Day: December 27, 2021

Is the ANZ (ASX:ANZ) share price a buy with its 8% dividend yield?

a hand places the number five on top of a pile of ascending wooden blocks, numbered 1 to 4 respectively. The number 5 pile is the tallest.

Could the Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price be a buy with its high dividend yield?

As one of the big four ASX banks, being ANZ, Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB), ANZ is one of the biggest businesses in Australia.

The big four banks typically have lower price/earnings (p/e) ratios and higher dividend payout ratios compared to plenty of other industries. This combination of factors leads to banks usually having quite a high grossed-up dividend yield, which includes the franking credits.

What is the dividend yield expected to be?

Every analyst has different thoughts for what dividends ANZ is going to pay over the next year or two.

For example, in FY22 the broker Morgans thinks that the big bank is going to have a grossed-up dividend yield of 7.6%. Then, in FY23, that dividend yield is expected to grow to 8.5%.

But the brokers at Macquarie Group Ltd (ASX: MQG) don’t think the dividend is going to be quite as big. Analysts there think that ANZ is going to pay a grossed-up dividend yield of 7.5% in FY22 and then 7.6% in FY23.

Other brokers have different estimates too.

How do those estimates compare against the ANZ dividend yield for the last 12 months?

In the past year, ANZ has paid shareholders a grossed-up dividend yield of 7.4%.

Both brokers are expecting the big four bank to grow its dividend in FY22 and also in the following year in FY23.

What is the ANZ share price valuation?

As mentioned, banks typically trade on quite low price/earnings ratios.

According to Macquarie, ANZ shares are valued at 14x FY22’s estimated earnings.

Morgans’ profit forecast puts the ANZ share price at 12x FY22’s estimated earnings.

ANZ suffered a large profit hit during FY20 as the full impact of COVID-19 effects were felt on the business.

However, FY21 was a year of rebuilding the headline profit.

FY21 continuing operations cash profit increased by 65% to $6.2 billion. However, profit before credit impairments and tax was flat at $8.4 billion. Excluding large/notable items on top of that, profit actually dropped 6% to $9.5 billion in FY21.

However, the bank’s leadership recently admitted that the bank has been too slow in processing mortgage applications which led to ANZ losing market share.

The big four bank said that it took urgent action to fix those processing issues by materially increasing its assessment capacity as well as simplifying and automating processes.

Whilst it’s still “early days” with these changes and there is much to do, ANZ said it is seeing improvements in its processing times and a modest return to balance sheet growth.

Is the ANZ share price a buy?

The two brokers mentioned above – Morgans and Macquarie – both think that ANZ is a buy, with price targets that are approximately 10% higher than where it is today.

However, there are quite a few other analysts out there – such as the ones at Credit Suisse and Citi – that think that ANZ is only a hold/neutral at this stage.

The post Is the ANZ (ASX:ANZ) share price a buy with its 8% dividend yield? appeared first on The Motley Fool Australia.

Should you invest $1,000 in ANZ right now?

Before you consider ANZ, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and ANZ wasn’t one of them.

The online investing service he’s run for nearly 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 are better buys.

*Returns as of August 16th 2021

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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 recommended Macquarie Group Limited. 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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2 ASX dividend shares that could be buys with yields above 5%

Older woman looks concerned as she counts cash notes

There are some ASX dividend shares that have income yields of more than 5%.

Not every business that pays a dividend has large yield.

But some options have impressive yields that can boost investor income quite noticeably:

Charter Hall Long WALE REIT (ASX: CLW)

This real estate investment trust (REIT) owns a diversified portfolio of property assets across a number of sectors including: office buildings, retail, agri-logistics, telecommunication exchanges, service stations, distribution centres and Bunnings properties.

Whilst the portfolio is diversified, there is one thing that links them altogether – they have long rental agreements, providing income visibility and security for investors.

Its biggest four tenants are: government, Telstra Corporation Ltd (ASX: TLS), BP and Endeavour Group Ltd (ASX: EDV).

As noted by the REIT itself, all of its leases have annual rent increased, providing attractive income growth. Around 39% of leases have income growth linked to CPI inflation, with the remaining 61% have fixed annual increases that average 3.1%, providing in-built growth across the portfolio.

At the AGM it said that the ASX dividend share’s portfolio of 550 properties had an occupancy rate of 98.4% with a weighted average lease expiry (WALE) of 12.6 years, with 99% of properties being located in metropolitan locations.

Management said that it has a highly resilient tenant customer base, with 100% of rent received during COVID.

Charter Hall Long WALE REIT recently announced an increase in valuation of $529 million, representing an 8.1% uplift on prior book values to around $7 billion at 31 December 2021. That increased the estimated per forma net tangible assets (NTA) per security to $5.85 – a 14% increase.

It also aims for a 100% payout of rental profit each year.

Citi currently rates it as a buy, with a price target of $5.59. It’s expecting the business to pay a distribution yield of 6% in FY22 and 6.2% in FY23.

Metcash Limited (ASX: MTS)

Metcash is a business that generates earnings from its hardware businesses of Mitre 10, Home Timber & Hardware and Total Tools. It also makes money by supplying various supermarket and liquor businesses including Cellarbrations, The Bottle-O, IGA Liquor, Duncans, Thirsty Camel, Big Bargain, IGA and Foodland.

The business is now targeting a dividend payout ratio of around 70% of underlying profit. This led to Metcash increasing its interim dividend by 31% to 10.5 cents per share.

The ASX dividend share continues to see sales growth, as well as working on initiatives to improve margins.

In the first five weeks of the second half of FY22, food sales were up 2.3% year on year, liquor sales were up 7.6% and total hardware sales were up another 20.1%.

It’s currently rated as a buy by Credit Suisse, with a price target of $4.55. The broker is expecting Metcash to pay a grossed-up dividend yield of 7% in FY22.

The post 2 ASX dividend shares that could be buys with yields above 5% appeared first on The Motley Fool Australia.

Should you invest $1,000 in Metcash right now?

Before you consider Metcash, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Metcash wasn’t one of them.

The online investing service he’s run for nearly 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 are better buys.

*Returns as of August 16th 2021

More reading

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 owns and has recommended Telstra Corporation Limited. 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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