An ASX energy stock with a double digit dividend yield, bucking the industry trend
Since February 2024, Cue Energy has paid out approximately 40% of its market cap as a dividend, while maintaining a steady share price.
Source: iStock
Mentioned
KEY POINTS
- The S&P/ASX 200 Energy Index fell as much as 20% between April 2-7, after Trump's 'Liberation Day' announcement, while Cue Energy’s shares declined only 6%
- Since February 2024, Cue has returned $28 million or ~40% of its $70 million market cap, to shareholders through dividends, with its share price remaining stable at around 10 cents
- In the first half of FY25, 32% of Cue's revenue came from gas sales under fixed-priced contracts, protecting the company from oil price volatility
- With a debt-free balance sheet and $11.1 million in cash as of March 2025, Cue is well-positioned to sustain its dividend policy and pursue future growth opportunities
Despite its modest $70 million market cap, Cue Energy (ASX: CUE) has emerged as one of the most resilient energy stocks during the recent oil price selloff. As an oil and gas production and exploration company with assets in Australia, Indonesia, and New Zealand, Cue has showcased remarkable stability compared to larger peers.
President Trump’s April 3, 2025, "Liberation Day" announcement triggered a sharp decline in oil prices, with Brent crude falling up to 20% in the following five days, briefly dipping below the key US$60 per barrel mark to its lowest level since April 2021.
While major players like Woodside and Beach Energy saw their stock prices drop by as much 20%, Cue experienced a mere 6% drawdown and is now trading slightly higher for the year.
Brent crude (black) vs. Woodside (red), Beach Energy (yellow), Karoon (green) and Cue Energy (blue) | Source: TradingView
If you zoom further out, over the past twelve months, Cue is trading 4.7% lower vs. Karoon (-16%), Brent crude (-22%), Woodside (-23.5%) and Beach Energy (-24.0%).
To understand what makes Cue Energy a resilient and high-yielding stock, I spoke with CEO Matthew Boyall for a deeper dive into the company’s strategy and outlook.
Growing production and revenues
"We had been successfully building our baseline production and revenue for several years leading up to FY24," said Boyall.
Source: Cue Energy
The recent growth has been underpinned by revenue generation from a fourth asset located Onshore Australia (Mereenie, Palm Valley and Dingo fields) as well as increased cash flows from Indonesian oil and gas assets.
A special dividend
Despite strong and stable growth throughout FY23 and FY24, Boyall felt that Cue was being undervalued and overlooked on the ASX.
"In February 2024, the decision was made to return cash to shareholders via an initial special dividend of 2 cents per share and established an ongoing dividend policy," he said.
The dividend announcement drove Cue shares 50% higher on the day (29-Feb-24) to 10 cents, equating to an approximate 20% yield for the special dividend. With a cash balance of $23.2 million at the end of December 2023, the $14 million dividend payout was well-supported without compromising the company’s ability to maintain and grow its asset base.
The dividend announcement also significantly boosted the stock’s liquidity. Prior to the announcement, Cue’s 20-day average trading volume was around 100,000 shares, spiking to 2–3 million shares in the days following and stabilising at 300–400,000 shares today.
Dividend outlook
"The Cue dividend policy does not specify a payout ratio but commits to reviewing the financial position of the company, every 6 months when determining an appropriate dividend payment," he said.
Since the initial 2 cent dividend in February 2024, Cue has paid out a further:
1 cent per share ($7 million) in September 2024
1 cent per share ($7 million) in March 2025
This means that in an almost 13 month span, the company has yielded approximately 40%. As of the March 2025 quarterly report, Cue maintains a healthy $11.1 million cash balance with no debt, and its share price remains steady at around 10 cents.
Impact of low oil prices
Cue’s resilience stems from its diversified portfolio, which balances commodity price upside with protection against downturns, according to Boyall.
In the first half of FY25, 32% of Cue’s revenue came from gas sales under fixed-price contracts from its Mereenie, Palm Valley, and Dingo fields in Australia and Sampang in Indonesia, shielding the company from oil price volatility.
Recent contract renewals for Mereenie and Palm Valley, effective from January 2025, have secured higher prices, further increasing the proportion of gas revenue. Additionally, a pending Final Investment Decision (FID) on the Paus Biru gas development in Indonesia is expected to be funded through cash flow, and be capital efficient due to the cost recovery mechanism under the Production Sharing Contract (PSC) that repays capital expenditure through a larger share of field profits.
Growth plans
Boyall says the company's growth strategy focuses on maximising value from its existing assets, while pursuing selective new opportunities.
The company is actively drilling development wells in the Mahato PSC, with three wells remaining in the current plan. Recent drilling of two highly successful wells in the Mereenie gas field Onshore Northern Territory has delivered gas production rates exceeding expectations. The pending Paus Biru development could add new gas production in 2027.
Beyond existing assets, Cue is exploring opportunities in familiar operating regions, applying strict investment criteria to ensure new projects enhance its portfolio.
The bottom line
Cue has demonstrated a remarkable level of resilience and shareholder returns amid volatile energy prices, with its share price remaining largely stable over the past year while peer have broadly traded lower.
