Dividend investors: Top Australian energy stocks to buy in December

Australian energy stocks can be seen as some of the most appealing ASX defensive shares for dividend investors because of their ability to make fairly consistent profits and pay passive income.

There are a variety of types of investments in that space, including energy generators, retailers, and commodity producers.

The two businesses I’ll talk about are two of the largest energy generators and retailers in Australia: AGL Energy Ltd (ASX: AGL) and Origin Energy Ltd (ASX: ORG).

Let’s start by looking at the passive income potential of both businesses in FY26.

Australian energy stock dividend potential

Both businesses do not trade on a high price-earnings (P/E) ratio, which means they are more likely to deliver a pleasing dividend yield for shareholders.

The projection on CMC Markets suggests both businesses are capable of delivering a high dividend yield for investors in the 2026 financial year.

Origin Energy is forecast to pay an annual dividend per share of 60 cents in FY26. This translates into a potential grossed-up dividend yield of 7.4%, including franking credits.

AGL is forecast to pay an annual dividend per share of 46 cents in FY26. That prediction equates to a possible grossed-up dividend yield of 7.3%, including franking credits.

There are not many ASX blue-chip shares forecast to pay a dividend yield of more than 7% in FY26 because of a combination of higher valuations (pushing down on yields) and the iron ore price not being particularly strong.

Why both ASX shares could be solid longer-term buys

Australia always needs energy – Origin and AGL can both produce it and sell it.

Energy demand may grow significantly in the coming years if the number of data centres in the country continues to grow. They are very energy hungry because of the growing usage of AI. More electric vehicles on the road may also lead to higher electricity demand.

I like that the Australian energy stocks are investing in renewable/storage areas like batteries and hydro because that can help them generate earnings during times when it’s most needed (and most valued), such as during evening/night hours and peak times.

Origin also has a compelling investment in a business called Octopus Energy, which is growing strongly in the northern hemisphere.

In the three months to September 2025, the Octopus Energy retail business added approximately 560,000 customers, with 230,000 in the UK and 330,000 outside of the UK. It now has 1 million customers in Germany, with 100% growth in the last 12 months.

Out of the two, I think Origin is more appealing because of its exposure to Octopus Energy, which continues to grow rapidly and could drive the value of Origin shares higher in the coming years. On the dividend side of things, their yields are very similar.

The post Dividend investors: Top Australian energy stocks to buy in December appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison 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 Scott Phillips.