Day: 28 August 2021

The National Australia Bank Ltd (ASX: NAB) share price has been a strong performer over the last six months.

Since this time in February, the banking giant’s shares have risen 10%.

This means the NAB share price is now up 20% since the start of the year.

Why is the NAB share price up 10% in six months?

There have been a few catalysts for the strong gain by the NAB share price over the last six months.

One of those has been its much-improved performance in FY 2021. This led to the bank reporting a strong half year result and then an equally strong third quarter update earlier this month.

In respect to the latter, for the three months ended 30 June, NAB revealed an unaudited statutory net profit of $1.65 billion and unaudited cash earnings of $1.70 billion.

Although this was modestly ahead of the average quarterly profit and cash earnings that it achieved during the first half of the financial year, it exceeded the market’s expectations.

In response to the release, Goldman Sachs revealed that NAB was trading well-ahead of its second half estimates.

It commented: “NAB has released its 3Q21 trading update, with unaudited cash earnings from continuing operations of A$1.70 bn, up 1% on the previous period average, run-rating 11% ahead of what is implied by our current 2H21E forecasts.”

What else?

Also giving the NAB share price a boost was news that it has agreed to acquire Citigroup’s Australian consumer business.

The proposed acquisition includes a home lending portfolio, unsecured lending business, retail deposits business, and private wealth management business. It will add deposits of $9 billion and lending assets of approximately $12.2 billion. The latter comprises residential mortgages of approximately $7.9 billion and unsecured lending of approximately $4.3 billion.

Goldman was also pleased with this and sees the acquisition as a good way to deploy its excess capital.

The broker explained: “We see strategic merit in the transaction, which would contribute to an improvement in the returns drag NAB has suffered vs. peers from being underweight Consumer Banking and having a Consumer Bank that relatively under-earns, given a lower exposure to unsecured lending. We calculate that the transaction would result in a c. 1.5% better EPS outcome than if the equivalent capital was bought back on-market.”

Is it too late to invest?

As you might have guessed from Goldman Sachs’ positive comments, it still sees value in the NAB share price.

Goldman recently retained its conviction buy rating and lifted its price target to $30.62. Based on the current NAB share price of $27.64, this implies potential upside of ~11% over the next 12 months before dividends. Including dividends, the potential return stretches to approximately 16%.

This could mean NAB’s share price gains are still not over in 2021.

The post The NAB (ASX:NAB) share price has gained 10% in the last 6 months appeared first on The Motley Fool Australia.

More reading

• NAB (ASX:NAB) fined $18.5m for misleading customers, shares slump
• How is the NAB (ASX:NAB) share price performing against the banking sector?
• Top broker names 2 ASX dividend shares to buy
• What’s moving the ASX 200 Index (ASX:XJO) on Monday?
• ASX 200 Weekly Wrap: Miners drag ASX back to earth

Motley Fool contributor James Mickleboro 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 Bruce Jackson.

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The sudden collapse of iron ore prices sent the Fortescue Metals Group Limited (ASX: FMG) share price into free fall, down almost 20% in August to a 5 month low of $20.02.

Iron ore prices have rapidly deteriorated from record highs of ~US$230/t to around US$150/t after China pledged to reduce its 2021 steel output in an effort to curb carbon emissions.

Steel producers in major industrial provinces including Anhui, Gansu, Fujian, Jiangsu, Jiangxi, Shandong, and Yunnan were told to limit their production to 2020 volumes.

Iron ore markets have managed to find some support this week on steel demand optimism.

Bloomberg reported that China’s central bank chief viewed to “stabilise the supply of credit and boost the amount of money supporting smaller businesses and the real economy, after both credit and economic growth slowed in July”.

The prospect of accommodative policies might be why the Fortescue share price has managed to find some support around 5-month lows this week.

But looking ahead, analysts think there could be more pain for iron ore prices.

A bleak outlook for iron ore

According to an article featured on Mining.com, analysts Erik Hedbord and Richard Lu at commodities consultancy CRU Group said a further drop in iron ore prices is possible.

“CRU forecasts iron ore prices to decline further towards the end of the year, as we see a more balanced market with Chinese demand likely to stabilise for the rest of the year, while seaborne supply continues to improve,”.

Alongside stabilising demand from China, shipment volumes from iron ore producers in Australia typically improve in the fourth quarter, according to CRU analysts.

Fortescue share price snapshot

The Fortescue share price has tumbled well into negative territory, down 19.5% year-to-date.

The company is expected to release its FY21 full year results on Monday, 30 August.

The post Fortescue (ASX:FMG) share price tumbles in August, analysts see further declines in iron ore appeared first on The Motley Fool Australia.

More reading

• August hasn’t been a great month for the Fortescue (ASX:FMG) share price
• These 3 ASX 200 shares were the most heavily traded on Monday
• Pilbara Minerals (ASX:PLS) share price bounces back, up 8% on Monday
• Just how dependent is Fortescue Metals (ASX:FMG) on China?
• ASX 200 Weekly Wrap: Miners drag ASX back to earth

Motley Fool contributor Kerry Sun 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 Bruce Jackson.

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With interest rates likely to remain low for some time to come, the yields on the ASX dividend shares listed below could be even more attractive than normal for income investors.

Here’s what you need to know about these dividend shares that a leading broker has rated as buys:

Adairs Ltd (ASX: ADH)

The first ASX dividend share to look at is Adairs. It is a leading retailer of homewares and home furnishings in Australia and New Zealand through both retail stores and online channels.

It has been in fine form in FY 2021 thanks to heightened sales during the pandemic. This led to the company recently reporting a 28.5% increase in sales to $499.8 million. And thanks to margin expansion, Adairs’ underlying earnings before interest and tax (EBIT) almost doubled to $109.1 million. This allowed Adairs to increase its dividend to 23 cents per share.

And while it will be very hard for Adairs to outperform this in FY 2022, it has started the year strongly.

The team at Morgans are positive on the company. Last week the broker upgraded its shares to an add rating with a $4.20 price target. Morgans is also forecasting fully franked dividends per share of 22 cents in FY 2022 and 27 cents in FY 2023.

Based on the current Adairs share price of $3.73, this will mean yields of 5.9% and 7.2%, respectively.

Coles Group Ltd (ASX: COL)

This supermarket giant could be a dividend share to consider buying. Coles has just handed in a solid full year result for FY 2021.

For the 12 months ended 30 June, the company reported sales revenue growth of 3.1% to $38,562 million and net profit after tax growth of 7.5% to $1,005 million. The latter was a touch ahead of the market’s expectations. This allowed Coles to increase its full year dividend by 6% to a fully franked 61 cents per share.

Morgans is also feel bullish about Coles. In response to its full year results, the broker retained its add rating and lifted its price target to $19.80. It is now forecasting dividends of 61 cents per share in FY 2022 and then 62 cents per share in FY 2023.

Based on the current Coles share price of $17.89, this represents yields of 3.4% and 3.5%, respectively.

The post 2 excellent ASX dividend shares analysts rate as buys appeared first on The Motley Fool Australia.

More reading

• Why is the Coles (ASX:COL) share price down 5% this week?
• How does the Woolworths (ASX:WOW) earnings result compare to Coles (ASX:COL)?
• Coles (ASX:COL) share price slides amid $1.3 billion sustainability refinancing
• Telstra (ASX:TLS) and this dividend share have been named as buys
• Why the Coles (ASX:COL) share price has underperformed the ASX 200 in the last year

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ADAIRS FPO. The Motley Fool Australia owns shares of and has recommended ADAIRS FPO and COLESGROUP DEF SET. 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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The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has risen by around 6% over the last six months.

Could there be more on the way?

ANZ’s most recent result

For the first half of the 2021 calendar year, Australia was almost entirely COVID-19 free. The economy was recovering and ANZ was reporting a resurgence of profit.

In the first six months of ANZ’s 2021 financial year to 31 March 2021, the big four ASX bank generated $2.94 billion of statutory profit after tax, which was an increase of 45% compared to the second half of FY20. Continuing operations cash profit increased 28% to $2.99 billion.

However, underlying profit (excluding credit impairment, tax and large items) fell 4% to $4.87 billion.

ANZ noted that improving credit conditions resulted in a release of almost $500 million during the half. While the pandemic hasn’t resulted in large credit losses to date, it still has almost $4.3 billion in reserve if conditions get worse.

Management said that lower revenue in its institutional business were largely expected due to the impact of falling interest rates as well as the normalisation of its market revenue after an exceptionally strong 2020.

The recovery of the headline profit allowed the ANZ board to increase the half-year dividend from $0.35 to $0.70 per share.

The ANZ share price fell 3.5% in the week after the release of this result.

Capital management

ANZ revealed in July 2021 that it intended to buy back up to $1.5 billion of shares on market as part of its capital management plan.

The ANZ Chair Paul O’Sullivan said:

Despite the very real challenges being experienced by many of our customers, we have the financial strength to continue to support our customers, while also returning surplus capital to shareholders. After reviewing options, we consider an on-market buy-back to be the most prudent, fairest and flexible method to return capital in the current environment.

Our capital position may allow future capital returns to be considered, however we will continue to focus on balanced and prudent outcomes for all stakeholders.

Is the ANZ share price worth looking at?

Morgans says that ANZ is a buy, with a price target of $34.50. That suggests the bank could rise by more than 20% over the next 12 months if the broker is right. The broker thinks there could be more capital returns to shareholders in time.

However, Morgan Stanley only thinks that ANZ shares are a hold with a price target of $28 whilst noting that the bank’s capital position was a lot stronger. On Morgan Stanley’s numbers, ANZ is valued at 15x FY22’s estimated earnings.

The post The ANZ share price has gained 6% in the last 6 months appeared first on The Motley Fool Australia.

More reading

• 2 buy-rated ASX dividend shares for income investors
• ANZ (ASX:ANZ) share buyback, what does it mean for you?
• Is the ANZ (ASX:ANZ) share price a buy right now?
• Here’s what has been moving the ANZ (ASX:ANZ) share price in August 2021
• What’s moving the ASX 200 Index (ASX:XJO) on Monday?

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 Bruce Jackson.

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