1 ASX dividend stock down 44% I think is a bargain buy

This income stock could be far too cheap, in my opinion.

| More on:
Modern accountant woman in a light business suit in modern green office with documents and laptop.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The ASX dividend stock Spark New Zealand Ltd (ASX: SPK) has declined more than 40% since February 2024. As the chart below shows, the ASX telco share has been in a large and steady decline.

Created with Highcharts 11.4.3Spark New Zealand PriceZoom1M3M6MYTD1Y5Y10YALL1 Feb 202415 Oct 2024Zoom ▾Feb '24Mar '24Apr '24May '24Jun '24Jul '24Aug '24Sep '24Oct '24Mar '24Mar '24May '24May '24Jul '24Jul '24Sep '24Sep '24www.fool.com.au

It is one of New Zealand's biggest telecommunication businesses, providing fixed-line and mobile telephone services, broadband, and digital technology services.

The company's recent FY24 result did not help investors feel more confident about the outlook. However, it still demonstrated its passive income credentials, which may attract investors to the company at this lower price.

FY24 earnings recap for ASX dividend stock

The ASX dividend stock reported that its revenue declined 1.2% to $3.86 billion. It also said that reported net profit declined 72.2% to $316 million as a result of 'cycling' the Towerco and Spark Sport transactions in the prior corresponding period, as well as lower operating profit, higher finance expenses and depreciation, and a one-off $26 million tax adjustment relating to recent government policy changes.

Adjusted net profit, excluding one-off items in both years, declined 21% to $342 million.

Broadband revenue declined 2.1% to $613 million, total IT revenue dropped 1.6% to $692 million, mobile service revenue increased 3.1% to $1 billion, and data centre revenue increased 54.2% to $37 million.

Spark said it had been a "tough year", but its business fundamentals "remain strong", and it's focused on earnings growth in FY25.

It also said that its "leadership in the growing mobile market will support future top-line growth as demand for data continues to grow", and annual price reviews can help grow revenue, too.  

Spark then pointed out that the New Zealand data centre market is predicted to grow from around 90MW today to around 500MW by 2030, driven by the acceleration of generative AI and ongoing business migration to the cloud. It has a development pipeline of 118MW, with three strategic Auckland locations "primed for investment" and the ASX dividend stock is "well positioned to capture a significant share of this growth".

The future is more important than the past for Spark, so let's look at what the company said in relation to the next financial year.

FY25 outlook

The company gave the following FY25 guidance, assuming there are no adverse changes in its operating outlook.

Spark said the operating profit (EBITDAI) would be between $1.16 billion and $1.22 billion, compared to $1.16 billion in FY24.

Capital expenditure is predicted to be between approximately $460 million to $480 million.

Spark is expecting to pay a total dividend per share of 27.5 cents per share in FY25, the same as FY24. At the current Spark share price, that represents a potential forward dividend yield of 10% in Australian dollar terms.

As a defensive business with compelling growth potential, this is an attractive option for ASX dividend stock-focused investors, in my opinion.

Should you invest $1,000 in Telstra Corporation Limited right now?

Before you buy Telstra Corporation Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Telstra Corporation Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

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.

More on Dividend Investing

Gold bars and Australian dollar notes.
Dividend Investing

How these soaring ASX 200 stocks are shaping up to be the dividend gems of 2026

With revenue surging, these ASX 200 stocks may be supersizing their dividends in 2026.

Read more »

Australian notes and coins symbolising dividends.
Industrials Shares

ASX 200 dividend stock reveals next quarterly passive income payout

The ASX 200 dividend stock announced its quarterly results and latest passive income payout.

Read more »

Animation of a man measuring a percentage sign, symbolising rising interest rates.
Dividend Investing

Forget term deposits and buy these ASX dividend stocks in May

Interest rates could be heading lower so consider these shares that analysts rate as buys instead.

Read more »

Two pink pillar candles lit and shown with a pink background, indicating rosy news for the Dusk share price.
Dividend Investing

This ASX dividend share is expected to pay a 15% yield in 2026!

This small business is predicted to pay a huge yield.

Read more »

A woman presenting company news to investors looks back at the camera and smiles.
Dividend Investing

Analysts rate these top ASX dividend shares as buys this month

Income investors might want to check out these buy-rated shares.

Read more »

Man holding fifty Australian Dollar banknote in his hands, symbolising dividends, symbolising dividends.
Dividend Investing

Want $5,000 a year in ASX dividends? Here's how to build towards it

Here are three steps to take if you want to generate an income from the share market.

Read more »

Beautiful young couple enjoying in shopping, symbolising passive income.
Dividend Investing

3 ASX dividend stocks perfect for passive income portfolios

Analysts are bullish on these income stocks. Let's see what they are recommending.

Read more »

Woman with headphones on relaxing and looking at her phone happily.
Dividend Investing

This is the number one factor I look for when buying ASX dividend shares

I love looking for passive income stocks.

Read more »