APA Group reports strong full-year result: Is it time to buy?

What? Hot on the heels of a record half year profit by Woodside Petroleum Limited (ASX: WPL), gas pipeline company APA Group (ASX: APA) has announced a strong full year result to 30 June 2014, with normalised Net Profit After Tax (NPAT) jumping 14%.

APA’s revenues were driven 9.7% higher and helped by growing earnings from the company’s expanded Mondarra Gas Storage Facility.

There are four key points for investors to note:

  • Normalised Net Profit After Tax up 14.0% to $199.6 million
  • Growth in the ‘foreseeable future’ fully funded
  • Total, full-year dividend 36.25 cps
  • Targeting normalised NPAT growth of 6-9% for FY15

So What?

The growth in earnings supported a slight 2.1% increase in full year dividend to 36.25 cents per share (cps). At the current share price ($7.74) that makes for a dividend yield of 4.7% (although it should be noted that shares went ex-dividend back on 26 June, 2014).

Importantly for investors, the distribution represents 68.9 per cent of normalised operating cash flow, leaving plenty to fund ongoing business growth.

APA Group is strongly positioned to take advantage of the increasing demand for natural gas transport in Australia as production grows in areas like the Cooper Basin.

Now What?

Does APA Group’s result mean it’s time to buy? The infrastructure-based business pairs up nicely with the needs of long-term conservative investors and the low risk cash-flows justify a slightly higher share price. However the current price of 32 times is too high for my liking.

APA is worth adding to your watchlist though. The company forecasts normalised EBITDA to be in the range of $740 million to $760 million for the full year 2015, an increase of up to 9% on FY14 and the dividend payment is expected to be “at least equal” to FY14.

A grossed-up yield of 7%... plus double-digit profit growth!

APA Group offers a decent dividend, but at its current price is not on my 'must-buy' list. One company that IS however is The Motley Fool's top dividend stock for 2014.

This company boasts growing sales, accelerating profits and a grossed up dividend yield of 7%! Find out the name and code right now -- your copy of "The Motley Fool's Top Dividend Stock for 2014" is FREE. Simply click here!

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

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