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Can the AGL dividend bounce back this earnings season?

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The AGL Energy Limited (ASX: AGL) dividend will be in focus this reporting season. After dividend cuts in the last years, could there be a turnaround in the upcoming result?

AGL’s profit has been hurting. Dividends usually track the direction of net profit after tax (NPAT), as a dividend is funded by previous profit generation.

Dividends can be an attractive way to reap the rewards of a company’s profit each year.

But, let’s look at what energy giant AGL’s dividend is expected to be.

Dividend projections

In the FY22 half-year result, AGL paid an interim dividend of 16 cents per share. That was a reduction from the 41 cents per share FY21 interim dividend.

The FY21 final dividend from AGL was 34 cents per share. The total dividend per share for FY21 was 75 cents per share.

On CMC Markets, the estimate for the total FY22 dividend per share is 23.9 cents. That implies a final dividend in the single-digit cents, which would be a very large decrease.

A total dividend per share of 23.9 cents would be a decrease of almost 70%.

Plenty of brokers like Morgans and UBS have somewhat similar estimates for the dividend from the energy business.

However, Credit Suisse thinks the final FY22 dividend could be similar to the interim dividend.

AGL dividend growth expected

All the brokers mentioned above are expecting AGL to increase its annual dividend per share in FY23.

The dividend estimate on CMC Markets implies that the dividend could more than double in FY23. The projected dividend in FY23 is 48.5 cents per share, which would be a dividend yield of 5.8% at the current AGL share price.

Another AGL dividend increase is expected in FY24. That estimate is 64.6 cents per share, which would be a dividend yield of 7.7%.

Morgans rates the energy business as a buy, with a price target of $9.67 as profit is expected to recover. That implies a possible rise of around 15% over the next 12 months.

UBS is neutral on the business, with a price target of $8.35. That implies they expect the AGL share price to be flat over the next year.

Credit Suisse has an outperform rating on AGL, with a price target of $10.80. That suggests a possible rise of almost 30% after price rises for customers were more than expected.

Since the beginning of 2022, AGL shares are up 33% as the company became a takeover target.

At the current share price, AGL has a market capitalisation of $5.63 billion.

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