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National Grid (NG) Shares Have Fallen 18% Since May. Can It Recover?

Simon Mugo trader
Updated 24 Jun 2022

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Key points:

  • National Grid (NG) shares have fallen 18% since May on the windfall tax.
  • Investors are worried that the tax will be extended to electricity firms.
  • However, the company’s shares look attractive at current prices.

The National Grid plc (LON: NG) share price has fallen 18% from its May highs after the British government announced plans for a windfall tax on energy companies. While the tax is not targeted at utility companies such as National Grid, investors fear the tax may be extended to such firms.

The utility company’s CEO, John Pettigrew, was recently criticised for his massive pay package after being paid £6.5 million for the year ended 31 March 2022. The high figure represented a £1.1 million increase in his salary from the previous year, part of a £4 million three-year pay incentive package.

Also read: Five Best Green Energy Stocks In 2022.

Despite its high CEO pay, National Grid’s financial performance last year was impressive, given that its profits rose 11%, almost reaching £4 billion, which the company’s board has attributed to the incentive plan that has motivated its top executives to create more value for its shareholders.

While National Grid is not affected by the windfall tax, it has promised to invest significantly to help the UK meet its net-zero goals. However, the company’s CEO Pettigrew has said in the past that the windfall tax could deter its investment plans, although the firm does not benefit directly from rising energy prices.

The utility company also announced plans to share £200 million of its excess profits with consumers struggling to pay their electricity and gas prices after the recent surge in crude oil prices.

Utility companies are known as stable companies with reliable dividends, and National Grid is no different. The company has been paying a stable dividend, and its dividend yield went up after the recent drop in its share price.

NG shares look attractive. I’d buy them if they break above the 1047p resistance level. Another opportunity will arise if NG shares fall to the 980p support level and bounce. Investors should avoid the shares if these conditions are not met.

*This is not investment advice. Always do your due diligence before making investment decisions.

National Grid share price.

National Grid share price 24-03-2022
Source: IG

The National Grid share price has fallen 17.98% from its May high of 1266.11p to its current price of 1038.35p.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading