Looking for reliable returns from ASX utilities shares in 2025? Look no further.
Brokers are bullish on Santos Ltd (ASX: STO) and APA Group (ASX: APA) for the coming year. If they prove to be correct, these two stocks could be set to surge.
Let's dive in and see what's behind these two energy players.
ASX utilities shares rated highly
The first ASX utilities share on the list is Santos. It is one of the Asia-Pacific's largest oil and gas producers, with a market capitalisation of more than $23.5 billion at the time of writing.
The company provides energy to homes and various industries across the region, making it one of Australia's top energy shares as well.
Ord Minnett is bullish on the ASX utilities share and values it at $8.50 apiece. For reference, Santos shares are trading at $7.28 at the time of writing.
As my colleague James reported, the broker estimates a free cash flow yield of 20% from Santos' Pikka and Barossa LNG operations.
This leaves "plenty of room to return excess capital to shareholders", it says.
The broker expects this to translate into higher dividends or share buybacks in 2025.
Goldman Sachs also has a buy rating on Santos, valuing the company at $7.90 per share.
It likes Santos' "compounding returns trajectory", estimating the stock will trade on "an average 5% dividend yield over the next three years with the potential to payout up to our forecast FCF over 10% from 2026."
Santos is also rated a buy from the consensus of analyst estimates, according to CommSec.
APA Group catches a bid
The second ASX utilities share is APA Group, which had a challenging year on the chart last year. Its shares are down 14.8% in the past year.
The consensus of analyst estimates also rates APA Group as a buy, according to CommSec data.
Although profits are projected to be flat this year, consensus estimates are for the company to grow its earnings per share (EPS) by 21% next year, lifting another 17% by 2027.
Meanwhile, dividends are forecast to grow 1.3% per annum over this period, reaching 57 cents per share.
Zooming out, APA has a justified record of paying dividends to its shareholders. So, this level of growth seems achievable to me.
As my Foolish colleague James reported, Macquarie also rates the ASX utilities share a buy with a $8.02 per share price target.
This equates to around 15.7% upside potential from $6.93 per share at the time of writing.
The broker also forecasts dividends of 57 cents per share in FY25 and 57.5 cents in FY26.
If correct, this would provide dividend yields of more than 8% in both years, respectively.
ASX utilities share takeout
Both Santos and APA Group have strong cases for investors seeking a combination of capital growth and income.
Experts reckon they are set to deliver the goods in 2025 based on their fundamentals and the potential for chunky dividends. Time will tell what eventuates from here.
