In the last seven weeks, the National Grid plc (LON:NG) (NG.L) share price has comprehensively outperformed the FTSE 100. It has risen by 13%, while the index has declined by 6%.
Investor sentiment, it seems, has weakened towards the index over the time period in question. Fears surrounding the prospects for the world economy appear to have grown, and this trend could continue in the near term in my opinion.
The prospect of higher US interest rates and the impact of already-announced tariffs could be negative over future years, and this may cause investors to become increasingly cautious. As a result, shares with defensive characteristics may become increasingly popular.
This could be good news for the National Grid share price in my view. The company has a solid track record relative to some of its index peers according to my research, and this could make it more appealing from an investment perspective.
Alongside this, the company’s recent update appeared to be relatively encouraging to my mind. It continues to deliver improving dividend prospects, with it having a dividend yield of over 5% at the moment. This means its income return is due to be over 100 basis points higher than the FTSE 100’s yield over the next 12 months, which could be attractive if the index is unable to post improving performance following the disappointment of recent months.
Of course, National Grid faces risks such as the threat of nationalisation and regulatory changes. However, given its current dividend yield I believe that these factors could be priced into its current stock price.
As a result, I believe the company could continue to outperform the FTSE 100 over future months. I think that its defensive appeal, high yield and what seems to be a sound overall strategy could lead to improving total returns in the long run.