AMPOL (ALD) – Dividend attraction

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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