However, looking at the latest analyst projections, this passive income could be set to grow steadily over the next two years.
Forecasts always need to be taken with a healthy pinch of salt. After all, they’re dependent on a series of assumptions that may not come to pass. But assuming everything goes according to plan, the dividend per share for National Grid is currently expected to climb to 47.19p in 2026 and then jump again to 48.46p by 2027.
In other words, the current passive income of £467.20 could grow to £486.46 (or more, depending on whether dividends are reinvested) in two years’ time, keeping up roughly in line with inflation.
Is National Grid a good investment in 2025?
From an income perspective, there’s a lot to like about this stock. The constant and rising demand for electricity, regardless of economic conditions, suggests that dividends are highly resilient. And the group’s impressive track record certainly supports this view.
What’s more, by investing so aggressively in infrastructure modernisation, improvements in operational efficiency pave the way for wider margins. It may take some time for the benefits to materialise. But, in the medium-to-long-term, this gives management more flexibility to strengthen the balance sheet and grow shareholder payouts.
Needless to say, this sounds quite encouraging. However, it’s all dependent on National Grid’s ambitious investment plan actually paying off.
Implementing a £60bn renovation scheme is fraught with execution risk, including asset underperformance, cost overruns, and project delays. And considering this plan is expected to increase the group’s financial leverage in the short term, if performance fails to materialise, not only could dividends be cut further, but the stock price could also tumble as National Grid’s solvency is called into question.
The bottom line
A successful transformation of its infrastructure could unlock tremendous long-term value for shareholders both in terms of dividends and capital gains. Yes, this comes with some notable risks, especially if management’s return on investment falls short of expectations. Nevertheless, given the opportunity, National Grid shares could be worth a closer look.
