Today (5 November), National Grid (LSE: NG) released its interim results – and they contained good news about the dividend. The interim payout was raised to just under 17p per share, 4% higher than last year.

That is doubtless welcome news, but for shareholders it may come as little surprise.

After all, National Grid’s stated dividend policy is to try and grow the full-year payout per share at least in line with a common measure of inflation. That can help to protect the financial value of the dividend in real terms.

So, do I see this as a share worth considering, for its long-term passive income potential?

The income potential is attractive

No, I do not – and I have no plans to buy it.

At face value, the current 3.7% yield and inflation-matching dividend strategy might make National Grid shares seem like a potential goldmine for a long-term investor like me.

The challenge, though, is that a company’s dividend strategy is a vision of what it aims to do. In practice, things can turn out differently.

Can the dividend last?

We have seen that before with National Grid, when despite that strategy it sharply reduced its dividend per share last year.

That, along with a share issuance diluting existing shareholders, reflected the company’s desire to boost its balance sheet given its high capital expenditure requirements. Keeping an ageing network fit for purpose is costly business.

That has not changed. Today’s interims showed net debt has reached £48.6bn, a year-on-year rise of 10% from the same period last year. That is a sizeable increase

With ongoing extensive capital expenditure planned, I see a risk that the company’s net debt will continue to grow.

Not only is that concerning in itself, but it could also mean a higher interest bill. National Grid paid over £1bn of interest in the first half alone.

If things keep going this way, I see a risk that National Grid may decide to cut its dividend again at some point in coming years.

It’s not all doom and gloom!

Still, that may not come to pass – and the 3.7% yield is attractive.

The company grew its operating earnings strongly in the first half.

If it can keep doing that, use its resources more effectively, and reduce its capital expenditure over time, the company may be able to keep the different plates spinning at once that can enable ongoing dividend growth over the long run.

After all, the company does make a large operating profit and benefits from a captive customer base, extensive infrastructural network and deep expertise in its field.

Still, at 20 times earnings, the share looks expensive to me – and I am doubtful about whether the dividend is sustainable for the long term if capex does not start to fall significantly.

Fortunately, there are other income shares in today’s market that I think have far healthier balance sheets.

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Christopher Ruane does not hold any positions in the companies mentioned.