FTSE natural gas giant Energean’s (LSE: ENOG) dividend profile has moved into eye-catching income-share territory.
Its near-10% ultra‑high yield reflects the scale of its cash flows, but also the market’s lingering scepticism about execution risk.
However, production from its core field, Karish, is bedding in, and management forecasts production will rise over the medium term.
So, what sort of dividend income are we looking at, and should I buy the stock now?
Earnings growth drivers
Sustained earnings growth underpins long-term gains in both dividends and share price. A risk to Energean is operational interruptions in its core Mediterranean assets. This occurred last year and in 2023 due to Middle East security tensions.
A shutdown in its small Katlan field is already scheduled this year as part of the wider development of its Israeli hub. This is aimed at reconfiguring the hub to deliver higher, more stable volumes in the medium term.
This is the first of three themes likely to push its earnings growth over time. The higher volumes after the upgrading of the hub will be utilised in long‑term, fixed-price domestic gas contracts. These will give the company a utility‑like revenue visibility.
The second is management’s aim to add a new project in discovered‑but‑undeveloped fields in West Africa by year‑end. The third theme is further exploration and development of existing prospects in Greece, Egypt and Italy. Several of these are located close to existing infrastructure, which would keep development costs and breakeven prices low.
Overall, analysts’ consensus forecasts are that Energean’s earnings will grow by an annual average of 8.2% to end-2028.
How much dividend income potential?
The shares currently yield 9.7%, based on a $1.20 (88p) dividend and the present £9.06 price.
Analysts project that the dividend yield will drop slightly over the 2026/2027 Israeli hub restructuring period — to 10.1%. By 2028 though, the consensus forecast is that it will be back to 10.3%.
By comparison, the current FTSE 250 dividend yield is just 3.5%, and the FTSE 100’s is 3.1%. So, investors considering a £20,000 holding in the firm could make £32,554 in dividends after 10 years and £342,866 after 30 years.
This assumes the 9.7% current and forecast yield, although this could also go down over the period. It also reflects the dividends being reinvested into the stock to harness the power of ‘dividend compounding’.
By that time, the holding could be worth £362,866, which could be paying £35,198 a year in dividend income by that point!
My investment view
I really would like to own this share. I believe its strong forecast earnings growth will power its dividend even higher in the years ahead, and its share price too.
Moreover, the likely strong dividend income would be a welcome boon to my retirement plans.
However, as of now, I already own other stocks in the sector — BP, Shell, and Harbour Energy. Having another would unsettle the risk-reward balance of my portfolio.
So, the best I can do right now is to put it at the top of my wait list should any of these start meaningfully underperforming.
That said, for other investors without this conundrum, I think Energean is well worth considering.
