How Much Upside Does Macquarie See in APA Group Shares with a 6.9% Yield?

How Much Upside Does Macquarie See in APA Group Shares with a 6.9% Yield?


APA Group

(
ASX: APA
) stocks have been performing well this year.

From the beginning of 2025, the shares of the energy infrastructure firm have climbed by 17%.

This performs better than a 2.5% increase set by the benchmark.

S&P/ASX 200 Index

(ASX: XJO).

Is it possible for APA shares to continue increasing?

The team at

Macquarie Group Ltd

(
ASX: MQG
) has been scrutinizing the company and has issued its assessment on its shares.

Despite the broker maintaining an outperform rating on APA shares, they believe the stocks are currently fully valued.

As stated in the note, Macquarie has kept its price target at $8.14, slightly beneath its present share price of $8.23.

The rationale for maintaining its outperformance rating lies in the expectation that APA Group’s balance sheet will facilitate robust earnings growth in the upcoming years. Additionally, the company boasts an impressively generous
dividend yield
On the deal being offered, the broker seems to think it’s worthwhile to earn money while waiting.

Regarding its prospects for expansion, the brokerage firm stated:

The pipeline is still teeming with possibilities, and there’s optimism that both the Pilbara and ECG might reach Final Investment Decision on their upcoming projects. The GPG presents a fresh opportunity, whether through partnerships or directly, as APA works on developing an infrastructure framework for this asset. Our rating is outperform. The balance sheet can support annual spending up to $0.6 billion, enhanced by asset recycling allowing extra expenditure. We estimate that the unleveraged pipeline value stays above $6 billion.

Big dividend yields

As stated earlier, Macquarie thinks that APA will maintain its extensive track record of boosting dividends and will offer substantial yield payouts to shareholders in the upcoming years.

Following the payout of 56 cents per share in fiscal year 2024, the broker anticipates that the firm will increase its dividend to 57 cents per share in fiscal year 2025. Given its present share price of $8.23, this adjustment would result in a dividend yield of approximately 6.9%.

Subsequently, the broker anticipates that APA Group will increase its dividend to 58 cents per share in FY 2026 and further to 59 cents per share in FY 2027. Should these predictions hold true, they would equate to dividend yields of 7% and 7.15%, respectively.

Regarding its outperformance rating, the broker concludes:

Exceed expectations. With a yield of 7.1%, asset recycling proves beneficial. A key shift involves requiring natural gas during the transition phase; fortunately, there’s political backing ensuring it won’t follow international price trends. Expansion projects like those undertaken by APA and ECG will aid this process and likely result in more contracts being secured.

The post
With a yield of 6.9%, how much upside does Macquarie tip for APA Group shares?
appeared first on
The Motley Fool Australia
.


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Motley Fool
contributor
James Mickleboro
does not hold any shares in the stocks discussed. However, Motley Fool Australia’s parent company, Motley Fool Holdings Inc., owns shares in and recommends Macquarie Group. Additionally, Motley Fool Australia holds interests in and suggests investing in Apa Group and Macquarie Group. The Motley Fool holds a
disclosure policy
This article includes solely general investment guidance (covered under AFSL 400691). Authorized by Scott Phillips.