The ASX dividend stock Kelsian Group Ltd (ASX: KLS) has deviated significantly from its recent highs. The Kelsian share price is down around 50% from April 2021 and 25% over the last year, as shown in the chart below.
Kelsian describes itself as Australia's largest integrated multi-modal transport provider and tourism operator. It has established bus operations in Australia, Singapore, the USA, London, and the Channel Islands. At 31 December 2023, it had 5,500 buses, 115 vessels, and 24 light rail vehicles.
The company has been operating for over 30 years. It claims to be a leader in sustainable public transport, with Australia's largest zero-emission bus fleet and electrified bus depot.
It may not be the most well-known ASX dividend stock, but I believe it could be a compelling option.
Passive income potential
Kelsian has impressively grown its annual dividend per share each year since 2021, which is pretty good considering all of the uncertainty and volatility of the last three years.
Looking at the last two declared dividends, it has a fully franked dividend yield of 3.3% and a grossed-up dividend yield of 4.8%.
The estimate on Commsec suggests the ASX dividend stock could pay an annual dividend per share of 22.7 cents in FY25, which would be a grossed-up dividend yield of 6.2%.
In the subsequent year of FY26, the transportation business is forecast to pay an annual dividend per share of 25 cents. This would represent a grossed-up dividend yield of 6.8% in the 2026 financial year.
So, the business is projected to see a pleasing level of dividend yield and passive income growth in the next couple of financial years.
Are the ASX dividend stock's earnings going to grow?
I only want to consider investing in businesses whose earnings are likely to grow in the foreseeable future. Profit growth usually drives the share price higher and funds larger dividend payments.
In the FY24 first-half result, the business reported revenue grew by 44.9% to $982.7 million thanks to the acquisition of All Aboard America! and the new Sydney contracts from August 2023 and October 2023. It also reported underlying earnings before interest and tax (EBIT) growth of 29.4% to $58.1 million and statutory net profit after tax (NPAT) growth of 44.1% to $28.1 million.
Kelsian's outlook commentary on the HY24 result said it's "well-placed to continue to deliver growth underpinned by economies of scale, efficiencies and global procurement opportunities."
The ASX dividend stock believes the longer-term list of growth opportunities is "significant", with many markets "welcoming operational experts to support their decarbonisation agendas".
Its new contracts in Western Sydney are "in the fastest population growth corridor in Sydney", and this growth is expected to continue with the launch of a new international airport in 2026. The company is confident of more Sydney contracts, an expansion of routes and higher margins.
The All Aboard America! business provides "a multi-year runway that is both organic and inorganic." Organic growth examples include "construction and technology sectors, employee shuttle and expansion to new cities."
According to Commsec estimates, the Kelsian share price is valued at just 12x FY26's estimated earnings. For a growing business, I believe that's a very appealing valuation.
