Month: May 2022

The A2 Milk Company Ltd (ASX: A2M) share price has been on a tumultuous ride these past 12 months, sliding 17% in that time.

Downward trends have prevailed this year to date as well with the dairy nutrition company’s shares down by 19%.

But one broker is taking a glass-half-full approach to the future of A2 Milk.

Broker weighs in on A2 Milk share price

Purveyors of infant formula in the US have been biting their nails since February after one of the largest domestic manufacturers made large recalls on its product line.

Abbott Laboratories was forced to immediately shut a manufacturing facility after it discovered bacteria on the site, while simultaneously recalling shelved product and inventory from the market.

The result has been a dramatic wind back in the domestic production of infant formula in the US, resulting in a dislocation between demand and supply.

For these reasons analysts at investment bank Citi are flagging a potential entry into the US market for A2 Milk – something the company has been trying to secure for years.

Previously, Citi says, the US infant formula market has been ring-fenced from outside entrants such as A2 Milk, but that could all be set to change amid the latest challenges.

In a recent note, Citi analysts covered both BUBS Australia Ltd (ASX: BUB) and A2 Milk and reckon both are well positioned to take on a US entry.

As a result, the investment bank revised its targets upwards for the A2 Milk share price, lifting its rating from a sell to neutral in the process.

With that, it values the company at $4.64 per share, well behind the consensus price target of $5.83 apiece, according to Bloomberg data.

From this list of analysts, per Bloomberg, roughly 27% say to buy A2 Milk, whereas 60% say it’s a hold right now. The remaining coverage urges clients to sell their positions in the company.

At the time of writing, the A2 Milk share price is down 0.68% today at $4.38.

The post Low on milk? Fear not, here’s why Citi is bullish on the A2 Milk share price appeared first on The Motley Fool Australia.

More reading

• These 3 ASX shares have plunged this year: Expert reveals what to do
• Can A2 Milk shares benefit from the US baby formula shortage?
• A2 Milk share price wavers amid class action news
• Why is the A2 Milk share price falling today?
• Why A2 Milk, Gold Road, GrainCorp, and Monash IVF shares are dropping

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Zach Bristow 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 A2 Milk and BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Champion Iron Ltd (ASX: CIA) share price has dropped into the red on Thursday.

In morning trade, the iron ore miner’s shares are down 3% to $7.51 following the release of its full-year results.

Champion Iron share price falls on FY 2022 results release

• Revenue up 14% year on year to C$1,460.8 million
• Earnings before interest, tax, depreciation and amortisation (EBITDA) up 13% to C$925.8 million
• Net income up 12.5% to C$522.6 million
• Cash on hand and restricted cash of C$396.4 million

What happened in FY 2022?

For the 12 months ended 31 March, Champion Iron delivered a 14% increase in revenue to C$1,460.8 million and a 13% lift in EBITDA to C$925.8 million.

This was driven by a 14% increase in net average realised iron ore price to C$190.9 per dry metric tonne, which more than offset a small production decline and higher costs.

The company’s production of high-grade 66.2% iron ore fell 1.1% to 7,907,300 wmt during the 12 months, whereas its cash costs rose 8.7% to C$58.9 per dmt.

Champion’s CEO, David Cataford, was pleased with the company’s performance during the 12 months. He said:

Delivering robust operational and financial results for our 2022 fiscal year, while completing our Phase II expansion project is a significant achievement highlighting our team’s professionalism and perseverance.

This year we will work to double Bloom Lake’s nameplate capacity and further position our Company’s contributions towards green steelmaking solutions. In addition to ongoing feasibility studies for our DR pellet feed project and the Kami Project, we also partnered with a global leader in the steel industry, in order to evaluate the opportunity to re-commission our recently acquired Pellet Plant in Pointe-Noire and produce DR pellets.

How does this compare to expectations?

According to a note out of Goldman Sachs, it was expecting Champion to report revenue of C$1,466 million and EBITDA of C$924 million. This means the company has fallen short on revenue but beaten on earnings.

In light of this, the pullback in the Champion Iron share price is likely to have been driven more from sector weakness rather than these results. A number of iron ore miners are also trading notably lower today.

The post Champion Iron share price falls on FY22 results appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday

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 Scott Phillips.

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It isn’t easy to decide which horse to back during these volatile times, but top broker UBS has just added two ASX 200 shares to its ‘best ideas’ list.

The list reflects its most preferred and least preferred ASX shares for the next 12 months. The names on the list take into account UBS analysts’ views of individual shares and a macro view of the sectors.

Geopolitical conflict, runaway inflation, supply chain chokes, and rising interest rates are some of the many factors hanging over equities today.

Stagflation risk casts a long shadow

The bad news is that UBS believes the risk of stagflation is increasing. This is when inflation is high but economic growth is low to non-existent.

Such an outcome would be terrible news for ASX 200 shares. But there are some that are well placed to outperform.

In fact, UBS reckons a handful of ASX companies can even deliver solid earnings growth in such an environment.

Why some ASX 200 shares can thrive in the volatility

There are four themes that the broker is expecting. The first is a persistently tight global commodities market. Prices of metals to food have been surging higher and there is no relief in sight in the short to medium term.

The reopening of our domestic economy will also throw up some winners on the ASX 200. This is despite the threat of a global economic slowdown.

Our record low unemployment rate is another tailwind that is hard to ignore. Combined with the high levels of savings that households and businesses have hoarded, you can see why Australian consumers are sitting in a pretty good spot.

The ASX 200 shares to buy in 2022

Based on these factors, UBS has added Wesfarmers Ltd (ASX: WES) to its best ideas list. The broker did this not so much for the conglomerate’s retail operations, but more for its commodities businesses.

Wesfarmers operates chemical, energy, and fertiliser businesses that service a range of sectors in both domestic and international markets. It also owns lithium assets, such as the Mt Holland mine, and is looking to build a lithium refinery in Western Australia.

The second ASX 200 share to make it onto the list is Qantas Airways Limited (ASX: QAN).

The broker explained:

“Qantas is also added to our most preferred as a means to fully capture the domestic economy’s reopening momentum, and the strength in Airlines globally.”

Least preferred ASX 200 shares

On the flipside, the two least preferred ASX 200 shares for the next 12 months are Adbri Ltd (ASX: ABC) and Inghams Group Ltd (ASX: ING).

This is largely because of the broker’s expectation that they will be most impacted by rising input prices.

The post Guess which ASX 200 shares UBS just added to its ‘best ideas’ list appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX shares today
• This is the top ASX 200 share I wish I’d bought when starting out
• Top brokers name 3 ASX shares to buy today
• ASX 200 midday update: BHP and Pilbara Minerals shares tumble

Motley Fool contributor Brendon Lau 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 positions in and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The experts at Morgans believe there are some compelling ASX tech shares that are looking good value following their share price declines in 2022.

While shifting interest rates do change the theoretical value of businesses, the underlying business hasn’t changed and still has plans for growth.

The share prices of the two businesses below have dropped quite a lot and brokers like the look of them.

TechnologyOne Ltd (ASX: TNE)

TechnologyOne is a global tech business that provides cloud-based enterprise resource planning (ERP) tools for businesses and organisations.

How much cheaper is the ASX tech share now? In early morning trading today, the TechnologyOne share price is $10.22. That’s almost a 22% drop since the start of 2022. And that’s despite the growth that the business continues to report.

The company recently reported its first-half results for FY22. Revenue from its software-as-a-service (SaaS) “and continuing business” went up 21% to $169.5 million. Net profit after tax (NPAT) rose 18% to $33.2 million.

TechnologyOne says it has completed its SaaS transformation, with SaaS annual recurring revenue (ARR) reaching $225.1 million (up 44% year-on-year).

The company continues to win large-scale enterprise customers. It’s growing quickly in the UK, where profit before tax more than doubled to $2.3 million.

TechnologyOne says it sees “significant” growth opportunities in the coming years and it’s on track to deliver continuing strong growth over the full year in the UK. The total addressable UK market is three times larger than the Asia Pacific region.

In the long term, it’s expecting to reach total ARR of at least $500 million by FY26 and achieve a continuing profit before tax margin of 35% over time.

Morgans rates TechnologyOne shares as a buy with a price target of $11.53.

REA Group Limited (ASX: REA)

REA Group owns a group of digital real estate websites including realestate.com.au and realcommercial.com.au.

The business owns stakes in property websites in other countries including the US and India.

This ASX tech share has a leading market position in the property advertising digital space, allowing it to charge higher prices because it gets more eyeballs looking at its listings.

Due to the fact that it gets the most potential buyers, this can attract the most sellers, which attracts more buyers, and so on. Its market power allows it to regularly increase prices.

REA Group saw increased profitability in the latest update – the three months to 31 March 2022.

Revenue rose 23% to $278 million, while earnings before interest, tax, depreciation, and amortisation (EBITDA) increased by 27% to $155 million. Free cash flow jumped 39% to $91 million.

The ASX tech share can use that growing cash flow to pay larger dividends, make acquisitions and/or strengthen the balance sheet.

At the time of writing, the REA share price is $111.32. That’s a 35% drop year to date.

Morgans rates it a buy with a price target of $145.40. That implies a possible upside of 30%.

The post 2 beaten-up ASX tech shares with major upside: experts appeared first on The Motley Fool Australia.

More reading

• Leading broker names the best ASX tech share to buy following 2022’s tech meltdown
• Top brokers name 3 ASX shares to buy today
• The ASX 200 share with ‘hidden value’: fund manager
• 3 ‘disruptive’ ASX companies Aussies now can’t live without
• Why Nufarm, Sayona Mining, Tabcorp, and TechnologyOne shares are falling

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 REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The New Hope Corp Ltd (ASX: NHC) share price is tumbling in early trade, down 7.8%.

New Hope closed yesterday at $4.10 and is currently trading for $3.78 per share.

This comes after the S&P/ASX 200 Index (ASX: XJO) coal miner released its quarterly activities update this morning

What happened during the quarter?

The New Hope share price is sliding despite the company reported on tailwinds from continuing increases in coal prices over the three months.

The miner achieved quarterly underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) of $358.6 million. That brings its year-to-date underlying EBITDA (as at 30 April) to $913 million.

Russia’s invasion of Ukraine alongside a rising global energy shortage saw thermal coal prices hit all-time highs. In April New Hope received an average of US$326 per tonne for its thermal coal. That average price was 61% higher than the comparative quarter.

14 April marked the ex-dividend date for New Hope’s interim (17 cents) and special (13 cents) dividend payouts. Those were paid on 4 May.

Excluding those dividend payments, the ASX 200 coal miner had cash generation for the quarter of $281.8 million.

The New Hope share price could be coming under pressure from its report that total coal sold during the quarter declined by 26.7% from the prior quarter. The company said labour markets remained tight due to COVID-19 and it was also impacted by heavy rainfall at its Bengalla operations in New South Wales.

However, guidance for total coal sold for the 2022 financial year was lifted by 4.0%, to 9.461million tonnes from the previous 9.085 million tonnes.

Looking ahead the New Hope share price could continue to benefit from elevated coal prices.

According to the company:

Pricing is expected to remain elevated for the foreseeable future, with the potential for the market to structurally shift to materially higher long-term levels than those realised in the past.

New Hope share price snapshot

Despite today’s slide, the New Hope share price remains up 64% in 2022. That compares to 6% loss posted by the ASX 200.

The post Here’s why the New Hope share price is tumbling 8% on Thursday appeared first on The Motley Fool Australia.

More reading

• 3 ASX All Ordinaries shares smashing multi-year highs on Tuesday
• Why are ASX coal shares charging higher again today?
• Here are the best performing dividend shares in the ASX All Ords so far in 2022
• The New Hope share price has rallied 60% in 2022. Is there more to come?
• Why did ASX coal shares having such a stellar run on Thursday?

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.

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The Catapult Group International Ltd (ASX: CAT) share price is on the slide on Thursday following the release of the company’s full-year results. This is despite the rest of the tech sector shooting higher today.

At the time of writing, the sports technology company’s shares are down 6% to $1.08.

Catapult share price lower as losses widen

• Revenue up 54% to US$77 million
• Annual contract value (ACV) up 19.7% to US$63.9 million
• ACV churn down by over a third to 3.4%
• Underlying EBITDA loss of US$5.8 million
• Net loss widened by 265% to $32.1 million

What happened during the 12 months?

For the 12 months ended 31 March, Catapult reported a 54% increase in revenue to US$77 million and a 19.7% increase in ACV to US$63.9 million.

However, things weren’t anywhere near as positive for its earnings, with the company reporting a deterioration in its margins. Management advised that this was driven by its additional investment in accelerating ACV growth.

This led to Catapult recording an underlying EBITDA loss of US$5.8 million, compared to positive EBITDA of US$3.5 million in FY 2021 and US$9.4 million in FY 2020.

On the bottom line, Catapult revealed a net loss of US$32.2 million, up from a loss of US$8.84 million a year earlier.

Nevertheless, Catapult ended the period with a strong balance sheet. It reported $26.1 million of cash at bank.

Management commentary

Catapult’s CEO Will Lopes revealed that the company’s shift to a software-as-a-service (SaaS) model is coming along nicely. He said:

With our transition into a fully-SaaS model, we can better serve our customers around the world and provide them the objective data they need for their athletes and teams. As proof, subscription revenue accelerated dramatically after 12 months of strong ACV growth. With the world reopening post-pandemic, sports are delivering excitement and engagement again.

The strong rebound in North America especially, increases our confidence in future ACV growth. In FY22, the P&H vertical has also delivered high growth, and following our acquisition of SBG, we see new demand for our Tactics & Coaching solutions and are starting a second growth engine for the Company. The new customers we added along with new innovations continue to position us well for capturing demand at all levels of sport.

Outlook

Looking ahead, management is forecasting further solid growth over the next 12 months. It is expecting ACV growth of between 20% to 25% in FY 2023 with ACV churn in the range of 4.5% to 6%.

The company also appeared to address concerns that it may soon run out of cash.

It said:

Catapult is confident in its ability to generate strong operating cash flow in the short to long term. Operating cash flow is expected to be positive for FY23. During FY22 Catapult was subject to increasing supply chain challenges and cost inflation. These are expected to continue at a moderate degree throughout FY23, impacting freight, COGS, wage costs, and inventory sourcing. Catapult’s planned organic investments in FY23 are fully funded.

The post Why is the Catapult share price tumbling 6% lower today? appeared first on The Motley Fool Australia.

More reading

• 3 exciting small cap ASX shares to watch

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 positions in and has recommended Catapult Group International Ltd. The Motley Fool Australia has positions in and has recommended Catapult Group International Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Appen Ltd (ASX: APX) share price has come flying out of the gates on Thursday morning.

In early trade, the artificial intelligence services company’s shares were up as much as 35% to $8.64.

The Appen share price has pulled back a touch since then but remains up 29% to $8.29.

Why is the Appen share price rocketing higher?

Investors have been scrambling to get hold of Appen’s shares today after it revealed that it has received a takeover approach.

According to the release, the company has received an unsolicited, conditional, and non-binding indicative proposal from TELUS International to acquire it for $9.50 per share. This values Appen at approximately $1.2 billion.

Based on the Appen share price at the close of play on Wednesday, this offer represents a 46% premium for shareholders. Though, it is still well short of its 52-week high of $14.67 and two-year high of ~$40.00.

Will a deal be made?

Appen advised that it is looking over the offer but doesn’t sound overly keen to accept it. This may explain why the Appen share price is still trading at a sizeable 13% discount to the offer price.

It commented:

The Board is in discussions with Telus to seek an improvement in the terms of the Indicative Proposal. To facilitate this, the Board has offered to provide, on a non-exclusive basis, limited business and financial information, subject to Telus agreeing to enter into a mutually acceptable confidentiality and standstill agreement, which it has yet to execute. At this point in time, no material non-public information has been provided to Telus.

Trading update

It may prove quite fortuitous that the company received a takeover approach, because without it the Appen share price may have come under pressure from the release of a particularly weak trading update.

That update reveals that Appen’s year-to-date revenue was lower than it was at this time last year at the end of April.

In light of this, the company expects its first half earnings before interest, tax, depreciation and amortisation (EBITDA) to be “materially lower than the prior corresponding period.”

And while management expects its second-half performance to be stronger, its guidance has been wide of the mark in recent years so this is far from guaranteed.

The post Appen share price rockets 35% on Telus takeover approach appeared first on The Motley Fool Australia.

More reading

• Appen share price on watch amid $1.2 billion takeover bid
• If you’d invested $10,000 in Appen shares 7 years ago, lucky you! Here’s what you’d have now
• These are the 10 most shorted ASX shares
• These are the 10 most shorted ASX shares
• ASX 200 midday update: Brambles rockets, Goodman upgrades guidance

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 positions in and has recommended Appen Ltd. 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.

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The National Australia Bank Ltd (ASX: NAB) share price is gaining this morning as the bank reveals a buy now, pay later (BNPL) offering of its own.

NAB Now Pay Later will go up against Commonwealth Bank of Australia (ASX: CBA)’s StepPay, as well as ‘traditional’ BNPL companies such as Zip Co Ltd (ASX: ZIP) and Afterpay (now owned by Block Inc (ASX: SQ2)).

At the time of writing, the NAB share price is $31.86, 0.63% higher than its previous close.

For context, the S&P/ASX 200 Index (ASX: XJO) is currently up 0.04%.

Let’s take a closer look at the ASX’s latest BNPL product.

NAB launches BNPL product

The NAB share price is in the green as the bank reaches what arguably appears to be a rite of passage for ASX 200 banks – jumping aboard the BNPL train.

NAB Now Pay Later will allow NAB customers to buy up to $1,000 worth of goods and pay in four fortnightly installments. It can be used anywhere that Visa Inc (NYSE: V) is accepted.

Interestingly, NAB’s offering differs from most other BNPL products by ditching all fees. It charges no late fees, no interest, no account fees, and has no minimum spend.

The product can be accessed through the NAB app. The bank’s executive of personal banking Rachel Slade noted customers can be approved to use NAB Now Pay Later while moving “from the fitting room to the register”.

“We’re able to do this quickly because of the combination of technology and knowing our customers,” Slade continued.

“We know their banking and credit history and we’re assessing them based on our existing banking relationship.”

It follows the release of NAB’s no interest credit card in 2020. The card has accounted for 30% of credit card applications over the past year, making it NAB’s most popular credit card product.

The bank expects NAB Now Pay Later to officially launch in July. Customers can pre-register for the product now.

NAB share price snapshot

The NAB share price is outperforming the ASX 200 by 13% in 2022.

The bank’s stock has gained around 8% since the start of the year. It’s also nearly 19% higher than it was this time last year.

The post NAB share price lifts amid BNPL product reveal appeared first on The Motley Fool Australia.

More reading

• Why is the NAB share price having such a cracker of a day?
• ASX shares paid out a record $98b in dividends in the 12 months to March. Which are the star performers?
• 3 reasons this broker thinks the NAB share price is great value
• Why Allkem, NAB, Pushpay, and Virgin Money UK shares are rising
• Has the NAB dividend been growing?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. and Visa. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of electric vehicle leader Tesla (NASDAQ: TSLA) zoomed higher on Wednesday morning, and were up by 5% through 11:58 a.m. ET.

You can give some credit to Cathie Wood for that.

So what

Over the past two days, as Tesla stock trended lower, famed (and lately, famously embattled) growth investor Wood scooped up nearly 42,000 shares — 15,858 shares on Monday, and another 26,081 shares Tuesday — according to data provided by the website of her investment management firm, ARK Invest. These were Wood’s first purchases of Tesla stock in at least the last two months — and they followed a two-month-long selling streak during which her ARK exchange traded funds (ETFs) sold off more than 490,000 shares.  

Wood, it appears, had been waiting patiently for Tesla stock to top $1,000, and she’s been steadily unloading the EV maker’s shares ever since, but after they sank below $700 on Friday, she resumed buying.

Now what

What prompted Wood’s sudden shift? A stock price that’s now 30% cheaper than it was when she started selling was likely one catalyst. But there was also some more substantive news out regarding Tesla on Wednesday. As U.K. newspaper The Independent reported, Tesla’s Advanced Battery Research division has announced it has developed a nickel-based rechargeable car battery that has the potential to last 100 years — or at least 1 million miles — before it must be recycled. (For the technically curious, the key material’s chemical formula is Li[Ni_0.5Mn_0.3Co_0.2]O₂.)  

Granted, Tesla’s current LiFePO₄ batteries are already estimated to have a service life of more than 20 years before they lose 20% of their maximum charge capacity — longer than the lifespan of most cars. But even so, increasing that lifespan by a factor of five implies the batteries might effectively never lose any significant charging capacity within a car owner’s time of ownership. That would give Tesla’s vehicles another strong competitive advantage in an electric car market that’s getting more crowded by the day.

Even more than Cathie Wood’s stamp of approval, this battery news is a good reason for Tesla stock to be rising. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Tesla stock raced higher today appeared first on The Motley Fool Australia.

More reading

• Why Tesla stock turned south today
• Why Tesla stock finally bounced today
• Nasdaq sell-off: 2 growth stocks billionaires were buying in Q1
• Down almost 30% in the past month, here are 2 reasons to buy Tesla shares and 1 reason to hold off
• Why Tesla stock fell again today

Rich Smith has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. 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. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The S&P/ASX 200 Index (ASX: XJO) mining shares are known to be large dividend payers. In fact, one of them is currently the world’s biggest payer of dividends.

But does a big dividend mean that they are good options as ASX dividend shares?

FY21 and FY22 are certainly looking fruitful for shareholders of the large iron ore ASX mining shares of BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Limited (ASX: FMG).

Dividend expectations for FY22

In the current financial year, these are the following estimates for the dividend yields of the big three miners:

• Macquarie is expecting BHP to pay a grossed-up dividend yield of 16.6% in FY22.
• The broker thinks Rio Tinto is going to pay a grossed-up dividend yield of 16.3%.
• Macquarie has projected that Fortescue is going to pay a grossed-up dividend yield of 14% in FY22.

There’s no doubt these yields are very large. Not many ASX 200 shares will pay yields as large as that in FY22.

Longer-term shareholders have received a lot of cash from these miners in recent times thanks to the buoyant commodity prices.

Are ASX 200 mining shares attractive income ideas?

Short-term profits and dividend yields from the above names look tempting.

However, a key thing to remember with resource companies is that those commodities can move up and down at any time. Commodity prices are not predictable or consistent.

One year could see big profits and another year could show a major decline. Just look at what happened to the iron ore price towards the end of 2021 and also in 2016.

That’s the problem – ASX mining shares generate profit from their relevant commodities and then the dividends are paid from that profit. Dividends can suffer from a major decline in profit if the commodity price drops.

If shareholders don’t mind a variable dividend, then an ASX mining share could be an attractive option for income over the longer term.

However, for investors wanting a more consistent level of dividends year to year, ASX mining shares may not be the right place to be looking.

When is a good time to be looking for ASX mining shares?

Investors can choose to buy resource businesses any time they choose. However, I think it could be useful to consider commodity businesses when the price of that commodity has gone down, which may affect sentiment about that company and the sector. A cheaper share price could be better at the low point of the resource cycle.

For example, during the volatility towards the end of 2021, I chose to buy some Fortescue shares at a cheaper price than where they are today.

If the Fortescue share price were to drop below $16 again then I would be interested in adding to my position. I believe that any share price weakness of BHP or Rio Tinto could also make them more tempting.

The post Are ASX 200 mining shares good options for dividends? appeared first on The Motley Fool Australia.

More reading

• Australia’s renewable energy output could triple by 2030 under Labor. Will that impact these ASX 200 shares?
• Why BHP, BrainChip, Chalice Mining, and Fisher & Paykel shares are dropping
• Why has the Fortescue share price gained 10% in a week?
• ASX 200 midday update: BHP and Pilbara Minerals shares tumble
• What exactly is the difference between Woodside Energy (WDS) and Woodside Petroleum (WPL)?

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. 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 Scott Phillips.

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