AGL Energy Ltd (ASX: AGL) shares are in the green today.
Shares in the S&P/ASX 200 Index (ASX: XJO) energy provider closed Friday trading for $12. At the time of writing, shares are swapping hands for $12.10 apiece, up 0.8%.
As you can see on the chart above, AGL shares have been on a tear recently, up 57% in six months. This will come as good news to long-term shareholders, who watched the stock lose more than 70% of its value from early 2020 through to the end of 2021.
While reducing its payouts following those tough years, the ASX 200 energy provider pleased passive income investors by managing to continue paying two annual dividends.
Over the past 12 months, the company paid a final dividend of 10 cents per share and an interim dividend of 8 cents per share.
At the current price, AGL shares trade on an unfranked trailing yield of 1.5%.
But are those dividend payments sustainable?
Can AGL shares keep delivering passive income?
For some greater insight into that answer, we turn to the analysts at Firetrail Investments.
In its Firetrail Australian High Conviction Fund June monthly report, the company notes that AGL shares were an outperformer for the fund "after providing FY2024 earnings guidance ~15% above consensus forecasts and clarifying future capital expenditure intentions".
Indeed, AGL shares closed up 9.7% on 16 June, the day the company upgraded its earnings guidance.
Citing the tailwinds received from higher wholesale electricity pricing, improved plant availability, and flexibility of its asset fleet, management increased its FY 2024 guidance for underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) to between $1.88 billion and $2.18 billion. That's up 50% from FY 2023.
The company also expects to almost double its profits year on year. FY 2024 underlying profit after tax guidance is for between $580 million and $780 million.
As for the sustainability of the dividends investors can expect from AGL shares, Firetrail noted:
Of the $20 billion that AGL has earmarked for investment on the energy transition, roughly half will be on AGL's balance sheet, and only $4 billion will be spent between now and 2030.
This capex profile enables AGL to pay out 50-75% of profits as dividends, providing a strong, sustainable yield for investors.
