Questor share tip: Ofgem review mean it's time to cut off National Grid The regulatory consultation is far from over. On July 27, Ofgem will publish detailed proposals and National Grid will respond to this on August 2 through an online seminar. Ofgem's final proposal is due in December. The regulator appears to be taking a tough stance and there could be little room for manoeuvre unless National Grid can provide new information. In these times of austerity the trend is for companies to have to do more with less. Ofgem clearly believes this is the case with UK electricity and gas transmission. The financial calculations are complex, but the result of Ofgem's proposals appears to be that dividend cover could be tight. JP Morgan's calculations indicate that the initial proposals would lead to dividend cover of 1.4 times for the year ending March 2014 but that cover will then erode over the review period "along with Grid's credit." We have just gone through a transition year between two regulatory periods. In the previous period, National Grid's dividend policy was very generous, increasing the annual payout by 8pc. In the current "buffer" year, plans are for a 4pc increase. After this week's falls, which were surprisingly muted, the shares are trading on a 2013 and 2014 earnings multiple of 12 times. The prospective yield is 6.2pc. Questor said "buy" on Feb 1 when the shares were at 632p, but downgraded the shares to hold in May when they were at 675p. Questor feels that the two next catalysts - Ofgem's detailed proposals and National Grid's response - will be negative catalysts for the shares which have performed extremely well of late. Therefore, despite the dividend attractions, Questor is inclined to sell the shares now and wait to buy in again at a cheaper level. National Grid is an attractive share for income seekers to hold - especially for investors who bought in cheaply. However, the valuation is rich and uncertainty is high. The shares are more likely to fall than rise in the short term. On balance, Questor says sell and wait for an attractive re-entry point later in the year.