I’m very much in a minority when it comes to National Grid (LSE: NG) shares. Investors love the stock, but I’ve always been wary. Unfortunately, recent performance has proved them right and me wrong. Should I finally admit defeat and buy it?

My scepticism started with a simple problem. I just couldn’t get excited about the FTSE 100 utility. I’ve always seen National Grid as a plodder. True, a typical dividend yield of 5.5% looked attractive, but I felt I could match that income elsewhere, with bags more growth potential.

Wrong. Wiser heads view National Grid as the ultimate portfolio building block. Solid and dependable, throwing off steady returns while more adventurous holdings add some fizz. I should simply have accepted that argument and bought it years ago.

FTSE 100 building block

Lately, my doubts have centred on something bigger. The company has to pour around £60bn into upgrading networks to cope with the green transition. In May 2023, it announced a £7bn rights issue to help fund that expansion. The shares wobbled, but not for long. Investors piled in, seeing it as a chance to buy more of this strategic asset at a discount.

I watched, baffled. UK infrastructure projects have a nasty habit of costing twice as much as planned and taking twice as long. Further dilution and even dividend cuts could follow. Couldn’t investors see the dangers here?

Wrong again? Not totally. National Grid has hiked dividends every year this millennium – but in 2025 the board cut the final total dividend by 13.7%, to 46.72p per share. So did the shares plunge as I expected? Nope.

The National Grid share price has soared 42% over the last 12 months and 87% over five years, with dividends on top. And it just won’t stop. It’s jumped about 15% in the last month, which would have turned a £15,000 investment into £17,250. Only three blue-chips did better in February: Schroders, Tesco and GSK. At least I hold GSK.

No dividends, no growth (for me)

As for the latest surge, there hasn’t been a single dramatic announcement to explain it. So here’s my guess. As investors fret about AI valuations, they’re rotating into defensive stocks with visible cash flows. And who does that better than National Grid?

So have I changed my tune? I’m afraid not. For years, the shares typically traded on a price-to-earnings ratio of around 15. That looked fair value for a steady utility, but today the P/E’s nudging 25, while the trailing dividend yield has slipped to 3.3%.

If I didn’t buy when it looked good value with a chunky yield, it would be silly to jump in now. Other investors may disagree and can safely ignore all my warnings. I don’t have a good track record here.

But I still won’t buy National Grid. The market and I will just have to disagree on this one. Instead, I’ll target FTSE 100 dividend growth stocks with higher yields and lower valuations. I can see plenty out there that I do want to buy.