Why Macquarie expects this dividend paying ASX 300 stock to leap 19%

The S&P/ASX 300 Index (ASX: XKO) stock, Bega Cheese Ltd (ASX: BGA), is marching higher today.

Bega Cheese shares closed yesterday, trading for $5.69. In early afternoon trade on Wednesday, shares are changing hands for $5.74, up 0.9%.

For some context, the ASX 300 is up 0.2% at this same time.

Taking a step back, Bega Cheese has also modestly outperformed over the past year, with shares up 8.4% compared to the 7.3% one-year gains delivered by the index.

Atop those capital gains, the ASX 300 stock also offers a 2.1% fully franked dividend yield.

And looking to the year ahead, the team at Macquarie Group Ltd (ASX: MQG) expects investors will see both higher dividends and a significantly higher share price from Bega Cheese.

Here's why.

ASX 300 stock tipped to outperform

At the company's annual general meeting (AGM), held on 27 October, Bega Cheese CEO Pete Findlay noted, "Dairy continues to be a powerful vehicle for delivering daily health and wellness outcomes, and we are well-positioned to lead in that space."

Running the numbers on the ASX 300 stock in a new report released today, Macquarie highlighted the growth potential for dairy snacking products.

According to the broker:

Health/wellness trends are driving a high-single to low-double-digit sales CAGR globally in sub-categories, including high protein; no/low sugar; gut health; energy. In AU, dairy snacking products – particularly yoghurt – are delivering double-digit unit growth, with consumers preferring 'better-for-you' options over traditional snacking categories such as confectionery and soft drinks (low- to mid-single-digit unit growth).

Snacking in AU is under-penetrated in the morning daypart, rel. to global benchmarks (US and EU). Yoghurt & milk-based beverages (MBB) well placed to benefit from greater morning daypart snacking, driven by NPD through BGA's fast second-mover advantage.

Macquarie also noted the benefits of Bega Cheese's high market share when it comes to gaining the required shelf space and promotional campaigns with major customers, including supermarkets and convenience store operators.

On the earnings outlook, the ASX 300 stock is targeting significant growth.

According to Bega Cheese's Findlay:

We believe we are on track to exceed our EBITDA [earnings before interest taxes, depreciation and amortisation] target of $250 million by FY 2028. We are pleased to provide guidance for FY 2026 with a normalised EBITDA range of $215 million to $220 million, further evidence of our strategic momentum and delivery capability.

Macquarie said it is "gaining comfort" in Bega Cheese's revenue outlook.

"With BGA's key categories in a growing TAM, we believe this should give the market increasing confidence in BGA's ability to deliver sustained sales growth and exceed $250m+ in EBITDA by FY28E (MQe & VA cons ~$260m)," the broker said.

Connecting the dots, Macquarie raised its 12-month target price on the ASX 300 stock to $6.80 a share (up from the prior $6.60 a share).

That represents a potential upside of 18.5% from current levels. And it doesn't include those upcoming dividends.

The post Why Macquarie expects this dividend paying ASX 300 stock to leap 19% appeared first on The Motley Fool Australia.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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