The AGL Energy Ltd (ASX: AGL) share price has been on a downward trend over the last few months. As the chart below shows, it's down 14% in 2025 to date. This has had the pleasing benefit of increasing the prospective dividend yield for passive income investors.
Of course, a business isn't necessarily a buy just because the share price has declined, so we'll also examine whether the AGL share price valuation is actually attractive.
AGL is one of the country's largest energy generators and retailers, so it plays a very important role in Australia's economy and society.
Let's examine the passive income potential of the business first.
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Projected passive dividend income
Broker UBS projects that AGL could pay an annual dividend per share of 51 cents in FY25. That payout would translate into a dividend yield of 5.2%, or 7.4% if the dividend is grossed-up for franking credits (assuming the dividends continue to be fully franked).
Pleasingly, UBS projects the business to see regular dividend growth between FY25 to FY29.
For starters, FY26 could see an annual dividend per share of 62 cents. This would be a grossed-up dividend yield of 9%, including franking credits.
By FY29, the ASX energy share could pay an annual dividend per share of 90 cents. That would be a grossed-up dividend yield of 13.1%.
On the passive income side of things, this company looks compelling, assuming UBS is (close to being) right with its predictions.
Is the AGL share price a buy?
The latest rating from UBS on AGL is neutral, though the price target implies pleasing gains.
A price target is where the analyst thinks the share price will be in 12 months from now, though it's not guaranteed to happen, of course. UBS has a price target of $11.50 on the ASX energy share, implying a possible rise of 17% from where it is today.
UBS is optimistic on the company's ability to grow profit after FY26, thanks to its expected expanded battery portfolio. The broker said:
AGL expects to take FID [final investment decision] on 1.4GW of new battery capacity over the next 18 months (on balance sheet). This includes 4x new batteries in NSW adding 900MW + x1 battery in QLD adding 500MW. This will bring AGL's total committed battery capacity to ~2,4GW by 1H FY27 and sees AGL guide batteries to contrib. ~$95m and $155m EBITDA in FY26 & FY27e. We forecasts returns from AGL's NSW/QLD batteries at ~9% post-tax IRRs…
UBS is forecasting AGL can generate $690 million of net profit in FY25 and $971 million of net profit by FY29. This could drive AGL's share price in the coming years.
