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Friday newspaper share tips: National Grid and Ricardo

By Andrew Schonberg

Date: Friday 20 May 2016

Friday newspaper share tips: National Grid and Ricardo

(ShareCast News) - Shares in National Grid are good to hold in portfolios because of their attractive yield, and the prospect of additional income further down the track, said The Times' Tempus column today.
The UK's largest-listed utility has bumped up its dividend for the past year by 1.1%, which is precisely the same rate by which Scottish power group SSE upped its own payout Wednesday.

Tempus contends that this looks like the new normal among utilities, most of which have pledged to lift their dividends by inflation, plus a bit.

That, of course, does not add up to much when inflation is essentially non-existent.

"Others will be reporting soon and it will be interesting to see whether they take the same line," the column pondered.

National Grid's shares have overall been strong performers with the market taking a liking to reliable dividend streams. But, even then, the shares have wobbled occasionally, Tempus said.

"These (shares) don't come much more reliable than the (National) Grid, which will see its regulatory period in the UK run to 2021, pretty well guaranteeing income until then.

"The shares [...] offer a forward dividend yield of (about) 4.5%." The column also points to the sale of National Grid's UK gas distribution side for a probable £11bn.

Even after debt attached to it is repaid, one analyst was suggesting a 39p one-off return to investors," Tempus said.

"There are better yields in the market but investors should hang on for that payment."

Tempus' recommendation: Hold as the yield is attractive and there is extra income to come.

Meantime, Ricardo is rated a hold by The Telegraph's Questor column, which cited the engineering consultant as being well placed thanks to its technical expertise in good demand.

In particular, the column pointed to Ricardo enjoying steady demand for its talent in reducing carbon emissions from a range of different engines, particularly from existing commercial car and rail engines.

"With revenue up ... and a strong order book the company is on target to hit market expectations for the full-year," noted the column, referring also to the successful integration and performance of the company's recent acquisitions.

It paid £42.5m for Lloyd's Register Rail last year, which helped lever the revenue growth of 32% in the 10 months to end-April.

"Even excluding the extra sales from recent acquisitions, the revenues increased by 9% compared to a year earlier," the column said.

It has also cinched a major contract to build the engines for the McLaren supercars, with volumes steadily increasing during the second half.

Steady demand for work in Asia and the Middle East helped saw the end-April order book at £207m, from £152m a year ago.

Investors could take further confidence from management's assertion that the company is on track to hit market views for full-year revenues of about £307m, boiling down to £33.6m in pre-tax profits.

The shares -- trading on 17-times forecast earnings -- offer a prospective dividend yield of 2.3%.

"Ricardo is well placed with its technical expertise in demand around the world and we remain supporters. Hold," said Questor.

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