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Dividend Alerts, National Grid bond versus shares - issue
September 14, 2011

September 14th, 2011

  • National Grid issuing an index linked bond

Dear Subscriber

National Grid is offering UK's first inflation linked bond open to everyone, appealing to savers worried about the falling value of their savings in the bank.

The new 10-year bond, which requires a minimum 2,000 investment, will have an annual interest rate of 1.25pc above the rate of inflation, as measured by the Retail Price Index (RPI). There is currently not a single savings account available that beats RPI at 5.2pc.

When asked how safe it is to invest with National Grid, which is triple B rated, Henrietta Podd, of Evolution Securities, which is marketing the issue, said: 'National Grid runs the transmission and distribution for gas and electricity for the country - I'm not sure the country would function without it. It's an essential infrastructure'.

Retail bonds are considered more risky than bank accounts because they are not covered by depositor guarantee schemes in case of default by the issuer.

However, they have become more popular in recent years, as interest rates have remained low since the financial crisis. Royal Bank of Scotland last year launched a retail bond with an interest rate of 3.9pc, or RPI - whichever is higher.

Companies such as Tesco and John Lewis have previously targeted retail investors with bonds in small 100 chunks and short maturity dates.

Is it a good deal?

But how does National Grid's index linked bond compares to a prospective dividend yield on its shares for 2012 of well over 6%, and growing? Read more on this Here.

Until next time.

Kind regards

Steven Dotsch
Early Retirement

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