Origin Energy Ltd (ASX: ORG) and AGL Energy Limited (ASX: AGL) are two of Australia’s largest energy companies.
But only one of them represents a good investment option right now according to the team at Morgans.
Origin shares are a buy
According to the note, the Morgans thinks investors should be buying Origin shares over AGL shares right now.
This week the broker put an add rating and $6.44 price target on the company’s shares. Which, based on the current Origin share price of $5.82, implies potential upside of almost 11% over the next 12 months.
In addition, its analysts expect a 12-month fully franked dividend yield approaching 5% to sweeten the deal even further.
As a comparison, Morgans has a hold rating and $7.24 price target on AGL’s shares. Which is a touch lower than the current AGL share price of $7.28.
Why Origin over AGL?
Morgans sees AGL as a difficult investment proposition at present.
It notes: “AGL remains a difficult investment proposition ahead of its demerger with its component parts likely to attract investors who have environmental priorities that are at polar opposites.”
As for Origin, the broker was pleased with its recent update and $250 million on-market share buyback. It also believes the company’s APLNG business is well-placed to generate robust cash flows that underpin strong dividends.
Its analysts explained: “ORG is looking to farm down interest in its Beetaloo basin tenure and has reiterated steady production targets for APLNG. It is also taking a selective approach to Energy Markets investment. We therefore see limited growth opportunities for the company but equally limited need to spend capital. Our outlook for commodity prices suggests ORG could sustain strong dividends in the medium term. We maintain our ADD rating and see 10% upside to our valuation on today’s closing price and potential dividend yield of 5% giving forecast 12-m TSR of 15%.”
The post Why this broker says buy Origin (ASX:ORG) shares instead of AGL appeared first on The Motley Fool Australia.
Should you invest $1,000 in Origin right now?
Before you consider Origin, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Origin wasn’t one of them.
The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of January 13th 2022
More reading
- Could Origin Energy (ASX:ORG) shares be next on the investment agenda for Mike Cannon-Brookes?
- Soul Patts urges AGL (ASX:AGL) board to give ‘more thought’ to takeover bid
- ASX 200 (ASX:XJO) midday update: Origin’s $250m buyback, Nickel Mines smashed
- Origin (ASX:ORG) share price higher on $250m buyback and refreshed strategy
- ASX 200 (ASX:XJO) midday update: AGL rejects new takeover offer, Appen makes strategic investment
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
from The Motley Fool Australia https://ift.tt/V8gBmvC
Leave a Reply