The ASX dividend share APA Group (ASX: APA) recently delivered its latest annual result for investors and outlined what it expects the payout to be in FY26.
APA is a major energy infrastructure owner, with a huge gas pipeline network, gas processing facilities, gas storage, solar farms, wind farms and electricity transmission assets.
The business reported statutory revenue growth of 4.7% to $2.7 billion, underlying operating profit (EBITDA) growth of 6.4% to $2 billion (the top end of its guidance), marginally higher free cash flow of $1.08 billion and a 1.8% increase of the annual distribution to 57 cents per security.
Let's take a look at what experts from Macquarie think of the ASX dividend share.
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What Macquarie experts thought of APA Group's FY25 result
Macquarie noted that APA met its FY25 guidance, while the FY26 operating profit guidance of between $2.12 billion to $2 billion was in line with market expectations.
The expert pointed to a number of positives including CPI inflation (with a large majority of revenue linked to inflation), cost reduction, Kurri Kurri, Port Hedland and ECG investment.
The broker also said that operating cash flow was "solid" at $1.28 billion, 8% ahead of expectations due to lower tax paid and interest (benefiting from timing).
Macquarie also noted that APA's outlook has been lifted with growth capital expenditure increased to $2.1 billion over the next three years, up from $1.8 billion.
Discussing potential developments with APA's energy portfolio, Macquarie said:
Major FID [final investment decision] is Bulloo, albeit we see it as a 2H event as gas policy (reservation) is settled.
Management talked up the potential for GPG [gas powered generation] investment. Given GPGs will be used like insurance policies in the future, a tolling arrangement is plausible (ORG indicated as much). Near-term opportunity limited government sponsored projects in NEM (eg, Brigalow); we do not see this really emerging as an earnings contributor before FY31E. The stopping of Electricity Transmission delivers immediate savings of $10-15m, and probably sees APA recycle the Basslink asset (+$750m).
Price target on the ASX dividend share
A price target is where analysts think the share price will be trading in 12 months from the time of the investment call.
Macquarie has a price target of $9.23 on the business, implying a possible rise of around 5% in the next year, if Macquarie ends up being right.
The broker is also expecting APA to increase its annual distribution by 1 cent per security in each of the next three financial years, with the FY26 payout expected to be 58 cents per security. That translates into a forward distribution yield of 6.6% at the time of writing.
Macquarie has an outperform rating on the ASX dividend share and said:
We anticipate a theme of slippage to continue as energy transition takes longer and government policy continues to evolve. Combined APA balance sheet has ample capacity to find the current pipeline of opportunities.
APA's…EV/EBITDA of ~11.6x looks attractive vs an historical range of 11.8-13.3x. The yield of ~6.7% pa is sustainable, with growing franking in coming years. Core earnings momentum should build with cost reductions and as new investment becomes income-generating.
