Is Ampol Ltd (ALD) worth considering as an income/growth stock
Hi MM, Is Ampol now worth considering as an income/growth stock given it has come back a long way from its early 2024 high? Thanks, Peter
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Answer
Hi Peter,
Ampol (ALD) has indeed endured a tough 2024 declining 35% from its 2024 high. The stock is now forecast to yield between 6.2% and 7.5% pa fully franked over the next 5-years which is attractive assuming we don’t witness any further significant capital depreciation.
ALD is primarily involved in the purchase, refining, distribution and marketing of petroleum products and the operation of convenience stores with costs the big issue, a common theme across the ASX:
- ALD’s 1H24 dividend missed expectations, with ALD conservatively choosing to pay out at the midpoint of policy, 61% of underlying NPAT (vs consensus expectations of 70%).
- High capex & refining costs tempered expectations on capital returns although convenience Retail (CR) has held up well in tough market conditions.
Additionally, Ampol has been scaling back its electric vehicle (EV) charging rollout due to grid connection delays and slower-than-anticipated EV adoption. This adjustment in strategy has probably also dampened investor sentiment.
- Overall we think there is value there, however, it’s hard to really know what the future of service stations are when EV ownership reaches a tipping point. We’re unsure on this one.
