The ASX dividend stock Kelsian Group Ltd (ASX: KLS) has plenty to offer income-focused investors. I think it can provide a good dividend yield and potentially capital gains.
Kelsian is not a well-known business, but it describes itself as Australia's largest integrated multi-modal transport provider and tourism operator, with established bus operations in Australia, Singapore, USA, the UK and the Channel Islands. It's the operator of Australia's largest electrified bus depots and has more than 5,800 buses, 115 vessels and 24 light rail vehicles.
When a share price falls, the dividend yield on offer from a business can increase. For example, if a dividend yield is 5% and then the share price declines by 10%, the yield on offer becomes 5.5%.
As the chart below shows, the Kelsian share price has dropped by 21% over the past 12 months.
Image source: Getty Images
ASX dividend stock credentials
The business has steadily increased its annual dividend per share over the last few years for shareholders. In the 2024 financial year, it grew its payout by around 3% to 17.5 cents per share.
That's not the fastest growth rate in the world, but for a sizeable dividend yield, it's pleasing to see that payout rise at a decent pace, year-over-year.
At the current Kelsian share price, it has a trailing dividend yield of 4.4% and the grossed-up dividend yield is 6.3%, including franking credits.
That FY24 dividend equated to close to half of the ASX dividend stock's underlying net profit (earnings per share before amortisation expense).
Why this is an attractive business
Kelsian says that the majority of its service contracts are long-term, highly defensive and are government and corporate-backed.
The business said that macro trends support growth, with the revenue profile tied to favourable tailwinds, including decarbonisation, population growth, high density housing and increased use of commuter transport.
Kelsian has demonstrated a track record of delivering organic growth from new and expanded contracts and through acquisitions.
In the update for the third quarter of FY25, it said that it had generated underlying operating profit (EBITDA) of $210.4 million.
It reported continued strong revenue growth driven by Western Sydney bus contracts, Bankstown rail replacement, contract indexation and Swan Transit.
The company regularly announces positive contract news, the latest being a contract with Bechtel Energy to supply workforce transportation services in connection with the Louisiana LNG development project in Calcasieu Parish in Louisiana, USA. This contract is estimated to be worth US$82 million of four and a half years.
Estimates on Commsec suggest the company's net profit and dividend per share could increase in FY26. The projected grossed-up dividend yield could be 6.7%, including franking credits.
