Origin Energy's Dividend Boost: A Windfall for Shareholders

Origin Energy Limited (ASX:ORG) has announced a significant increase in its fully franked final dividend to A$0.30 per share for the full year ended 30 June 2024. This marks a 37.5% increase from the previous year's dividend of A$0.275 per share. The news has been well-received by investors, with the company's share price rising in response. But what lies behind this dividend hike, and how does it align with Origin's overall strategy and financial performance?



The primary drivers behind the dividend increase are:

1. Improved earnings from Energy Markets and Integrated Gas businesses: Origin's underlying profit increased by $436 million compared to the prior year, driven by higher earnings in these two key business segments. This increase in earnings contributed to the company's ability to distribute a larger dividend to shareholders.
- Energy Markets EBITDA rose to $1,783 million, up from $1,044 million in the prior year, primarily due to higher wholesale energy costs and optimization of the energy supply portfolio.
- Integrated Gas EBITDA increased to $1,919 million, up from $1,837 million in the prior year, mainly due to higher commodity prices and improved production from Australia Pacific LNG.

2. Strong cash generation and adjusted free cash flow: Origin's adjusted free cash flow for the year was $1,296 million, compared with $965 million in FY23. This strong cash generation enabled the company to increase returns to shareholders through a higher dividend.
- The company received cash distributions from Australia Pacific LNG of $1,384 million, net of oil hedging, which contributed to the overall cash generation.

3. Execution of the company's strategy: Origin's dividend increase aligns with its overall strategy of investing in renewables and storage while maintaining a strong balance sheet. The company has made significant progress in executing this strategy, as evidenced by:
- Establishing a pipeline of renewables developments in NSW, including the Yanco Delta wind farm development.
- Building a portfolio of owned and tolled battery systems, totaling 1.5 GW across two- and four-hour dispatch duration.
- Supporting vulnerable customers through energy bill relief and tariff freezes.



This dividend increase is a clear indication that Origin Energy is performing well and is confident in its future prospects. The company's strong financial performance, driven by improved earnings and cash generation, has allowed it to distribute more cash to shareholders. The dividend increase also reflects the company's commitment to returning value to shareholders while continuing to invest in its growth and expansion.

In conclusion, Origin Energy's dividend increase to A$0.30 per share is a testament to the company's strong financial performance and its commitment to returning value to shareholders. The increase aligns with the company's overall strategy and is supported by improved earnings and cash generation. As Origin Energy continues to execute its strategy, investors can expect the company to maintain its competitive position and deliver sustained value for shareholders.