Day: January 27, 2021

3 small ASX dividend shares with big yields

ASX dividend shares

There are some ASX dividend shares that have big dividend yields.

Some businesses are quite a bit smaller than the biggest companies on the ASX. Shares like Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP) have market capitalisations of more than $100 billion.

These stocks have much smaller capitalisations, but they still have large yields:

Adairs Ltd (ASX: ADH)

Adairs is one of the largest retailers of furniture and homewares in Australia.

Using the market capitalisation from the ASX, it’s valued at $646 million.

The ASX dividend share has a trailing grossed-up dividend yield of 4.3%. In FY21, Commsec has numbers projecting that Adairs will pay an annual dividend of $0.21 per share, equating to a forward grossed-up dividend yield of 8.1%.

In a recent trading update, Adairs said for the first 23 weeks sales had gone up 23.4% with Adairs online sales going up by 99.7%. Online sales made up 39% of total sales, compared to 20% for the same period last year.

In terms of guidance for the FY21 first half, total sales are expected to be in a range of $235 million to $245 million, representing growth of at least 31%.

Pacific Current Group Ltd (ASX: PAC)

Pacific Current is an ASX dividend share that takes strategic stakes in fund managers from around the world. One of its biggest investments is GQG.

Dean Fremder of Perpetual Limited (ASX: PPT) said when Pacific Current shares were a bit lower: “The stock’s really cheap. It is on nine times earnings. It’s growing earnings at double digits, so more than 10% a year. It’s paying a 6.5% fully franked yield. And most excitingly, we think they can pay out a much larger portion of their earnings as dividends. We see no reason, given the surplus franking credits they have on the balance sheet, they can’t be paying a 10 or 11% fully franked yield in the next 12 months. So, really excited about that one.”

In FY20 the company grew its dividend by 40% to $0.35 per share on the back of a 62% increase in the funds under management (FUM).

Looking at the first quarter of FY21, Pacific Current said that its FUM went up by another 14% to $106.4 billion, with the vast majority of the FUM growth during the period coming from GQG. In native currencies, US dollar orientated fund managers saw FUM rise by 19.3%. When converting to Australian dollars, the increase was offset by the significant appreciation of the Australian dollar against the US dollar.

Pacific is also thinking about launching a fund to manage external money and invest that capital into fund managers, where Pacific Current would also have co-investment rights.

At the current Pacific share price, it has a trailing grossed-up dividend yield of 8%.

Pengana Capital Group Ltd (ASX: PCG)

Pengana is an ASX dividend share that operates as a fund manager, it largely looks to provide services to retail investors.

At the end of December 2020, its FUM increased to $3.593 billion, up from $3.523 billion.

The fund manager operates a variety of investment strategies – Australian multi-caps, Australian small caps, global multi-caps, global small caps and global private equity.

Pengana says that it has a sticky and loyal client base of financial advisors, retail and high net worth individuals with more than 20% of FUM in listed vehicles. The benefit of this is that it provides a stable pool of FUM which generates stable management fees.

One of the ways that Pengana plans to grow is overseas expansion. It bought two thirds of Lizard Investors in the US, Pengana plans to help it increase its FUM whilst also transforming Lizard into a platform for managing other strategies.

Pengana management think that eventually Lizard can become the size of the Australian business.

At the current Pengana share price, it has a trailing grossed-up dividend yield of 6.7%.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Here’s why the Field Solutions (ASX:FSG) share price is up 20% today

Two fists connect in a surge of power, indicating strong share price growth or new partnerships for ASC mining and resource companies

The Field Solutions Holdings Limited (ASX: FSG) share price hit a multi-year high today after the company announced a partnership agreement with MyRepublic Australia Pty Ltd.

In late-morning trade, the Field Solutions share price shot up 54% to a high of 7 cents, before retreating to 5.3 cents at the time of writing, up 20.4%.

The telecommunications carrier and technology company provides connectivity for rural, regional and remote areas. It builds fixed wireless networks, employing technologies such as fibre and fixed wireless spectrum.

What’s driving the Field Solutions share price?

The Field Solutions share price is up there among the top ASX performers today after its market update this morning. The company reported that it has signed a non-binding wholesale supply, management and partnership agreement with MyRepublic.

The deal is the culmination of 12 months spent by Field Solutions developing its virtual wholesale broadband (WBA) agreement product. The platform is designed to removed costs of using internet service providers (ISP) or managed service provider (MSP) when delivering nbn services.

In effect, ISP companies such as MyRepublic can pay for backhaul, transit and termination on a per subscriber model, while focusing on driving sales growth. 

Terms of the deal

Under the agreement, Field Solutions will provide National nbn point of interconnect (POI) backhaul, network management and orchestration services. This will also allow the company to expand nationally and into other government and enterprise sectors.

In addition, Field Solutions will resell some of MyRepublic’s nbn products, and vice-versa, with MyRepublic reselling Field Solution’s rural network products.

The contract is valid for a minimum term of 6 years, and is expected to generate around $45 million in revenue. The project is scheduled to begin next month, and will take between 6 to 9 months to complete.

Management commentary

Field Solutions CEO Andrew Roberts welcomed the deal, saying:

FSG’s Virtual WBA is highly scalable and capable of managing nbn’s consumer and business products for multiple ISPs and MSPs. Comprehensive connectivity nationwide to all 121 nbn’s POIs allows us to deliver services in every state, helping to position us for growth opportunities.

MyRepublic’s country manager for Australia, Ji Jing, added:

Given the unique Australian telco landscape, partnering with FSG gives us the opportunity to outsource the network management layer, in turn bolstering operational efficiency and sharpening our customer-centric focus.

FSG’s orchestration platform across nbn products allows us to expand our offerings. We will also be able to leverage FSG’s enterprise and rural networks, delivering business services as well as accelerating our delivery of consumer 1Gbps services. Combining this with our customer experience will enable us to offer a unique product in the market.

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When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

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Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

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Here’s why the Galaxy Resources (ASX:GXY) share price is dropping lower

Falling asx share price represented by man in chinos falling suspended in mid-air

The Galaxy Resources Limited (ASX: GXY) share price is out of form on Thursday and dropping lower.

At one stage today, the lithium miner’s shares were down as much as 6.5% to $2.80.

The Galaxy share price has since recovered a touch and is down 2% to $2.94 this afternoon.

Why is the Galaxy share price dropping lower today?

Investors have been selling Galaxy’s shares today after the market selloff overshadowed a reasonably positive fourth quarter update.

According to the release, Galaxy shipped a record total of 75,336 dry metric tonnes (dmt) of lithium concentrate during the quarter. This brought its full year FY 2020 shipments to 150,630 dmt with an average grade of 5.8%.

Another positive was the company’s quarterly sales, which increased 349% on the prior quarter. This was driven by improved customer demand, improved grades, and stronger prices.

Galaxy’s free on board (FOB) unit cash cost of lithium concentrate produced for the quarter was US$452 per dmt, which is just a touch lower than the price it is commanding at present.

Management advised that this was an 11.3% increase compared to the previous quarter and due predominantly to a 41% increase in material mined, lower recoveries, and shipping costs as sales volumes were greater than production.

At the end of the period, Galaxy’s balance sheet was in a strong position with cash and financial assets of US$215.1 million and no debt.

Outlook

Management spoke positively about the future and revealed that trading conditions are improving rapidly.

It said: “Galaxy is experiencing solid demand for its spodumene as strong global EV sales increases the demand for lithium chemicals through the value chain leading to an increase in utilisation of spodumene converters. As a result, spodumene inventory in China has declined to ~2 months of supply, down from ~ 6 months’ supply for much of 2020. The absence of Altura product in the market is also having an impact on product availability and customer sentiment.”

The company also provided investors with an update on lithium pricing.

“Galaxy has completed contractual arrangements on two shipments with 30,000 tonnes scheduled for February and 15,000 tonnes for March. Pricing has moved significantly to begin the year and currently stands at approximately US$480/dmt CIF.”

“Galaxy’s marketing plans for 2021 are for sales to broadly match production and to continue selling on a spot basis as the market recovery continues,” it concluded.

Finally, management revealed that it is aiming to reduced its FOB costs to US$360 to US$390 per tonne. If lithium prices continue to rise this year, this should put Galaxy in a position to deliver a solid profit in FY 2021.

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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. 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 Bruce Jackson.

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Why the Cann (ASX:CAN) share price is sinking lower today

Red and white arrows showing share price drop

The Cann Group Ltd (ASX: CAN) share price is out of form and sinking lower on Thursday.

In afternoon trade, the cannabis company’s shares are down 3% to 62 cents.

Why is the Cann Group share price dropping lower?

The Cann share price has come under pressure today following the release of an underwhelming second quarter update.

According to the release, Cann recorded quarterly cash receipts from customers of just $99,000 for the three months

However, management advised that it is expecting its revenues to increase in the currently quarter due to sales contracts and purchase orders that are anticipated to ship to customers pending regulatory approvals.

This includes a shipment of 1,400 units to LYPHE Group to be used in support of Europe’s largest medicinal cannabis registry, Project Twenty21.

Thanks to a $645,000 or ~10% reduction in operating costs from the previous quarter, due mainly to lower production charges, Cann reported an operating cash outflow of $5.3 million.

This left Cann with a cash balance of $27.7 million. It also has a $50 million bank debt facility from National Australia Bank Ltd (ASX: NAB) to support the construction of its state-of-the-art medicinal cannabis production site near Mildura.

Mildura facility update

The release explains that Cann continues to work toward mobilising construction in Mildura, with site activities scheduled to begin in late February.

The company remains committed to using as many Australian workers as possible but there are some specialist roles required from overseas.

As a result, COVID travel restrictions and availability of flights continue to have some impact on the timing associated with this activity. Management is reviewing several alternative plans that will enable work to get underway at full pace.

Outlook

Management advised that customers are placing orders and indicating continued growth in demand in their various markets.

A much stronger second half is expected, with FY 2021’s projected sales revenues heavily weighted to the second half of the financial year. As mentioned above, this is due to the requirement for certain regulatory clearances to be finalised. Management is continuing to work with authorities in Australia and elsewhere to expedite those clearances.

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Returns as of 6th October 2020

More reading

Motley Fool contributor James Mickleboro 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 Bruce Jackson.

The post Why the Cann (ASX:CAN) share price is sinking lower today appeared first on The Motley Fool Australia.

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