Friday tips round-up: National Grid, BSkyB

31st Jan 2014 07:22

National Grid is in an enviable position. Unlike water companies its pricing regime goes out to March 2021, giving shareholders more than ample 'visiblity'. Likewise, since its business has little impact on consumers´energy bills it remains comfortably outside the perimeter of the politcal backlash surrounding soaring utility bills. Both of the above contribute to the company´s ability to keep raising dividends to at least keep track with inflation. The only downside is that the firm no longer has a need to offer investors the alternative of shares, instead of cash, as a dividend, which in the process helped it to raise £5.1bn over the the past three years. That was also a cheap way for shareholders to reinvest in the outfit. With a 5.4% yield on the shares there is every reason to continue to hang on to them, The Times´ Tempus says. Inflation in sports rights is indeed a risk for BSkyB, as BT looks to attack its rival´s position in that segment, on which it has built its success over the last two decades. However, there is a danger of overstating that risk, as yesterday´s half-year numbers out from BSkyB show. Simply put, the average customer now pays a yearly bill of £570, versus £536 two years ago. Yet it´s not just a matter of the company finding new ways to squeeze more money out of each user, it has also spread its wings into various new areas of endeavour. Its recent tie-up with the American network HBO or its new drama channel have cemented its position as the premier entertainment broadcaster. As well, over the last quarter it continued to manage to sign up new customers to its TV service, at 77,000 it was the largest increase in three years. Having said that, sports rights inflation is already hitting profits. Even so, Thursday´s 9% increase in the interim dividend reflects confidence from management. Furthermore, its shares trade at the average price-to-earnings multiple for the wider Footsie. Then there is the possibility that Rupert Murdoch´s 21st Century Fox´s takeover ambitions might be rekindled. Thus, "there are more upsides than downsides. Buy," says The Daily Telegraph´s Questor column. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB