Businesses in the utilities space could be appealing investments because they provide an essential services and can deliver a good payout. One useful contender would be AGL Energy Ltd (ASX: AGL) shares, with a promising dividend forecast out to 2030.
When a business trades on a relatively low price/earnings (P/E) ratio, it means that the dividend yield is naturally higher.
The energy space is in an interesting transitory period right now. Daytime energy is generally cheap because of solar power, while night-time power is much more expensively priced. It's this dynamic that is already helping AGL's earnings and could become even more pronounced in the coming years.
Broker UBS wrote the following in a recent note covering the AGL result:
AGL expects volatility to prevail into the LT [long-term] & owning low cost capacity assets with some operating flexibility to capture a greater share of higher price periods (ie. in partic. Loy Yang A & Bayswater Power stations) place AGL in a strong position to grow underlying EBITDA y/y to 2030—provided generation availability is maintained. We forecast underlying EBITDA & NPAT CAGR of 10% & 15% over FY26-30e.
The HY26 result confirmed that AGL's battery portfolio is performing well ahead of its own expectations & reiterated that batteries can sustain post tax unlevered asset returns at the upper end of its 7-11% target range—despite accelerating growth in both utility scale & residential battery installs.
AGL again increased its planned devpt pipeline pushing leverage higher. We maintain some comfort that AGL ultimately controls the pace of devpt and is seeking opportunities to efficiently manage its balance sheet.
Let's take a look at what analysts think owners of AGL shares could see in terms of passive income in the coming years.
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FY26
The broker UBS is currently projecting that the business could slightly increase its annual payout per share in the 2026 financial year. I think that's attractive because a higher payout is appealing, it suggests rising underlying earnings and that the board are confident about the future.
AGL is expected by UBS to deliver an annual payout of 49 cents per share in FY26, translating into a grossed-up dividend yield of 6.7%, including franking credits, at the time of writing.
FY27
The payout could rise again for shareholders in the 2027 financial year to a forecast annual dividend of 54 cents per share, which would be a year over year rise of 10%.
FY28
The 2028 financial year could see the dividend take a step backwards, according to UBS, with the projected profit also expected to reduce in that year.
The annual dividend per share for owners of AGL shares is expected to reduce to 47 cents in FY28.
FY29
The 2029 financial year could see the business deliver a much stronger payout of 57 cents per share, which would be pleasing for shareholders to see biggest payout in quite a few years.
FY30
The last year of this series of projections could be the best of all for dividend income.
UBS projects that AGL could pay an annual dividend per share of 84 cents in FY30. That would translate into a grossed-up dividend yield of 11.5%, including franking credits, at the time of writing.
This projected payout would represent growth of 71% between the projected payouts of FY26 and FY30.
UBS currently has a buy rating on AGL shares, with a price target of $11.
