If I could buy just one stock this Christmas, it would be National Grid (LSE: NG) (NYSE: NGG.US).
The stock market hates uncertainty. And with a general election next May, the result of which looks far too difficult to call, there’s going to be a lot uncertainty around.
So I’d want to buy a nice defensive share.
Everyone uses energy, even when times are hard and the future’s fraught, so a company that makes its money from electricity or gas seems like a good bet.
National Grid has its fingers in both pies. It owns and operates the electricity distribution network in England and Wales and it operates the Scottish network.
And all gas in the UK passes through National Grid’s systems as it goes from the main terminals to consumers. In addition, the company owns four of the eight regional gas distribution networks that pipe gas to people’s homes.
The fact that National Grid operates in a regulated market means that it’s got a good idea of its essential income and expenditure for several years into the future.
But unlike the utility companies that actually sell electricity and gas to people, National Grid’s business model insulates it from the sort of political price-meddling being threatened by some vote-hungry politicians.
Better still, no-one’s likely to try to build their own national energy distribution networks, so the likelihood of National Grid having to face a serious competitor in its marketplace is minimal.
And the icing on the Christmas cake comes in the form of a forward yield of 4.7% for next year, forecast to edge up to 4.8% the year after.
