On the surface, it’s simple to see why National Network (LSE:NG) is a popular choice among many income investors. National Grid stock offers a starting dividend yield of 6.5%. This means that for every £10,000 I invest in it now, I hope to earn £650 a year in dividends.

This dividend has been increasing every year for years. For example, over the last three years, annual dividends per share have increased by 19%. This is a significant boost in my opinion.

A business with few competitors and high demand

But any clever income investor knows that it’s not enough to just look at dividend history.

After all, dividends are never guaranteed. That’s why it’s vital to take a look source dividends. How is the company making money and will it be able to continue doing so given what it knows now?

In this case, National Grid stock has some promising features.

After all, while energy sources may change, the need to move power across the grid will persist for decades to come. National Grid’s existing infrastructure is high-priced and arduous, if not impossible, to replicate. Realistically, I expect no one will even try to do this, although companies may try to compete with select parts of it.

National Grid is the kind of energy monopoly that billionaire investor Warren Buffett tends to love. Indeed, Buffett’s company Berkshire Hathaway actually owns Northern Powergrid, a regional network and supplier focusing on the north of England.

So why the hell am I not interested in owning National Grid stock?

High debt and high spending requirements

The answer is basic: “debt”. Much of it.

National Grid started operations last year with net debt of £41.0 billion (essentially residual debt after assets). By the end of the year the figure was £43.6 billion.

This is a continuation of a long period of rising net debt. Ten years ago it was £21.2 billion. This means that in the decade preceding the year, the company’s net debt – already significant – more than doubled.

Why? Running a power grid and maintaining it is an high-priced business that requires high investment outlays. I expect it will stay that way.

The downside to this spending is that it allows National Grid to run its business and make money. However, as with many regulated utilities, prices are also set by the government or regulator, not just the market.

Why don’t I buy shares

Do shareholders care? They receive a juicy dividend, and National Grid shares are up 15% over the last five years.

However, growing dividends and rising net debt often cannot last forever. One way to reduce debt is to spend less money on dividend payments and more on loan repayments.

The National Network did not do this. Instead, it issued millions of novel shares this month in a rights issue aimed at raising £7 billion of capital.

This should strengthen the balance sheet for now.

But while I consider this to be conservative, I think it highlights the very reason I have no interest in owning National Grid stock: I believe the dividend is at risk if the company’s net debt continues to boost. The rights issue buys time but does not solve this fundamental challenge.