When it comes to dividends, AGL Energy Limited (ASX: AGL) shares have been favourites with income investors for a long time.
In light of this, with so much going on right now at the energy company, investors may be wondering if that remains the case.
Should you buy AGL shares for the dividend yield?
Over the last 12 months AGL shares have yielded dividends per share of 92 cents. This comprises FY 2020's final dividend of 51 cents per share and FY 2021's interim dividend of 41 cents.
Based on the current AGL share price of $7.99, this represents a massive partially franked 11.4% yield.
Unfortunately, the prospect of a similarly generous yield over the next 12 months is not good. In fact, investors may want to prepare for a significant cut. Particularly given management's decision to cancel its special dividend plans due to its demerger.
What are analysts expecting?
Goldman Sachs recently put a neutral rating and $8.40 price target on AGL shares.
The broker said: "While AGL looks cheap vs historical valuation metrics, we'd highlight that the broader ASX energy sector remains heavily discounted as well. So while macro tailwinds post-Covid support the fundamental recovery for the business, near-term shareholder returns have been reduced with the removal of the special dividend and introduction of an underwritten DRP."
Goldman Sachs is forecasting dividends per share of 66 cents in FY 2021 (41 cents has already been paid), 45 cents per share in FY 2022, and then 47 cents per share in FY 2023.
With AGL shares currently fetching $7.99, this will mean yields of 8.2%, 5.6%, and 5.9%, respectively.
One broker that isn't as positive is Credit Suisse. Its analysts currently have a sell rating and $6.70 price target on AGL's shares.
Credit Suisse is also forecasting a big dividend cut in FY 2022. It has pencilled in a 35 cents per share dividend, which implies a 4.4% forward yield.
