If you are searching for a combination of major upside and an attractive dividend yield, then read on.
That's because Bell Potter has named one ASX 200 share that it believes offers both.
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Which ASX 200 share?
The share in question is Bega Cheese Ltd (ASX: BGA).
It is focused on the processing, manufacturing, and distribution of dairy and associated products to both Australian and international markets. This includes the iconic Vegemite brand.
According to the note, the broker was pleased with what it heard from Bega Cheese at its investor day event.
Bell Potter highlights that management continues to target strong earnings growth over the coming years. It said:
FY28e targets: FY26e EBITDA guidance $222-227m was unchanged, with recently announced product levies of 8-15¢/L or kg implemented quickly and with the ability to move on short notice. FY28e EBITDA guidance has been firmed from >$250m to $260-265m with the majority of the uplift from FY26e to FY28e linked to already announced initiatives, principally the closure of Strathmerton.
FY31e targets: BGA has issued its initial FY31e baseline EBITDA target of $310m+, which is driven by two strong themes in the branded business, being: (1) Continued investment in high growth categories such as milk based beverages and yoghurt, where category growth has been +8-10% p.a. and BGA unveiled a planned +25% uplift in yoghurt capacity; and (2) Continued investment in its Tatura cream cheese capability, where volumes have grown at +14% p.a. and a +28% capacity expansion is planned.
Importantly, Bell Potter believes this is achievable. The broker explains:
The FY28-31e baseline projections would look highly achievable based on current dynamics in the categories being targeted and requires BGA to execute at a rate not inconsistent with what they have achieved over the FY23-26e.
Big potential returns
In response to the investor update, Bell Potter has retained its buy rating and $7.75 price target on the ASX 200 share.
Based on the current Bega Cheese share price of $5.54, this implies potential upside of 40% for investors over the next 12 months.
In addition, it expects a 2.5% dividend yield over the period, rising to 3.5% by FY 2028.
Commenting on its recommendation, the broker said:
Our Buy rating is unchanged. BGA has articulated a strategy to generating double digit EPS growth to FY31e, through low risk investment in its core competencies of yoghurt, cream cheese and milk based beverages. In addition, BGA has also implemented levy frameworks that reduce the risk of prolonged Middle East disruption on the cost base and retailers have already followed suit with on shelf price moves.
