Buying 3,027 National Grid shares now would give me a second income of £150 a month

Some

defensive
stocks
have
been
on
the
slide,
but
that
means
investors
have
a
good
opportunity
to
nail
down
second
income
from
company
dividends.

In
the
energy
sector,
the

National
Grid
(LSE:
NG)
share
price
has
been
below
its
peak
for
some
time.
However,
the
company
has
been
trading
well
and
earnings
have
been
picking
up
since
2023.

Looking
ahead,
City
analysts
have
pencilled
in
an
advance
in
normalised
earnings
of
just
over
9%
for
the
next
trading
year
to
March
2025.

On
top
of
that,
the
directors
have
raised
the
dividend
every
year
since
2019.
So
why
has
the
share
price
been
weak
when
the
business
seems
to
be
trading
well?

Out-of-favour
stocks

Part
of
the
reason
could
be
a
general
malaise
that’s
been
affecting
stocks
in
the
defensive
sectors.
These
steady
cash-producing
enterprises
tend
to
move
in
and
out
of
favour
with
investors
–
and
their

valuations
fluctuate
over
time
too.

If
there’s
been
an
exodus
from
the
defensives
lately,
it
could
be
because
of
investor
rotation
to
other
stocks
showing
better
value
–
such
as
fallen
cyclicals,
for
example.

On
top
of
that,
in
the
fast-moving
consumer
goods
(FMCG)
space,
some
stalwart
business
have
been
discovering
their
brands
are
not
as
defensive
as
thought.

A
cost-of-living
crisis
can
test
the
loyalty
of
many
consumers.
It’s
easy
in
this
day
and
age
to
switch
to
cheaper
alternative
products.

For
example,
premium
alcoholic
drinks
company

Diageo
has
seen
its
profits
and
share
price
slip.

However,
even
with
the
stock
near
2,938p
(27
March),
the
forward-looking

dividend
yield
is
only
running
at
just
above
3%.
That
means
the
firm’s
valuation
is
still
quite
rich,
and
it
may
not
be
the
best
stock
to
buy
when
seeking
second
income
from
dividends.

That
said,
City
analysts
expect
earnings
to
begin
recovering
next
year
and
Diageo
remains
a
great
business.

Bigger
yields
right
now

Another
that’s
retreated
lately
is
popular
branded
FMCG
maker

Unilever,
which
deals
in
personal
care,
home
care
and
food
products.

With
its
share
price
near
3,962p,
Unilever
now
yields
about
4%
for
2025.
That’s
tempting
because
the
business
is
still
near
the
top
of
its
game.
However,
my
top
choice
for
second
income
right
now
is
still
National
Grid
because
the
pay-out
is
higher
and
the
dividend
record
looks
solid.

With
the
share
price
near
1,062p,
National
Grid
is
yielding
around
5.6%
for
the
next
trading
year
to
March
2025.

So,
if
I
wanted
to
generate
a
second
income
worth
£150
a
month
from
its
dividends,
I’d
need
to
buy
around
3,027
shares.

Allowing
a
bit
for
transaction
costs,
that
would
cost
me
about
£32,318.

That’s
more
than
a
years’
worth
of

Stocks
&
Shares
ISA
allowance.
I’d
be
unlikely
to
buy
so
many
of
the
shares
in
one
go.
It’s
far
better
to
diversify
between
several
dividend
paying
company’s
shares.

One
of
the
risks
with
National
Grid
is
that
it
carries
a
lot
of
debt
and
its
activities
are
highly
regulated.
If
the
regulators
require
even
more
investment
into
operations
from
the
company
in
the
future,
shareholder
dividends
could
suffer.

Nevertheless,
I
still
believe
it’s
a
decent
stock
to
research
and
consider
as
part
of
a
diversified
portfolio
focused
on
second
income.