Insights

Is AGL (ASX:AGL) really offering a 7% dividend yield today?

Is AGL Energy Limited’s (ASX: AGL) dividend yield of 7.3% legitimate? Here’s the breakdown of this seemingly massive yield.
The post Is AGL (ASX:AGL) really offering a 7% dividend yield today? appeared first on The Motley Fool Australia. –

surprised asx investor appearing incredulous at hearing asx share price

Looking at the AGL Energy Limited (ASX: AGL) share price today, a few things stand out. First up, the share price itself. AGL shares are trading at $13.46 at the time of writing. That gives this company a market capitalisation of $8.4 billion and a price-to-earnings (P/E) ratio of 8.51.

That is a very low share price for AGL, historically speaking. The last time AGL shares were this low was back in early 2015. On these prices, AGL shares have lost more than 50% of their value since they hit $27.61 per share in 2017.

And here’s another sobering statistic: you could have bought AGL shares for the same price as you can today, way back in 2006.

But secondly, AGL’s trailing dividend appears to be offering a whopping 7.27% yield on today’s prices. That’s more than triple the trailing yield of 2.39% that market-wide S&P/ASX 200 Index (ASX: XJO) fund, iShares Core S&P/ASX 200 ETF (ASX: IOZ), is offering. And it’s over 13 times more yield than a Commonwealth Bank of Australia (ASX: CBA) term deposit is offering right now at 0.55% per annum.

So is this yield too good to be true?

The AGL monster dividend

Well, let’s look at AGL’s latest shareholder payouts. Unlike some ASX dividend shares, AGL has paid two dividends in 2020. The first was an interim dividend of 47 cents per share (80% franked) that was paid in March. The second was a final dividend of 51 cents per share (also 80% franked), paid out in September. That’s 98 cents per share in dividends for 2020, giving AGL shares a trailing yield of 7.27%. So it does check out! Including the value of those franking credits, this trailing yield rises to 9.76% grossed-up.

It is worth noting that AGL has given some rare guidance into its plans for this dividend over the next few years. The company currently has a ‘payout ratio’ policy, which instructs that 75% of its profits should be paid out as dividends every year. Back in August, AGL told investors that its profits for the 2020 financial year were $816 million, which was down 22% from the prior year. But it also told the market it expects this profit to dip further in FY2021 to just $560 million. That’s not enough to keep 2020’s dividend levels steady next year under this ‘75% payout ratio’ rule.

However, AGL also told investors it would be bringing in a new rule for dividend payments for FY2021 and FY2022. This involves paying an additional 25% of profits as ‘special dividends’ on top of the normal 75%. In effect, this means AGL has committed to paying out 100% of its profits as dividends for the next two years. However, dividends won’t be coming with any franking credits at all over this period. This is being done so that AGL can “utilise historic tax losses”.

So yes, it would appear that AGL is really offering a dividend yield of nearly 7.3% today, if the company’s guidance is anything to go by.

These Dividend Stocks Could Be Your Next Cash Kings (FREE REPORT)

Motley Fool Australia’s Dividend experts recently released a brand-new FREE report revealing 3 dividend stocks with JUICY franked dividends that could keep paying you meaty dividends for years to come.

Our team of investors think these 3 dividend stocks should be a ‘must consider’ for any savvy dividend investor. But more importantly, could potentially make Australian investors a heap of passive income.

Don’t miss out! Simply click the link below to grab your free copy and discover these 3 high conviction stocks now.

Click Here For Your Free Stock Report

Returns As of 6th October 2020

More reading

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is AGL (ASX:AGL) really offering a 7% dividend yield today? appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!