S&P/ASX 300 Index (ASX: XKO) dividend share Propel Funeral Partners Ltd (ASX: PFP) looks well-placed for some strong outperformance over the year ahead.

That's according to the latest research report from Macquarie Group Ltd (ASX: MQG), released earlier today.

Shares in the death care services provider are up 1.5% in afternoon trade today, changing hands for $4.85 apiece.

Despite that lift, Propel Funeral shares remain down 12.6% over the past 12 months. Though those losses will have been somewhat lessened by the 14.6 cents per share in fully franked dividends the company paid out over the year.

At the current share price, that sees the ASX 300 dividend share trading on a fully franked 3.0% trailing yield.

Atop from the passive income on offer, Macquarie also expects Propel Funeral to deliver some outsized capital gains.

Today, the broker retained its outperform rating on the stock with a 12-month price target of $6.65 per share. That represents a potential gain of 37.1% from current levels.

Here's why Macquarie has a bullish outlook for the funeral company.

Why this ASX 300 dividend share could surge higher

Propel Funeral Partners shares came under heavy selling pressure following the release of the company's half-year results on 24 February, with shares down 16.2% since that time.

The sell-off came despite the ASX 300 dividend share increasing its interim dividend by 2.8% amid a 21.1% year-on-year increase in net profit after tax (NPAT) of $12.2 million.

In other core financial metrics, six-month revenue of $115.2 million was up 12.0% year on year, while operating earnings before interest, taxes, depreciation and amortisation (EBITDA) of $29.9 million were up 9.2%.

Macquarie said it believes "the recent sell-off has been aggressive".

The broker noted, "Long-term fundamentals remain attractive, with M&A continuing to represent material earnings upside".

As for those mergers and acquisitions, Macquarie noted:

In FY24, PFP deployed ~$104m into acquisitions, but in FY25 has only deployed ~$13m, below its ~$30-40m pa track record. Its acquisition pipeline is healthy, and significant opportunity remains for further inorganic growth, although timing remains uncertain.

We expect PFP to be a preferred acquirer given its: 1) scale; 2) lack of competition issues (~10% market share vs IVC >20%); and 3) decentralised model. PFP currently has $144m funding capacity.

Macquarie said it views the ASX 300 dividend share "as a buying opportunity".

The broker noted that Propel Funeral Partners shares currently trade at 13 times enterprise value/EBITDA, based on earnings forecasts for the next 12 months.