Day: 28 November 2022

There are a handful of ASX exchange-traded funds (ETFs) that I think can deliver outperformance in 2023 because of the types of businesses that they’re invested in.

2022 has been a rough year for a number of segments of the share market. ASX growth shares and bond-like ASX shares (such as real estate investment trusts (REITs)) have had a tough time as higher interest rates bite. ‘Quality’ has also suffered.

However, I think investors have already accounted for the headwind of higher interest rates. The main problem now could be for particular businesses when investors are disappointed by earnings announcements.

From here, in the current environment, I think it will be companies ranking well on quality metrics that can do well to weather whatever happens next. That’s why I like these two ASX ETFs.

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

This ETF is one of my preferred investment ideas. The portfolio is put together by analysts at Morningstar.

The analysts focus on quality US companies that are believed to have “sustainable competitive advantages” or “wide economic moats”. That refers to things like cost advantages, brand, network effects, intellectual property, and so on.

But, these quality businesses are only purchased when they are trading at attractive prices compared to Morningstar’s estimate of fair value.

While past performance isn’t a guarantee of future results, I think the historical outperformance shows that this investing method can deliver. Over the prior five years to October 2022, the VanEck Morningstar Wide Moat ETF has delivered an average return per annum of 15.1% compared to an average return of 13.9% per year for the S&P 500.

Some of the biggest positions right now in the ASX ETF are: Biogen, Gilead Sciences, Etsy, Mercado Libre, Emerson Electric, Boeing, and Blackrock.

VanEck MSCI International Quality ETF (ASX: QUAL)

The idea behind this ETF is to “access the world’s highest quality companies based on key fundamentals”. These include a high return on equity, earnings stability, and low financial leverage.

What this suggests is that investors are getting exposure to a group of companies that make strong, stable profits for shareholders, while having low levels of debt on their balance sheets.

According to VanEck, the companies with these sorts of ‘quality’ metrics have “delivered outperformance over the long term relative to global equity benchmarks”.

However, past performance is not a guarantee of future performance. The VanEck MSCI International Quality ETF has returned an average of 12.8% per annum over the five years to 31 October 2022, compared to a 10.4% return per annum for the MSCI World excluding Australia Index.

Positions in the 300-name portfolio include Apple, Microsoft, Johnson & Johnson, UnitedHealth, and Visa.

Around three-quarters of the ASX ETF’s portfolio is invested in businesses listed in the US, while the rest come from countries like Switzerland, Japan, the UK, the Netherlands, and Denmark.

The post Could these be the best ASX ETFs to buy now for 2023? appeared first on The Motley Fool Australia.

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More reading

• Skin in the game: The ASX share in my portfolio I’m most excited about
• 3 fantastic ETFs for ASX investors to buy in December
• 2 top ETFs for beginner investors to buy
• 3 quality ETFs for ASX investors to buy this month
• 2 of the best ETFs for ASX investors to buy next week

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 Apple, Emerson Electric Co., Etsy, Gilead Sciences, MercadoLibre, Microsoft, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Biogen, Emerson Electric, Johnson & Johnson, and UnitedHealth Group and has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple and VanEck Vectors Morningstar Wide Moat 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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Woolworths Group Ltd (ASX: WOW) shares and Coles Group Ltd (ASX: COL) shares both pay dividends to their shareholders.

Yet, these days, the two businesses are not as similar as they used to be.

Woolworths operates the Australian Woolworths supermarkets, Countdown supermarkets in New Zealand, business-to-business suppliers, and the retailer Big W.

Meantime, Coles runs Coles supermarkets in Australia, its Coles Express business, and the company owns a number of liquor retailers like First Choice Liquor, Liquorland, and Vintage Cellars.

According to the ASX, the market capitalisation of Coles is around $23 billion while Woolworths has a market capitalisation of around $42 billion.

The big question is which one has a higher dividend yield? So let’s look at that first.

Dividend yield

Looking at the numbers from FY22, Woolworths paid an annual dividend per share of 92 cents. That equates to a grossed-up dividend yield of 3.75%.

Coles paid an annual dividend per share of 63 cents per share. That translates into a grossed-up dividend yield of 5.25%.

As we can see, in terms of the current yield, Coles is the clear winner compared to Woolworths.

Valuation difference

A key statistic that can help investors compare businesses is the price/earnings (p/e) ratio. This shows what multiple of earnings the share price is valued at.

Using the estimated earnings for FY23 is probably the better measure to use rather than the last financial year because markets are usually forward-looking. It’s the next financial year that investors are typically focused on and valuing the business at, rather than the last year.

According to Commsec, the Coles share price is valued at under 22 times FY23’s estimated earnings. The Woolworths share price is valued at under 26 times FY23’s estimated earnings. The fact is that Woolworths is measurably more expensive than Coles.

What about future dividends?

However, what happened in FY22 is only a small amount of time compared to the long-term future of these businesses.

While it’s impossible to know what the future will be, we can certainly guess what future dividends will be.

Using the estimates on Commsec, Woolworths shares are expected to pay an annual dividend per share of $1.01 in FY23. This would represent a grossed-up dividend yield of 4.1%.

Then, in FY24, it could end up paying an annual dividend per share of around $1.12. This would represent a grossed-up dividend yield of 4.6%.

Let’s compare how much Coles shares may dish out in dividends.

Commsec suggests that Coles may pay an annual dividend per share of 65 cents in FY23 and 66 cents in FY24. This would represent forward grossed-up dividend yields of 5.4% and 5.5%, respectively.

Foolish takeaway

It seems that Coles shares are going to be the better source of dividends in the next few years. But that may not necessarily mean that Woolworths shares will produce smaller total returns. Woolworths may be able to achieve stronger earnings per share (EPS) growth, leading to more attractive share price growth.

The post Battle of the dividends: Do Woolworths shares pay more than Coles? appeared first on The Motley Fool Australia.

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More reading

• Almost ready to retire? Here’s why I’d buy Coles shares for dividends
• Use the ASX 200 market correction to retire early. Here’s how
• If you bought $15,000 worth of Woolworths shares this year, here’s how much dividend income you’d have
• Markets are nervous. Why waiting to buy these ASX 200 shares could prove expensive
• How big will the Coles dividend be in 2023?

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 positions in and has recommended COLESGROUP DEF SET. 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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Are you looking for dividend shares to boost your income portfolio? If you are, you may want to check out the two listed below that have been tipped to provide attractive yields.

Here’s what you need to know about these ASX dividend shares today:

Dicker Data Ltd (ASX: DDR)

The first dividend share to look at is Dicker Data. It is one of the largest technology hardware, software, cloud, cybersecurity, access control and surveillance distributors in Australia and New Zealand.

Dicker Data could be a quality option for income investors thanks to its long track record of growth and its positive long-term outlook. The latter will be supported by the company’s recent capital raising which is funding a 70% increase in its warehouse capacity. This provides the company with a significant runway to capture additional growth in the coming years and is also expected to deliver cost savings.

Goldman Sachs is currently forecasting fully franked dividends per share of 43.6 cents in FY 2022 and 49.7 cents in FY 2023. Based on the current Dicker Data share price of $10.63, this equates to yields of 4.1% and 4.7%, respectively.

And while Goldman only has a neutral rating on its shares, its price target of $12.25 offers upside potential of 15%.

Westpac Banking Corp (ASX: WBC)

Another ASX dividend share that is expected to provide attractive dividend yields is Westpac.

It is of course Australia’s oldest bank and one of the big four players in the Australian market. As well as its eponymous Westpac brand, it also owns other banking brands such as Bank of Melbourne and St Georges.

Thanks to a combination of rising interest rates and its cost cutting plans, the bank has been tipped to pay big dividends in the coming years.

For example, Goldman Sachs is forecasting fully franked dividends per share of 148.4 cents in FY 2023 and 160 cents in FY 2024. Based on the current Westpac share price of $23.99, this will mean yields of 6.2% and 6.7%, respectively.

The good news is that Goldman Sachs also sees plenty of upside for the bank’s shares. It currently has a conviction buy rating and $27.60 price target on the bank’s shares.

The post These ASX dividend shares have 4%+ forecast yields appeared first on The Motley Fool Australia.

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More reading

• Here’s the Westpac dividend forecast through to 2025
• Morgans names the best ASX 200 dividend shares to buy
• Are ASX 200 bank shares a buying opportunity hiding in plain sight?
• If I’d invested $1,000 in Westpac shares at the start of 2022, here’s how much I’d have now
• Brokers say these ASX 200 dividend shares are buys

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Dicker Data Limited. The Motley Fool Australia has positions in and has recommended Dicker Data Limited. 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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Can you believe it? December is almost upon us.

That means that, after a crazy year in share markets, expert predictions for 2023 will start to pop up.

One of the first cabs off the rank is Switzer Financial Group founder Peter Swtizer.

“I reckon the [Australian] market goes up 10% next year,” he told Switzer TV Investing.

“Add on dividends of 4% and franking too, and there’s 15% or 16%.”

As for individual stocks, he named three that are his favourites for next year:

The stock capable of doubling in 2023

Virtual networking provider Megaport Ltd (ASX: MP1) has seen its share price tumble a hair-raising 66% year to date.

But Switzer is convinced it is poised for a turnaround.

“Megaport is one I really like,” he said.

“Analysts really like it. At least two of the seven analysts see Megaport with over 100% gain over the next year.”

The returns won’t happen overnight, he added, and will need the market’s “forgiveness of the tech sector”.

“That will come when inflation peaks out in the US — and I think it’s already already happening — and interest rates have peaked as well.”

Those two conditions might still take some time to play out, Switzer warned.

“So it might not be until the second half of 2023 [that] the tech rebound will happen.”

Great world-class company

Healthcare giant CSL Limited (ASX: CSL) seems to be a favourite among analysts at the moment, and Switzer is no exception.

“CSL is a company that’s always worth investing in,” he said.

“The share price is still below what most analysts believe it will be this year.”

Consensus price target seems to be around $320, according to Switzer, but he reckons it will end up higher than that this time next year.

“CSL — great company, world class — has been going sideways for a number of years. It tends to do that and it takes off again.”

Buy this stock while it’s still out of favour

Electronics retailer JB Hi-Fi Limited (ASX: JBH) is Switzer’s third favourite for 2023.

“These sorts of companies are out of favour at the moment because interest rates are rising,” he said.

“People who have to make their mortgages on higher repayments will have less money to spend.”

But he feels JB Hi-Fi is “a good company” that’s worth considering as a long-term investment, with a nice income stream to keep investors going in the short term.

“JB Hi-Fi pays a really reasonably good dividend and is always a company of the future,” said Switzer.

“As the old saying goes, when great companies are being beat up by the market, it’s a good time to buy.”

The post ‘Over 100% gain next year’: Expert picks 3 best ASX shares for 2023 appeared first on The Motley Fool Australia.

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More reading

• 3 ASX shares to combat the next market dip: experts
• I’d aim for $1 million in retirement buying just 10 ASX 200 shares
• Here are the top 10 ASX 200 shares today
• Why did ASX 200 retail shares lead the market to fresh 25-week highs today?
• Why this could be a ‘powerful driver of sector dominance’ for CSL shares: Wilsons

Motley Fool contributor Tony Yoo has positions in CSL Ltd. and MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. and MEGAPORT FPO. The Motley Fool Australia has recommended JB Hi-Fi Limited and MEGAPORT 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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On Friday, the S&P/ASX 200 Index (ASX: XJO) finished the week with a small gain. The benchmark index rose 0.25% to 7,259.5 points.

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

ASX 200 expected to fall

The Australian share market looks set to start the week in the red following a mixed session on Wall Street on Friday night. According to the latest SPI futures, the ASX 200 is expected to open the day 9 points or 0.1% lower this morning. On Wall Street, the Dow Jones was up 0.45%, the S&P 500 fell slightly, and the NASDAQ dropped 0.5%.

Oil prices drop

ASX 200 energy shares such as Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) could have a tough start to the week after oil prices tumbled on Friday night. According to Bloomberg, the WTI crude oil price was down 2.1% to US$76.28 a barrel and the Brent crude oil price fell 2% to US$83.63 a barrel. Traders were selling oil due to concerns that soaring COVID cases in China could lessen demand.

Costa shares downgraded

The Costa Group Holdings Ltd (ASX: CGC) share price is fully valued according to analysts at Bell Potter. According to the note, the broker has downgraded the horticulture company’s shares to a hold rating with an improved price target of $2.90. It commented: “We downgrade our rating from Buy to Hold following the recent recovery in the share price.”

Gold price flat

Gold miners such as Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could have a subdued start to the week after the gold price traded flat on Friday. According to CNBC, the spot gold price was steady at US$1,754.93 an ounce during the session. A stronger US dollar put pressure on the precious metal.

Fletcher Building given buy rating

The Fletcher Building Limited (ASX: FBU) share price could be great value according to Goldman Sachs. This morning the broker initiated coverage on the building products company with a buy rating and $5.90 price target. While Goldman believes that key markets are at or near cyclical peaks, it believes “the share price captures the cyclical headwind (and more).”

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

• If you bought $20,000 worth of Fortescue shares this year, here’s how much dividend income you’d have
• Here are the top 10 ASX 200 shares today
• Why did ASX 200 retail shares lead the market to fresh 25-week highs today?
• Why is the Allkem share price diving 8% 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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended COSTA GRP 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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