AMPOL (ALD) – Dividend attraction

May 24, 2024

Ampol (ALD) is an independent Australian company involved in fuel marketing, refining, and convenience retail. We marginally raised our calendar 2024 earnings per share forecast to $3.74 after Ampol's first-quarter 2024 trading result. However, our $35 per share fair value estimate stands, with our mid-cycle estimates largely unchanged. Our $2.25 dividend per share forecast translates to a healthy 6.0% fully franked yield. That doesn't include the potential for another special eventually being declared—Ampol paid an $0.60 per share special in 2023. We still assume a 60% ordinary dividend payout ratio at the midpoint of the 50–70% policy, with Ampol's dividend a key appeal of the stock.  Ampol shares are well down from April 2024 highs and, at around $35, are trading in line with our fair value estimate.  We still forecast a five-year group EBITDA compound annual growth rate of 5.7% to $2.1 billion by 2028.  We assume a nominal mid-cycle retail fuels margin of $0.27 per litre, in real terms slightly ahead of 2023's $0.22 per litre, and a mid-cycle wholesale margin of $0.43 per litre, in line with the five-year historical average in real terms. We also assume a nominal mid-cycle refiner margin of USD 13.00 per barrel, in line with the 10-year historical average, excluding the period unduly dampened by Covid-19.

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