The ASX dividend stock HMC Capital Ltd (ASX: HMC) has fallen heavily over the past year. I think this is a wonderful time to buy into an undervalued business because of how much lower the valuation has declined – it's down 64% from February 2025, as the chart below shows.
The business is a diversified alternative asset manager focused on real estate, private equity, the energy transition and digital infrastructure.
One of the most useful things about a decline of a share price is that it leads to a higher dividend yield.
For example, if a business has a dividend yield of 4% and then the share price drops 10%, the yield becomes 4.4%. A 20% decline leads to a 4.8% yield, and so on.
Let's take a look at what payout and dividend yield the ASX dividend stock could deliver in FY26 and beyond.
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Projected passive income
Broker UBS currently forecasts that HMC Capital could continue to deliver an annual payout of 12 cents per share in FY26, as it has done in recent years. That potential payout translates into a forecast dividend yield of 3%, or 4.4% grossed-up if the upcoming payouts are fully franked.
The ASX dividend stock is forecast to provide investors with another year of 12 cents per share in FY27, which would translate into the same yields I mentioned above.
But, the business could see higher dividends in the subsequent years, according to the projection from UBS.
The broker forecasts that the business could pay an annual dividend per share of 13 cents in FY28. That'd be a dividend yield of 3.3% and a possible grossed-up dividend yield of 4.7%, including potential franking credits.
The FY29 payout by the business could be 13 cents per share again, according to UBS. That would translate into the same dividend yields I calculated for FY28.
The best year of all for income-focused investments could be the 2030 financial year, according to the projection from UBS. That would be a possible cash dividend yield of 3.6%, or a grossed-up dividend yield of 5.1%, if it provides fully franked dividends.
Why this could be a good time to invest in the ASX dividend stock
Last week, the business announced it had established a new strategic partnership where KKR managed funds will invest up to $603 million into HMC's energy transition platform.
The investment will support the platform's continued expansion, according to HMC, including the development of new battery storage and wind projects critical to grid reliability and Australia's energy transition.
This deal will be used to repay HMC Capital debt, and the company will charge annual fees of $5 million for the provision of corporate services support. HMC's invested capital in the platform is expected to reduce by approximately $200 million.
I think this is a good step toward rebuilding investor confidence in the business.
UBS has a buy rating on the business, with a price target of $7.14, suggesting sizeable capital growth over the next year from where it is today. Explaining its buy rating on the business (which came before the KKR news), the broker said:
Our Buy rating is based on expectations that risks can be resolved and the platform can continue to grow, albeit at a more modest rate than the recent history. We now assume AUM reaches $28bn in FY29 with only $4.5bn assumed for energy transition (in contrast HMC are still targeting $50bn in 3-5yrs incl. energy transition at $5-10bn). The pushback to this view reflects a scenario where the energy transition assets take time to sell down, limiting the group's ability to execute elsewhere across the platform given capital constraints, and other fund raisings disappoint as historical missteps/risks limit the ability to raise new equity.
Earnings per share (EPS) is expected by UBS to rise from 36 cents in FY26 to 52 cents in FY30, a rise of 44%, which is a positive tailwind for both capital growth and dividend growth.
