Four big-energy dividend ideas

There is no relief in sight for low interest rates, which the Reserve Bank of Australia (RBA) elected to hold at 2.75% at the start of June. It is not a great situation for investors seeking a good cash return on their savings or investment portfolio.



The energy industry, including oil and gas producers and electricity retailers, encompass some of the greatest cash-generating companies around. Although many of the companies undertake significant capital investment to grow and keep the cash flowing, the following four energy companies have a solid history of rewarding shareholders with dividends:

NZ Oil and Gas (ASX: NZO)

NZ Oil and Gas operates two oil- and gas-producing wells off the coast of New Zealand called Tui and Kupe and is currently undertaking exploration off the coast of Indonesia. In 2012, the company paid a total dividend of 7 cents per share, giving it a pleasing 10% dividend yield at its current share price of $0.70.

Origin Energy (ASX: ORG)

Origin Energy is a household name as an electricity retailer, but also has a significant investment in natural gas production as a 37.5% partner in the APLNG joint venture. Origin paid out a 50 cent per share total dividend in 2012 (fully franked), up 100% on the payment made five years prior. This gives Origin a gross dividend yield of 4.0%. The company’s next dividend is the ‘final’, set to be paid end of September.

AGL Energy (ASX: AGK)

Paying a solid 4.2% dividend yield at 61 cents per share is AGL Energy, an electricity retailer like Origin, but also Australia’s largest private owner and developer of renewable generation assets. This makes AGL stand out from other energy retailers and producers and is an attractive quality in a time of emission concerns and carbon taxes.

AGL’s dividend has grown 15% over the last five years and the company aims to pay out around 60% of underlying NPAT. Next dividend is the ‘final’ at the end of September.

Santos Limited (ASX: STO)

While Santos currently only yields 2.4% on a 2012 dividend of 30 cents per share (fully franked), this could be about to change with the coming completion of the US$19 billion PNG LNG project which Santos holds a 13.5% stake in. The project is currently 80% complete and Santos’s board has noted they will look to increase the dividend as soon as appropriate once cashflows from the project start flowing.

Foolish takeaway

Most (if not all) of the above companies mentioned offer dividend reinvestment plans, many at a discounted rate. Santos and NZ Oil and Gas, for example, offered a generous 2.5% discount to the market price and without brokerage. Reinvestment plans are great no fuss way to instantly boost your return in a long-term portfolio.

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Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.

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