He commented that many market participants have been upgrading their expectations for the earnings that can be achieved by the company in the near-term.
Labour policy in this general election is to nationalise the National Grid, an obvious threat to shareholders in the company. But McGarry noted that the Conservative Party policy of a price cap on energy costs does not affect National Grid.
He said, ‘ Tories plans for a price cap has hurt the Big 6, but National Grid is relatively immune from these pressures in part due to the fact that customers don’t get a bill from National Grid.’
Elaborating on what he sees as the investment case for National Grid he commented that investors have ‘pricing certainty’ until 2021, as secured by the government, and that it will be next year before the next round of price negotiations, covering the period after 2021 take place.
McGarry added that ‘the company is well diversified, with operations in the US and the UK. There are many tailwinds in the US which will help National Grid shares. The company is a beneficiary of the strong dollar. It would likely benefit from any increase in infrastructure spending under Trump.’
He added that the company has had some success in it’s dealing with US regulators of late.
It is due to the sale of a US asset that National Grid will pay a special dividend to shareholders on June 2nd.
McGarry added that the sale of the US business should also generate cash to pay down debt and allow National Grid to ‘accelerate’ the pace of dividend growth in the future.
National Grid shares have been broadly flat over the past year, and currently trade at £10.50.