Up 24%! Are National Grid shares the FTSE 100’s newest growth play?

Lately, it seems National Grid (LSE: NG.) shares have quietly shifted from a steady FTSE 100 income pick to a growth play. The yield has dropped below 4% while the share price is up 24% in the past 12 months.

The key factor driving this appears to be a ‘sell shovels in a gold rush’ narrative — only it’s shovels are electricity infrastucture. Significant investment is being spent on hardware to support electric vehicles (EVs), datacentres and renewable energy projects.

But that kind of transition comes with fundamental risks investors can’t ignore. So what does this mean for existing shareholders and new investors alike?

From bond proxy to net‑zero growth engine

National Grid’s £60bn five‑year investment plan is designed to build the electrical backbone for a digital, electrified, net‑zero economy. Around 80% of that capex is going into electricity networks, with roughly £51bn aligned to EU Taxonomy‑defined green projects such as renewables connections, grid reinforcement and EV charging infrastructure.

In other words, rather than investing in a single green energy play, investors are backing the regulated infrastructure that everything else plugs into.

And the growth story is already showing up in the numbers. Last year’s performance was powered by earnings growth of 36.2% year‑on‑year, as new hardware helps boost its regulated asset base and increase returns. For a utility that used to trade mainly on its dividend, that is a big narrative shift.

But there’s more to the story…

The valuation and income trade‑off

The flip side is that National Grid now looks more like a growth utility on valuation too. The stock trades around 15 times forward earnings, a premium to many traditional income‑focused utilities. That puts it in an unusually overvalued position, given its regulatory and political risks.

At the same time, dividend coverage is slim for a company with such a heavy capex schedule. Recent results showed full‑year dividends covered about 1.6 times by underlying earnings, which is sufficient but not bulletproof. Cash‑flow metrics are even tighter: some estimates put the combined dividend and capex coverage ratio below 1, implying National Grid may need to lean on debt or sell assets to fully fund both investment and shareholder returns.

Even the balance sheet is looking more like that of a growth stock. Debt stands at roughly £47bn against equity of around £38bn and is expected to rise further as the investment plan progresses. For now, interest is sufficiently covered but this could pose a risk to dividends if earnings slip.

So are National Grid shares still worth considering in 2026?

For investors bullish on the digital/renewables narrative, National Grid is worth considering as a low-volatility way to gain exposure. Effectively, it offers both income and growth potential but in a more regulated way. Rather than taking on direct project or technology risk.

However, today’s set‑up is less ‘stable income’ and more ‘growth at a price’. With the shares up and the yield down, income investors may be deterred. That doesn’t make a bad pick, but it arguably shifts it more toward the ‘high risk/high reward’ bucket. 

For investors comfortable with the risk, National Grid can still be a solid core holding to explore in a diversified portfolio. But those seeking real value, there may be better opportunities in lesser-known, energy-linked names that the market hasn’t priced in yet.