The AGL dividend has just been slashed. Here's what you need to know

AGL has been struggling with plant closures amid what CEO Damien Nicks called "challenging energy market conditions".

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Key points
  • AGL reported its half-year results (1H FY23) today, with profits falling 55%
  • The AGL dividend of 8 cents per share is half the 16 cents per share paid out in 1H FY22
  • The company’s dividend reinvestment plan is available to shareholders

The AGL Energy Ltd (ASX: AGL) dividend that management just declared is likely to leave investors feeling underwhelmed.

The S&P/ASX 200 Index (ASX: XJO) energy provider reported its half-year results for the six months ending 31 December this morning (1H FY23).

With the company struggling with plant closures amid what CEO Damien Nicks called "challenging energy market conditions", AGL saw its underlying net profit after tax (NPAT) fall 55% from the prior corresponding half year (1H FY22) to $87 million.

And that big drop in profits was reflected by a much lower AGL dividend payout.

A woman sits at a computer with a quizzical look on her face with eyerows raised while looking into a computer, as though she is resigned to some not pleasing news.

Image source: Getty Images

What's happening with the AGL dividend?

The AGL board declared an interim unfranked dividend of 8 cents per share.

That's half the 16 cents per share dividend the company paid out in 1H FY22. And, if you're keeping track, it's 74% less than the 31 cents per share interim dividend paid in 1H FY21.

Management said the interim dividend is consistent with its policy to target a full-year payout ratio of 75% of underlying profit after tax.

Indeed, with 672.75 million shares outstanding and NPAT of $87 million, it falls close to that ratio.

The AGL dividend will be paid on 24 March.

The company's dividend reinvestment plan (DRP) is available to shareholders as an alternative to receiving cash payments. Investors wishing to participate in the DRP need to do so by 24 February.

Factoring in the intraday 10.7% fall in the AGL share price to $7.09 per share, the stock currently pays a trailing, unfranked dividend yield of 2.5%.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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