This actually shouldn’t occur to the Nationwide Grid (LSE: NG) share price, nevertheless it has. The FTSE 100 transmission big’s shares crashed 14.81% final week. Isn’t it speculated to be essentially the most strong inventory on the FTSE 100? Not now.

I as soon as described Nationwide Grid a “no-brainer buy”. But no inventory is with out dangers and I did have one concern. It had a heap of debt however was having to speculate billions into the UK’s power community, particularly electrification to hit web zero targets.

Inventory shock

Final Thursday (23 Might), that threat got here in because the board introduced a meaty £7bn fairness elevate by way of a rights concern. This can assist fund £60bn of funding over the 5 years to March 2029, doubling the earlier five-year spend. Its shares fell greater than 10% on Thursday and fell on Friday too. Over 12 months, the inventory is down 11.91%.

Nationwide Grid nonetheless got here by way of with the dividend, which is the principle motive folks purchase the inventory. Buyers acquired 58.52p per share in 2023, up 5.55% on the earlier yr. Analysts forecast the shares will yield 6.17% in 2025, rising to six.48% for 2026.

That’s greater than at the moment however I’m not fully satisfied by these figures, on condition that the dividend might be rebased, with the identical cash unfold between extra shares as a consequence of that fairness elevate.

Unsurprisingly, Nationwide Grid shares are abruptly cheaper than they have been, buying and selling at 13.2 instances ahead earnings. They’d been hovering round 15 to 16 instances for yonks.

Analysts forecast web debt will prime £48.01bn in 2025, then climb once more to £53.56bn in 2026. These are dizzying sums, method above at the moment’s market cap of £42.75bn. They’re greater than 10 instances the group’s annual revenue, which rose 6% to £4.8bn within the yr to 31 March.

Pure restoration play?

A lot now rests on the board’s turnaround plan. It has the ability to shrink that debt with disposals, asserting plans to promote its UK LNG enterprise, Grain LNG, and US onshore enterprise Nationwide Grid Renewables.

The board reckons that turning the group right into a “pureplay network business” will drive up group belongings by 10% a yr, lifting them to £100bn by 2029.

I’ve by no means purchased Nationwide Grid shares, satirically as a result of I believed they have been a bit boring. So in that respect, I’ve dodged a bullet. However, the fairness elevate permits traders to purchase seven new shares for each 24 they personal and pay simply 645p for every of them. That’s a 30% low cost on at the moment’s price of 897.4p per share.

The group’s enormous capex funding might drive long-term share price progress, one thing traders normally don’t anticipate from a utility. Nationwide Grid nonetheless has safe-haven traits, with comparatively low borrowing prices and controlled revenues as a monopoly.

If I owned any of the shares, I’d maintain my nostril and purchase extra at 645p. As I don’t, I’ll sit this out. I don’t fancy paying nearer to 900p now. If I’m going to carry a dangerous FTSE 100 dividend inventory, then I need much less debt and extra potential to develop the share price than I can see right here.