Day: 21 November 2022

ASX dividend shares can be a really good way for investors to grow wealth and also receive passive income.

Some businesses may be largely known for their dividends, such as Australia and New Zealand Banking Group Ltd (ASX: ANZ) and Rio Tinto Limited (ASX: RIO).

But, some of these large blue chip ASX shares may be about as large as they’re going to become. I think businesses that can deliver both income and earnings growth (which can help share price growth) could be the ticket for long-term financial success.

How much $100 a week can grow into

Investors should try to minimise their brokerage costs where possible, so it doesn’t make sense to make lots of small investments.

However, it’s possible to save the $100 each week in a savings account until the amount grows to a satisfactory level to invest.

In total, that would amount to $5,200 a year.

It’s hard to say what future returns will be – past performance is not a reliable indicator of future performance. Over the decades, the ASX share market has returned approximately 10% per annum, excluding franking credits.

Investing $5,200 a year, returning 10% per annum, could turn into $83,000 in 10 years, and $298,000 in 20 years. And in 30 years that $100 a week could turn into $855,000. Remember, those numbers assume the $100 per week number stays the same, with no increase. It would grow even more if the investment is $120 per week or $200 per week.

Which ASX dividend shares could deliver good returns?

I think that businesses that have already done well have a good chance of continuing that success.

Businesses that have diversification of earnings – through different product/service offerings or being geographically diversified – give themselves a better chance of performing well in the long term. That’s because they aren’t reliant on just one market for one product.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is one business that ticks the box in my opinion. It has an array of impressive retail businesses like Bunnings, Officeworks and Kmart. But, the ASX dividend share also has a growing portfolio of other businesses. These include chemicals, energy and fertilisers (WesCEF), healthcare (Priceline and Clear Skincare Clinics) and lithium (Mt Holland project).

I think Wesfarmers will be around for decades to come, generating good profit. Its business portfolio may be quite different, but I like that it can alter its businesses to be more future-focused.

In FY24 the ASX dividend share is expected to pay a grossed-up dividend yield of 5.8% according to CommSec.

Pinnacle Investment Management Group Ltd (ASX: PNI)

Pinnacle Investment Group is a funds management investment business. It helps fund managers start and grow their own funds management businesses. It can help with seed capital and also do a lot of the back-office tasks like legal, compliance and so on.

The underlying fund managers are growing over time, and Pinnacle itself is expanding its number of portfolio managers. Some of its latest moves have been to invest in a private equity fund manager, as well as a Canadian fund manager.

While it may go through volatile periods, I think times of a depressed Pinnacle share price are a good time to pounce (such as right now).

Pinnacle is projected to pay a grossed-up dividend yield of 5.75% in FY24 according to CommSec.

Premier Investments Limited (ASX: PMV)

Premier Investments is a retail-focused ASX dividend share, but it’s expanding globally through some of its brands. It has brands like Just Jeans, Peter Alexander and Jay Jays that are focused on Australia.

But, Smiggle is a globally-growing business, which sells things like kids backpacks, water bottles, pencil cases and so on. These items can be branded with things like Minecraft, Harry Potter and Marvel art and imagery.

It also has investments in other ASX retail shares including global kitchen appliance business Breville Group Ltd (ASX: BRG) and Myer Holdings Ltd (ASX: MYR).

In FY24, Premier Investments is expected to pay a grossed-up dividend yield of 5.8%.

Foolish takeaway on ASX dividend shares

At the end of the wealth accumulation phase, investors can sit back and enjoy the cash flow that ASX dividend shares dish out, depending on the investment picks and the yield.

The post I’d invest $100 a week in cheap ASX dividend shares for passive income in retirement appeared first on The Motley Fool Australia.

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More reading

• Brokers says these top ASX 200 dividend shares are buys this week
• If you’d bought $10,000 worth of Wesfarmers shares in January, this is how much you’d have earned in dividends
• Which stocks are in the Vanguard Australian Shares Index ETF (VAS) right now?
• How to have your ASX 200 dividend cake and eat it too
• 3 passive ASX income machines to help fund your retirement

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 positions in and has recommended PINNACLE FPO. The Motley Fool Australia has positions in and has recommended PINNACLE FPO and Wesfarmers Limited. The Motley Fool Australia has recommended Premier Investments 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 COVID-19 pandemic was as terrible for many businesses as it was for individual health and freedoms.

Industries that relied on movement of people came to an absolute standstill, and ASX-listed companies in those areas had to figure out how to survive on almost zero revenue.

But those who made it through the other side are now looking slim, fit and ready for supercharged earnings, unencumbered by high costs.

Morgans senior analyst Belinda Moore named one such ASX share that she’s currently bullish on:

‘Management hasn’t wasted a crisis’

Travel agent Webjet Limited (ASX: WEB) understandably was in deep trouble when the coronavirus struck the world and the travel industry pretty much shut down around the world.

The company was forced to cut costs dramatically just to stay afloat. But now, Moore said in a Morgans blog post, that’s paying off.

“With less reliance on international airline capacity and China, and the fact that management hasn’t wasted a crisis with a stronger business coming out of COVID, Webjet is leading the recovery of our travel stocks under coverage.”

The business is already starting to see the benefits of losing excess weight.

“Webjet reported a strong 1H23 result which exceeded expectations,” said Moore.

“Pleasingly, operating cash flow was materially stronger than expected and has further strengthened its already strong balance sheet.”

The Webjet share price gained more than 10% in 24 hours last week after those numbers were revealed to the market.

‘Webjet now deserves a PE rerating’

The company’s wholesale accommodation business WebBeds is leading the way, with earnings before interest, taxes, depreciation and amortisation (EBITDA) already back at 87% of pre-pandemic levels.

“Its EBITDA margin was impressive at 55.7%,” said Moore.

“In September, WebBeds was 35% more efficient on a booking per FTE basis compared to pre-COVID.”

The outlook for the coming year was “upbeat”, with WebBeds on track to top pre-pandemic earnings by 30%.

This has forced a rethink for Moore’s team on the business’ prospects.

“Given Webjet’s stronger than expected result and full year guidance, we have upgraded our FY23 EBITDA forecast by 18.7% to $120 million,” she said.

“With plenty of market share to win over coming years, which should underpin a strong earnings growth profile, whilst generating higher margins than pre-COVID and with a much stronger balance sheet, we would argue that Webjet now deserves a PE rerating.”

The post ASX 200 company to rake it in now after COVID cost cuts: expert appeared first on The Motley Fool Australia.

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More reading

• Brokers name 3 ASX shares to buy today
• Goldman Sachs tips Webjet share price to keep rising
• 5 of the craziest things making news on the ASX this week
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Tony Yoo 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 Webjet 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 ASX lithium share sector has had a great run this year. But it will be a hard act for ASX lithium shares to follow and do half as well in 2023 in my opinion. ASX lithium shares could even lose some of the ground they’ve gained.

But, we can’t know and predict for sure what share prices are going to do on any given day, month or even year.

Hence, If I had to choose two ASX lithium shares in the sector to invest in right now, I’d go with these two:

Pilbara Minerals Ltd (ASX: PLS)

I think that Pilbara Minerals is the leading ASX lithium share. Its share price has certainly risen to reflect that. The company has seen a gain of 35% so far in 2022 and is up 108% since 30 June.

The lithium price could drop back from here. But, it could stabilise, or even keep going higher. Pilbara Minerals achieving a price of US$5,000 per dry metric tonne (dmt) through a digital auction may have been unrealistic a year ago, yet its latest sale of 5,000 dmt was for US$7,805 per dmt.

The business is a cash machine right now. At 30 September 2022, it had built a pile of US$1.375 billion of cash and it’s planning to start paying dividends soon.

I’m a big fan of the company’s plans to be more involved with the lithium supply chain, not just extracting the raw materials from the ground. This should help the ASX lithium share achieve stronger profit margins.

If the lithium price remains elevated, I think that Pilbara Minerals could outperform the S&P/ASX 200 Index‘s (ASX: XJO) return in 2023.

Mineral Resources Limited (ASX: MIN)

Mineral Resources is involved in iron ore, lithium and mining services.

It could be useful for the business to have that diversification in this environment of uncertainty. With China seemingly looking to ease COVID restrictions a little, as well as providing support to the troubled real estate sector, things are looking up for iron ore.

The ASX lithium share is already profitable and it’s investing in increasing production, owning its lithium hydroxide conversion capabilities, decarbonising, automating road trains and so on.

I think that things are looking up in the short-term and the long-term for the business, particularly if it can capitalise on the strong lithium prices.

The promising look may turn into good dividends for shareholders. According to Macquarie, it could pay a grossed-up dividend yield of 15.9% in FY24. Dividends are not guaranteed, but this level of payment would certainly help future investment returns

According to Macquarie, Mineral Resources shares are valued at 4 times FY24’s estimated earnings.

The post Which are the best ASX lithium shares to buy now for 2023? appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Friday
• Here is the Pilbara Minerals dividend forecast through to 2025
• Why are Mineral Resources shares hitting the headlines on Friday?
• 5 of the craziest things making news on the ASX this week
• Pilbara Minerals share price on watch as chair describes maiden dividend as ‘great source of pride’

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 Scott Phillips.

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Plenty of ASX shares have dropped this year. I think that investors may be able to do well by thinking differently to the market and looking at beaten-up ASX shares.

While investing with a contrarian mindset isn’t always wise, it could work with unloved businesses that may be able to keep growing their revenue (and hopefully profit).

Now that many names are at much lower valuations, the entry price seems more compelling.

Some names may see their growth slow in FY23 as inflation and higher interest rates bite. But I don’t think economic conditions will keep worsening. At some point, hopefully sooner rather than later, the economy will look promising again.

With that in mind, I think the following two ASX shares are promising investments.

Adore Beauty Group Ltd (ASX: ABY)

Adore Beauty is Australia’s largest online beauty store, with more than 270 brands and over 12,000 products. However, it also says that its offering includes integrated content and marketing. For example, it has multiple podcasts going to connect with customers – the distribution costs for these podcasts are comparatively low.

I like that the business is seeing a growing number of returning customers, which reduces reliance on paid marketing channels. In the FY23 first quarter, its number of returning customers increased by 85% on a two-year basis, and was up 14% on the prior corresponding period.

Over the long term, the ASX share is planning to add new products, expand into new markets and geographies, and consider acquisitions. It’s planning to grow its gross profit margin by selling owned brands with higher margins, getting improved supplier terms, and expanding into attractive adjacencies.

In the long term, beyond FY27, the company is aiming for owned brands to contribute at least 15% of revenue and achieve an overall earnings before interest, tax, depreciation and amortisation (EBITDA) margin of at least 10%.

In 2022 to date, the Adore Beauty share price has fallen 56%, making the long-term value much better in my eyes.

Temple & Webster Group Ltd (ASX: TPW)

This is another e-commerce ASX share that is currently going through a bit of a setback with investor confidence.

When the company announced its FY22 result, it said that it “remains committed” to its profitable growth strategy and that it’s confident it can achieve its goal of becoming Australia’s largest retailer of furniture and homewares – offline or online.

While it will be tough to beat the locked-down revenue generation of the first half of FY22 when it reports its FY23 first-half result, the business is expecting “a return to double digit growth during FY23” once it finishes lapping COVID lockdowns from the year before.

The ASX share is working on improving its profitability. As such, it was able to increase its EBITDA margin guidance for FY23 from 2% to 4%, up to 3% to 5%.

I like the areas that the business is growing in. For example, it’s adding the following with its content and service: video, 3D, augmented reality and virtual reality, as well as design help for households.

Plus, the business is working on becoming a more effective option for trade and commercial customers. It’s also looking to grow in the home improvement category (including painting, plumbing and flooring products) via its The Build website.

The Temple & Webster share price has fallen 53% since the beginning of the year, making it more attractive in my opinion.

The post Why I think these beaten-up ASX shares are compelling contrarian buys appeared first on The Motley Fool Australia.

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More reading

• Here are the 10 most shorted ASX shares
• Here are the 10 most shorted ASX shares
• Share market rally: How I’d invest $5,000 right now in ASX shares
• Goldman Sachs says these ASX growth shares are buys
• These 10 predictions could help you profit from the stock market regardless of inflation, interest rates or even another bear market

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 positions in and has recommended Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia has recommended Adore Beauty Group Limited and Temple & Webster Group 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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At the start of each week, I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Betmakers Technology Group Ltd (ASX: BET) remains the most shorted share on the Australian share market with short interest of 15.9%. Short sellers aren’t giving up on this betting technology company despite its shares crashing 65% in 2022.
• Flight Centre Travel Group Ltd (ASX: FLT) has seen its short interest rise slightly to 14.6%. This travel agent giant’s shares were under pressure last week following the release of a disappointing trading update.
• Block Inc (ASX: SQ2) has seen its short interest ease to 12.2%. Interestingly, this is almost triple the short interest of the payments company’s NYSE listed shares.
• Domino’s Pizza Enterprises Ltd (ASX: DMP) has seen its short interest fall to 11.4%. This pizza chain operator’s shares have taken a hit this year after inflationary pressures weighed on its performance.
• Megaport Ltd (ASX: MP1) has seen its short interest ease to 11.1%. A softer than expected first quarter update from the network as a service operator has put significant pressure on its shares.
• Perpetual Limited (ASX: PPT) has seen its short interest drop to 9.5%. Short sellers will have been pleased to see this fund manager’s shares tumble last week after the courts pressured the company into completing its acquisition of Pendal Group Ltd (ASX: PDL). This is likely to scupper its own proposed takeover by private equity.
• Nanosonics Ltd (ASX: NAN) has short interest of 9.1%, which is up week on week again. Unfortunately for short sellers, this infection prevention company released a trading update last week which revealed strong sales growth so far in FY 2023.
• Breville Group Ltd (ASX: BRG) has seen its short interest slide to 8.8%. Short sellers may have been closing positions after the appliance manufacturer’s shares jumped following a solid first quarter update.
• St Barbara Ltd (ASX: SBM) has entered the top ten with short interest of 8.6%. This struggling gold miner’s shares have fallen almost 60% this year. Short sellers appear to believe they can keep falling.
• Temple & Webster Group Ltd (ASX: TPW) has short interest of 8.5%, which is down week on week. This may be due to concerns over a potential ecommerce slowdown.

The post Here are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

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More reading

• Top brokers name 3 ASX shares to buy next week
• Why A2 Milk, Cettire, Coronado, and Perpetual shares are dropping
• Why Arafura, Nanosonics, NextDC, and OZ Minerals shares are rising today
• 5 things to watch on the ASX 200 on Friday
• Why did the Flight Centre share price trounce the ASX 200 today?

Motley Fool contributor James Mickleboro has positions in Dominos Pizza Enterprises Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Betmakers Technology Group Ltd, Block, Inc., MEGAPORT FPO, Nanosonics Limited, and Temple & Webster Group Ltd. The Motley Fool Australia has positions in and has recommended Block, Inc. and Nanosonics Limited. The Motley Fool Australia has recommended Betmakers Technology Group Ltd, Dominos Pizza Enterprises Limited, Flight Centre Travel Group Limited, MEGAPORT FPO, and Temple & Webster Group 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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ASX shares that have a long-term growth outlook seem like attractive opportunities to me, particularly with how share prices share dropped this year.

I’m not sure whether every business has the potential to deliver strong growth over the long term. But, the ones that are able to deliver good compounding revenue growth over the years may be able to deliver good shareholder returns.

For that, I’m looking for ASX shares that have large addressable markets.

VanEck Video Gaming and Esports ETF (ASX: ESPO)

This exchange-traded fund (ETF), if you haven’t already guessed, is about getting exposure to the global video gaming and e-sports sector.

While it does provide focused exposure to a specific sector, it is somewhat diversified because it has 25 holdings. It is invested in businesses that are involved in game development and other parts of the gaming infrastructure (such as semiconductors and semiconductor equipment).

Let’s look at some of the ASX share’s largest holdings: Nvidia, Activision Blizzard, Nintendo, Advanced Micro Devices, Roblox, Tencent, Take-Two Interactive Software and Bandai Namco.

According to VanEck sources, the competitive video gaming audience is expected to reach 646 million people globally in 2023 and e-sports revenue has grown by an average of 28% per annum since 2015. As noted by VanEck, e-sports has created new potential revenue streams including game publisher fees, media rights, merchandise, ticket sales and advertising.

I think the sector is seeing long-term revenue growth, and the industry is seeing positive signs in multiple regions, including the Middle East and Africa.

It looks much better value after the VanEck Video Gaming and Esports ETF’s 29% fall this year.

Bubs Australia Ltd (ASX: BUB)

Bubs manufactures and sells several products including goat milk formula, organic grass-fed (cow) formula, A2 beta-casein protein formula, organic baby food, and adult goat milk powder.

The business is growing at an impressive rate after its successful entry into the United States market as it tries to help alleviate the shortage there.

In the first quarter of FY23, group gross revenue increased 28% to $23.6 million, while infant formula more than doubled, contributing 92% of quarterly sales. However, adult goat dairy portfolio revenue was down 82% and business-to-business (B2B) revenue fell 91%, due to lockdowns in China and southeast Asia, according to Bubs.

Bubs produces Chinese-labelled products for China’s general trade. The ASX share said:

Over the next several years, these two pathways are likely to both significantly exceed the current largest revenue source of English label products into China via the cross-border e-commerce.

If Bubs can hang on to (and grow) its market share in the US, then its future looks very promising.

With the Bubs share price down around 40% in three months, I think this is a good time to pounce for a long-term investment as it looks to grow internationally.

The post Why I’d buy and hold these ASX shares until 2030 appeared first on The Motley Fool Australia.

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More reading

• 3 quality ETFs for ASX investors to buy this month
• 3 ETFs for ASX investors to buy right now
• 2 high quality ETFs for ASX investors in November
• Why is the Bubs share price down 16% this week?
• Why Brainchip, Bubs, EML, and Fortescue shares are falling today

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 positions in and has recommended Activision Blizzard, Advanced Micro Devices, Nvidia, Roblox Corporation, Take-Two Interactive, and Tencent Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Nintendo and has recommended the following options: long January 2023 $115 calls on Take-Two Interactive. The Motley Fool Australia has recommended Activision Blizzard, BUBS AUST FPO, Nvidia, and VanEck Vectors ETF Trust – VanEck Vectors Video Gaming and eSports ETF. 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 Australian share market is home to a large number of quality dividend shares for income investors to choose from.

Two that brokers are very positive on are listed below. Here’s why these ASX 200 dividend shares have been tipped as buys:

Charter Hall Social Infrastructure REIT (ASX: CQE)

The first ASX 200 dividend share that has been tipped as a buy is the Charter Hall Social Infrastructure REIT.

Goldman Sachs is a fan of this social infrastructure focused property company and has a conviction buy rating and $4.13 price target on its shares. This is due to its belief that the company is well-placed despite the challenging macroeconomic backdrop.

The broker highlights the company’s exposure to the childcare sector, noting that “childcare fundamentals are solid.” Overall, its analysts expect its “resilient underlying cash flows” to support above-average dividend yields in the coming years.

Goldman is forecasting dividends of 17.3 cents per share in in FY 2023 and then 18 cents per share in FY 2024. Based on the current Charter Hall Social Infrastructure REIT share price of $3.38, this will mean yields of 5.1% and 5.3%, respectively.

Wesfarmers Ltd (ASX: WES)

Another ASX 200 dividend that could be in the buy zone is Wesfarmers.

The team at Morgans is positive on the conglomerate and has an add rating and $55.60 price target on its shares. This is due its belief that the company is well-placed for the long term thanks to its “quality retail portfolio” and “highly regarded management team.”

The broker is expecting this to underpin the payment of attractive fully franked dividends this year and next year.

It has pencilled in fully franked dividends per share of $1.82 in FY 2023 and $1.89 in FY 2024. Based on the current Wesfarmers share price of $47.57, this will mean yields of 3.8% and 4%, respectively.

The post Brokers says these top ASX 200 dividend shares are buys this week appeared first on The Motley Fool Australia.

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More reading

• If you’d bought $10,000 worth of Wesfarmers shares in January, this is how much you’d have earned in dividends
• Which stocks are in the Vanguard Australian Shares Index ETF (VAS) right now?
• How to have your ASX 200 dividend cake and eat it too
• 3 passive ASX income machines to help fund your retirement
• Income investor? Analysts say these are the ASX 200 dividend shares to buy

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 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 National Australia Bank Ltd (ASX: NAB) share price has been trending lower in recent weeks. It’s down by 6% since 2 November 2022. For a large S&P/ASX 200 Index (ASX: XJO) bank share in a rising interest rate environment, I think that’s a noticeable drop.

Over that same time period, the ASX 200 has gone up by 2.4%. So, that’s a sizeable bit of underperformance.

However, I think that the period of underperformance could make it an attractive time to consider the NAB share price for these three reasons.

Savvy management

The management team at NAB are a quality group, in my opinion. They have done an excellent job of turning the company around.

Decisions made by the business have led to the bank reporting solid numbers. In the FY22 result it revealed 8.3% growth of cash earnings to $7.1 billion. Underlying profit growth was 11.5%.

NAB noted that this result was achieved through its strategy, including targeted volume growth and a disciplined approach to managing costs while investing for growth.

The CEO said that an ongoing focus on strong balance sheet settings has been “key to delivering sustainable growth and keeping the bank safe”.

I like how the bank is positioned going into this period where households could see elevated mortgage stress. At the end of FY22, it had a group common equity tier 1 (CET1) ratio of 11.5%.

NAB CEO Ross McEwan said:

Maintaining these settings is important during the current economic uncertainty, with higher interest rates and higher inflation likely to challenge some customers. However, strong employment conditions along with substantial household and business savings give us confidence in the resilience of our customers and the broad economy.

We will continue to remain focused on the disciplined execution of our strategy to support sustainable growth in earnings and shareholder returns over time.

Interest rates are rising

Central banks have been hiking interest rates to try to take the steam out of the economy.

The Reserve Bank of Australia (RBA) interest rate has jumped from 0.10% to 2.85%. Though, it could go even higher from here.

ASX bank shares like NAB, Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) have been passing on the interest rate hikes to mortgages faster than for savers.

Due to this, I think that NAB’s lending profit can increase. The net interest margin (NIM) – the lending profitability that compares the lending rate against the cost of the funding (such as term deposit) – is increasing for NAB.

NAB said that in the fourth quarter of FY22 it achieved a NIM of 1.72%, which was up 10 basis points (or 0.10%) compared to the third quarter. This is good for ongoing profitability.

However, I think we should remain aware of the potential for higher arrears and bad debts with borrowers.

Dividend outlook for investors holding NAB shares

NAB has been growing its dividend for shareholders, which means increasing cash returns from the business.

In FY22 the ASX bank share grew its total annual dividend by around 19% to $1.51 per share. That currently represents a grossed-up dividend yield of 7%.

In FY23, CommSec has estimated an annual dividend of $1.72 per share for NAB, which equates to a grossed-up dividend yield of 8%.

The grossed-up dividend yield in FY24 could be around 8.3% according to CommSec.

NAB’s dividends alone could provide a solid return for shareholders over the next couple of years.

The post 3 reasons why I think it’s time to snap up NAB shares appeared first on The Motley Fool Australia.

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More reading

• Why these 3 ASX 200 shares have done ‘particularly well’ and remain top holdings into 2023: fund manager
• 5 things to watch on the ASX 200 on Monday
• Time to buy? Which ASX 200 shares are trading on single-digit P/E ratios?
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Friday

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 Westpac Banking Corporation. 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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Ask a Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In part one of this edition, we’re joined by Andrew Martin, principal of Alphinity Investment Management. The Alphinity Concentrated Australian Share Fund has delivered an annual return of 7.6% after fees over the past five years.

The Motley Fool: The macroeconomic situation has changed dramatically since we last spoke with you in October 2021. Has the higher inflation and interest rate environment changed your investment approach with Alphinity’s Australian share funds?

Andrew Martin: Not at all. If anything, this has reinforced that focusing on earnings and focusing on the companies is the right thing to do.

Macro has been so volatile over the last year. But that’s incredibly difficult to pick. So, ultimately, earnings are going to drive the market over time. Whether it becomes a growth market or a value market because of the change in macro, ultimately, growth stocks and value stocks are still driven by their earnings. They still have to come through.

Sticking to this process is even more important when you get all this volatility.

MF: What’s been your best call over the past year?

AM: When you get this much volatility, avoiding stuff is as important as what you buy.

On that, we avoided getting sucked into those high-valuation, low-profitability type growth stocks. It’s been very positive for us this year, not being in those stocks.

As for what we’ve owned, in this environment, our large caps have done particularly well, in a relative sense. Companies like BHP Group Ltd (ASX: BHP), like National Australia Bank Ltd (ASX: NAB), like Woodside Energy Group Ltd (ASX: WDS).

These large caps have benefited from the environment they’ve been in.

MF: What’s your outlook on these three ASX 200 shares heading into 2023?

AM: We are still holding them.

BHP is obviously exposed to the global economy, and China in particular. On that front, things are a bit more questionable going forward than they were six months ago, particularly around China. They are taking longer to come out of their COVID-zero slump. That may take a bit of time to play through.

Woodside has had a very good run and it’s a little bit more stretched now from a valuation perspective. But the outlook for gas remains strong.

And then National Australia Bank; the banks are one of the few sectors that are getting upgrades. Banks are beneficiaries of higher rates. That’s still playing through.

MF: Why NAB shares rather than some of the other ASX 200 bank stocks?

AM: I think NAB is executing better. They have really reinvented themselves over the last five years.

They’ve reclaimed their title as the best business bank in the country. Business is actually going really well, despite everything else that’s going on. They’ve managed to have a better margin outcome than their peers. And they’ve managed their costs better. So their growth trajectory looks better than some of the others.

**

Tune in tomorrow for part two of our interview with Andrew Martin.

(You can find out more about Alphinity’s Australian, Global, and Sustainable funds here.)

The post Why these 3 ASX 200 shares have done ‘particularly well’ and remain top holdings into 2023: fund manager appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Time to buy? Which ASX 200 shares are trading on single-digit P/E ratios?
• Why did the Woodside share price lag the ASX 200 today?
• Are BHP shares in the buy zone following the latest OZ Minerals news?
• Why Arafura, Nanosonics, NextDC, and OZ Minerals shares are rising today

Motley Fool contributor Bernd Struben 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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On Friday, the S&P/ASX 200 Index (ASX: XJO) finished the week in a positive fashion. The benchmark index rose 0.2% to 7,151.8 points.

Will the market be able to build on this on Monday? Here are five things to watch:

ASX 200 expected to rise again

The Australian share market looks set to start the week with another gain after a decent session on Wall Street on Friday night. According to the latest SPI futures, the ASX 200 is expected to open the day 24 points or 0.3% higher this morning. On Wall Street, the Dow Jones was 0.6%, the S&P 500 rose 0.5%, and the NASDAQ traded flat.

Oil prices tumble

ASX 200 energy shares such as Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) could have a poor start to the week after oil prices tumbled on Friday night. According to Bloomberg, the WTI crude oil price was down 1.9% to US$80.08 a barrel and the Brent crude oil price fell 2.4% to US$87.62 a barrel. Traders were selling oil due to concerns about weakened demand in China and further increases to U.S. interest rates.

Link’s Pexa stake update

The Link Administration Holdings Ltd (ASX: LNK) share price will be on watch on Monday after the administration company announced the sale of 10% of its stake in PEXA Group Ltd (ASX: PXA). Link sold the shares for a discount of $13.50 per share and intends to use the proceeds to repay borrowings. It now plans to distribute the remainder of its holding to shareholders via an in-specie distribution in January.

Altium given neutral rating

The Altium Limited (ASX: ALU) share price will be in focus today after Goldman Sachs initiated coverage on the electronic design software company with a neutral rating and $42.00 price target. Goldman said: “We initiate at Neutral, given balanced risk/reward.” The broker also set out its bull case with a $66 valuation and bear case with a $29 valuation.

Gold price falls

Gold shares such as Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could have a tough start to the week after the gold price fell on Friday. According to CNBC, the spot gold price was down 0.5% to US$1,769 an ounce during the session. The prospect of higher interest rates weighed on the precious metal.

The post 5 things to watch on the ASX 200 on Monday appeared first on The Motley Fool Australia.

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More reading

• Time to buy? Which ASX 200 shares are trading on single-digit P/E ratios?
• Why did ASX 200 gold shares lag the index today?
• Why did the Woodside share price lag the ASX 200 today?
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Friday

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 Altium, Link Administration Holdings Ltd, and PEXA Group 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 Scott Phillips.

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