Day: 4 May 2023

Looking for more passive income? Then you may want to check out the ASX dividend stocks listed below.

Both have been named as buys and tipped to provide investors with attractive fully franked yields. Here’s what you need to know about them:

Dicker Data Ltd (ASX: DDR)

The first ASX dividend stock that has been tipped as a buy is Dicker Data.

It is a technology distributor to over 10,000 resellers across the ANZ region. The company distributes a wide portfolio of products from the world’s leading technology vendors. This includes Cisco, Citrix, Dell Technologies, Hewlett Packard Enterprise, HP, Lenovo, and Microsoft.

The team at Morgan Stanley is very positive on the company’s outlook and is expecting Dicker Data’s earnings to be strong enough to underpin some big dividends in the near term.

For example, the broker is forecasting fully franked dividends per share of 43.8 cents in FY 2023 and 48.8 cents in FY 2024. Based on the latest Dicker Data share price of $8.01, this will mean yields of 5.45% and 6.1%, respectively.

Morgan Stanley currently has an outperform rating and $10.00 price target on its shares.

Super Retail Group Ltd (ASX: SUL)

Another ASX dividend stock that has been tipped as a buy is Super Retail. It is the retail conglomerate behind brands such as Macpac, Rebel, and Super Cheap Auto.

Goldman Sachs is a big fan of the company. In fact, just this morning the broker has responded to the company’s quarterly update by reiterating its buy rating.

It highlights that “the company’s positive trading update continues to display resilience that is built upon its competitive advantage of high loyalty.” The good news is that this will soon be “further bolstered in 2H23 as the company launches the Rebel loyalty program and continues to build personalisation capabilities.”

Goldman is expecting this to support fully franked dividends per share of 74.1 cents in FY 2023 and then 62.6 cents in FY 2024. Based on the current Super Retail share price of $13.45, this will mean yields of 5.5% and 4.7%, respectively.

Goldman Sachs has a buy rating and $14.90 price target on its shares.

The post Brokers say buy these ASX dividend stocks for their big fully franked yields appeared first on The Motley Fool Australia.

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More reading

• Passive income alert! Experts say buy these ASX dividend shares with big and growing yields
• Why Citi says these ASX 200 dividend shares are buys
• Here are the ASX 200 dividend shares to buy: analysts
• Get a passive income boost from these ASX dividend shares: analysts
• 5 steps to bring in $1,000 per month in passive income

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 Dicker Data and Super Retail Group. The Motley Fool Australia has positions in and has recommended Dicker Data and Super Retail Group. 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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Amid the chaos of 11 interest rate rises over the last year, there is one sector that’s been forgotten as a beneficiary.

The banking sector, which dominates the S&P/ASX 200 Index (ASX: XJO) alongside mining, derives a natural benefit from higher interest rates paid by borrowers.

The enviable strength of the major four banks in Australia meant that the local industry even admirably fought through the storms that troubled the US and European institutions in recent months. 

In fact, the S&P/ASX 200 Banks (ASX: XBK) index is only down 2.2% year to date, while its American cousin Dow Jones US Banks Index (DJX: DJUSBK) has taken a 14.1% tumble.

That’s all while the Aussie stocks paid out handsome dividend yields.

Shaw and Partners portfolio manager James Gerrosh reckons Aussie banks unfairly get a bad rap.

“The press so often likes to knock our banks, but they’ve definitely helped most Australians super over the last few years,” he said in a Market Matters newsletter.

So which ASX bank stocks would he be invested in right now?

Fierce competition is ‘running out of steam’

Gerrish revealed that his team is “long and bullish” towards National Australia Bank Ltd (ASX: NAB).

“NAB is set to release its 1H23 result this Thursday with the market looking for NPAT of $4,148 million and an accompanying 91 cent fully franked dividend,” he said.

“The headlines in the three bank results will be one thing but the market will also be looking very closely at key metrics such as net interest margins (NIM), plus of course rhetoric around the state of play economically.”

A once-in-a-generation interest rate hike sequence has definitely assisted the banks, but strong competition in the banking industry has cancelled out this tailwind somewhat.

But that seems to be peaking.

“We actually believe the intense competition between the country’s largest lenders is running out of steam with Westpac Banking Corp (ASX: WBC) hiking rates for new mortgages last month by +0.1% after the RBA kept rates on hold.”

‘Surprises on the upside’

The other big four bank that Gerrish’s team favours is ANZ Group Holdings Ltd (ASX: ANZ), which delivers its update on Friday.

“Market Matters is long and bullish towards ANZ,” he said.

“The market [is] looking for net profit after tax (NPAT) of $3,538 million and an accompanying 79 cent fully franked dividend.”

ANZ is the only big four to have increased share price this year, but the current entry point still looks tempting.

“The valuation story is attractive with ANZ trading at book value, and below historical averages, compared to other major banks.”

Gerrish’s third “long and bullish” pick is not from the big four, but is still a giant in the industry.

“We like Macquarie Group Ltd (ASX: MQG) medium [term], which, as a company, has proven its ability to increase earnings even in a tough economic backdrop.”

It will also provide a financial update on Friday.

“Macaquarie’s retail banking business continues to outperform the entire sector and has consistently posted record mortgage net flows,” said Gerrish.

“Overall, we can see surprises on the upside in Friday’s numbers.”

The post 3 ASX 200 bank shares to go ‘long and bullish’ on right now appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• Buy NAB and this ASX dividend share: analysts
• Why did ANZ shares smash the other ASX 200 banks in April
• Should I snap up Macquarie shares ahead of this week’s full-year results?
• What’s happening with ASX 200 banks today as First Republic teeters on the brink of collapse?

Motley Fool contributor Tony Yoo has positions in Macquarie Group. 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 Macquarie Group. 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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Analysts at Goldman Sachs believe that it could be time to pounce on BHP Group Ltd (ASX: BHP) shares.

This morning, the broker has upgraded the mining giant’s shares to a buy rating with a price target of $49.90.

Based on the current BHP share price of $43.27, this implies potential upside of just over 15% for investors over the next 12 months.

In addition, the broker is forecasting fully franked dividend yields of 7.1% in FY 2023 and 5.7% in FY 2024. This stretches the potential returns on offer with BHP shares to beyond 20%.

Why did Goldman upgrade BHP shares?

According to the note, the broker has now incorporated the OZ Minerals acquisition into its valuation.

Interestingly, Goldman doesn’t see a lot of immediate valuation creation from the acquisition. In fact, the broker suspects it could be value dilutive in the near term. It explains:

The OZL acquisition will increase BHP’s copper production by ~7% and earnings by a modest 1% in FY24 on our estimates, however will also lift group capex and gearing and lower FCF over the medium term.

We see the deal as slightly value dilutive even at our top of the street, long run copper price forecast of US$4.3/lb (real $), and assuming part of the identified ~US$1.5bn (mid-point) in potential synergies associated with both the Olympic Dam and Nickel West smelters are captured over the next 5-10 years.

So why the upgrade? Well, the upgrade is simply due to the current valuation of BHP shares. Goldman believes recent weakness has created a buying opportunity for investors. It adds:

Although we believe BHP’s biggest challenge will be the execution of the Carrapateena block cave and West Musgrave projects within OZL’s budget and timeframe, along with capturing the potential synergies with the smelters that we have identified, we upgrade BHP to Buy (from Neutral) based on attractive valuation after the recent ~15% drop in the stock price since January. The slide in share price is due to the recent drop in iron ore and copper prices on the back lower than expected Chinese steel demand and developed market copper demand in 1Q.

The post Why Goldman Sachs just slapped a buy rating on BHP shares appeared first on The Motley Fool Australia.

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More reading

• Investing for passive income? Here’s your dividend yield if you bought BHP shares in July
• Bye bye OZ Minerals shares
• Worried about the market? 2 ASX dividend stocks that could help you sleep at night
• Dalio says US and China ‘on brink of war’. Which ASX shares could be impacted?
• How I’d generate $400 in monthly passive income from 2 ASX 200 iron ore shares

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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Who doesn’t love the thought of passive income rolling on in every month? If you’ve been thinking about the possibility of earning more and working less, then read on! 

Because we asked our Foolish writers which ASX income shares they reckon could be worth taking for a spin right now.

Here is what the team came up with:

7 best ASX dividend shares for May 2023 (smallest to largest)

• Metcash Limited (ASX: MTS), $3.77 billion
• Viva Energy Group Ltd (ASX: VEA), $4.68 billion
• ASX Ltd (ASX: ASX), $13.18 billion
• South32 Ltd (ASX: S32), $18.98 billion
• Coles Group Ltd (ASX: COL), $24.24 billion
• Rio Tinto Ltd (ASX: RIO), $41.26 billion
• Westpac Banking Corp (ASX: WBC) $79.13 billion

(Market capitalisations as of 3 May 2023).

Why our Foolish writers love these ASX passive-income stocks

Metcash Limited

What it does: Metcash supplies a wide number of independent retailers around the country, including IGA supermarkets, Cellarbrations, The Bottle-O, IGA Liquor, Porters Liquor, Thirsty Camel, Big Bargain Bottleshop, and Duncans. It also owns the hardware brands Mitre 10, Home Timber & Hardware, and Total Tools.

By Tristan Harrison: The Metcash share price has plunged around 19% over the past year, despite the company’s ongoing sales growth in FY23. I think this represents an attractive entry point for ASX income investors in May.

I believe the company’s food, liquor, and hardware divisions have the potential to be quite defensive, regardless of whatever happens next with the economy. Furthermore, Australia’s ongoing population growth should help fuel increased demand.

Commsec numbers put the Metcash share price at just 12 times FY23’s estimated earnings with a possible grossed-up dividend yield of 8.1%.

Motley Fool contributor Tristan Harrison does not own shares in Metcash Limited.

Viva Energy Group Ltd

What it does: Viva Energy supplies about a quarter of Australia’s fuel. The company supplies Shell fuels and lubricants through its national network of around 1,350 Shell and Liberty service stations.

By Bernd Struben: I like Viva Energy as both an ASX income share and one for potential capital appreciation.

Looking at the charts, the share price has marched steadily higher over the past three years. And the company has been expanding through a series of strategic acquisitions.

On 5 April, Viva announced it was acquiring OTR Group for $1.15 billion. The independent Australian convenience retailer generates some $3 billion of annual revenue with around 6,500 employees.

And on 1 May, the company reported it had completed its acquisition of the Coles Express Convenience Retailing business. This will help transform Viva’s retail business into a leading convenience and mobility business.

Viva Energy trades on a trailing yield of 8.8%, fully franked. Shares are up by around 15% since the opening bell on 3 January.

Motley Fool contributor Bernd Struben does not own shares in Viva Energy Group Ltd.

ASX Ltd

What it does: If you have participated in the Australian share market before, there’s a high probability you have interacted with a part of ASX Ltd’s business. The company is responsible for clearing and settling trades, conducting ASX listings, and providing market data.

By Mitchell Lawler: Australia’s largest securities exchange operator has fallen out of favour over the past year during reduced trading in financial markets. 

The subdued revenue growth and a non-cash, pre-tax impairment charge of $251.9 million – due to the CHESS replacement kerfuffle – brought statutory net profits after tax (NPAT) down 70.6% in the first half. 

In turn, ASX Ltd shares are now trading on what appears to be an extremely expensive 40 times earnings. However, I don’t believe the costly CHESS mistakes will be a recurring sight, which should help future earnings and bring that price-to-earnings (P/E) ratio back into reasonable bounds. 

At present, the company offers a trailing dividend yield of 3.5%. With a near-monopoly position and high barriers to entry, I’m personally confident ASX will prevail as a solid dividend payer well into the future.

Motley Fool contributor Mitchell Lawler does not own shares in ASX Ltd.

South32 Ltd

What it does: South32 is a globally diversified mining and metals company that was spun out of BHP Group Ltd (ASX: BHP) in 2015.

By James Mickleboro: I think South32 could be an ASX income share to buy in May if you’re not averse to investing in the mining sector.

I’m a big fan of the company due to the quality and diversity of its operations and its exposure to metals that will play a big role in the decarbonisation of the planet. These include aluminium, copper, and nickel.

Given the demand for these metals will likely remain strong over the next decade (or longer), I feel South32 is well-placed to generate bountiful free cash flow and pay big dividends.

In the near term, the team at Citi expect this to be the case. The broker is expecting fully-franked dividends per share of 21 cents in FY 2023 and 31 cents in FY 2024. This equates to yields of 5% and 7.4%, respectively. Citi also sees scope for its shares to rise from here with its buy rating and $4.90 price target.

Motley Fool contributor James Mickleboro does not own shares in South32 Ltd.

Coles Group Ltd

What it does: Coles operates Australia’s second-largest grocery store chain, with more than 800 stores around the country. It also owns Liquorland, First Choice Liquor Market, and Vintage Cellars.

By Brooke Cooper: With a 3.6% dividend yield, Coles might not be the first ASX share one considers when looking for passive income.

However, I think the current economic environment and the company’s history of dividend growth make it an attractive investment prospect.

Inflation is coming down, but it’s got a long way to go still, and we’re not out of the interest rate woods yet. But no matter how tight budgets get, most Australians won’t be able to shirk their weekly grocery shop.

Further, the company’s sales revenue jumped 6.5% last quarter to nearly $10 billion.

And Morgans agrees with me. It has an add rating and a $19.60 price target on Coles stock.

Motley Fool contributor Brooke Cooper does not own shares in Coles Group Ltd.

Rio Tinto Ltd

What it does: Rio Tinto is an Australian multinational company and one of the world’s largest mining corporations. It has four key operating segments: iron ore, aluminium, copper, and other minerals.

By Bronwyn Allen: Australia is a world leader in resources exploration and mining. Even when commodity prices are low, our big mining companies still make great money and typically pay above-average dividends.

For example, most investors would consider 4% a decent dividend yield. Rio Tinto has paid more than 4% every year for the past eight years. It’s also among the world’s top 20 dividend payers.

Looking ahead, broker Goldman Sachs is forecasting a fully-franked dividend of US$5.36 (AU$8.07) in FY23 (a 7.4% dividend yield) and US$4.68 (AU$7.05) in FY24 (6.5% yield).

Furthermore, I love any ASX share that combines strong dividends with good prospects for share price growth. Unlike the other big dividend payers of the ASX – the banks – I believe miners have far more scope for business growth and development. For example, production has just begun at Rio’s expanded Oyu Tolgoi copper mine in Mongolia.

Rio Tinto owns 66% of this mine, which is set to become the world’s fourth-largest copper project. This is important given demand for copper is expected to rise as the world decarbonises. In 2022, copper was the smallest contributor to Rio’s EBITDA among its four operating segments, so Oyu Tolgoi provides a significant strategic boost and diversification to earnings.

Goldman likes Rio’s projected production growth and improved free cash flow and says this ASX income share is great value at current share price levels. It has a buy rating on Rio Tinto and a 12-month share price target of $136.20.

Motley Fool contributor Bronwyn Allen does not own shares in Rio Tinto Ltd.

Westpac Banking Corp

What it does: Westpac is an ASX 200 share that hardly needs introducing. It is one of Australia’s oldest companies, and today occupies a spot in the exclusive club of the big four ASX banks.

By Sebastian Bowen: If you’re on the hunt for passive income this May, where better to start than the ASX banks?

The big bank shares have long had a reputation as heavy hitters when it comes to dividends, and for good reason.

This continues today, with Westpac’s dividends bouncing back with a vengeance over 2021 and 2022. Right now, the bank is offering a fully franked dividend yield of over 5.5%.

This bank may have had its ups and downs over the past few years. But I think Westpac’s indomitable position in Australia’s economy and financial services sector makes it a great pick if you want to get a chunky stream of passive income started right away.

Motley Fool contributor Sebastian Bowen does not own shares in Westpac Banking Corp.

The post Top ASX passive income shares to buy in May 2023 appeared first on The Motley Fool Australia.

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More reading

• Better ASX blue-chip share to buy for resilient returns: Coles vs Transurban
• Retirees: How you could earn $705 a month in ASX dividends with less than $100K in savings
• My 5-step plan to achieving $500 in monthly passive income
• 3 ASX 200 stocks I’ll be watching like a hawk in May
• Should I buy Westpac shares ahead of next week’s half-year results?

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 Coles Group. The Motley Fool Australia has recommended Metcash and 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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Warren Buffett – CEO of the US$692 billion Berkshire Hathaway ­– is best known as a value investor.

In fact, in a recent Bloomberg investor survey, the majority of respondents said his biggest legacy will be, “Buying stocks for less than what they are worth.”

The Oracle of Omaha is also a famously long-term investor, steers clear of stocks he doesn’t understand, and looks for companies with big ‘moats’, or barriers to entry.

Atop his success in steering Berkshire Hathaway alongside his right-hand man Charlie Munger, Warren Buffett’s investing philosophy has also helped net him a personal fortune of more than US$100 billion.

And he’s not done yet.

Where to for growth?

As The Motley Fool reported on 12 April, Buffett recently increased Berkshire’s holdings in five Japanese trading houses: Itochu Corp, Marubeni Corp, Mitsubishi Corp, Mitsui & Co, and Sumitomo Corp.

Trading houses are what conglomerates that trade across a wide range of products are called in Japan.

Berkshire initially acquired just over 5% of each of the five corporations back in 2020.

“They were selling at what I thought was a ridiculous price. Particularly the price compared to the interest rates prevailing at that time,” Warren Buffett recently said of the 2020 acquisitions.

At the time, he commented:

I am delighted to have Berkshire Hathaway participate in the future of Japan and the five companies. The five major trading companies have many joint ventures throughout the world and are likely to have more of these partnerships. I hope that in the future there may be opportunities of mutual benefit.

Last month, Berkshire increased its stake in each of the five Japanese trading houses to 7.4%.

Buffett met with a range of top Japanese business leaders when he was in Tokyo.

Citing people with knowledge of the talks, Bloomberg reports the Japanese executives wanted the Oracle’s advice and help on how to speed up their transition from commodities.

He asked a lot of questions and was said to be eager to find ways to work with them.

But the big question is, why is Warren Buffett increasing his investments in Japan right now?

According to Fast Retailing founder Tadashi Yanai, worth a cool US$36 billion himself, “It’s probably the influence of the weak yen.”

Yanai added:

And he may think there are many companies in Japan with growth potential. The trading houses could be a guide to Japanese companies. They could be a guide to the Japanese market in that they can contact all these firms.

How can ASX investors mimic Warren Buffett?

If you want to limit your investments to the ASX, you won’t be able to buy shares in the five trading houses Warren Buffett just poured more money into.

But there is a way to gain direct exposure to the Japanese stock market via an ASX-listed exchange-traded fund (ETF).

Namely the iShares MSCI Japan ETF (ASX: IJP). IJP, according to the company’s website, provides investors with targeted access to some 85% of the Japanese stock market.

While only making up a small percentage of IJP’s total holdings, all five of the Japanese conglomerates Warren Buffett looks to be targeting for growth are held by the ASX ETF.

The IJP share price is up 9% so far in 2023.

The post Where is Warren Buffett looking for growth stocks right now? appeared first on The Motley Fool Australia.

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More reading

• Warren Buffett is doubling down on these Japanese stocks. How can ASX investors do the same?

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 positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. 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 Wednesday, the S&P/ASX 200 Index (ASX: XJO) had a tough session and sank deep into the red. The benchmark dropped 0.95% to 7,197.4 points.

Will the market be able to bounce back from this on Thursday? Here are five things to watch:

ASX 200 expected to fall

The Australian share market is expected to have another tough session on Thursday after a poor night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 25 points or 0.35% lower this morning. In the United States, the Dow Jones tumbled 0.7%, the S&P 500 dropped 0.6% and the NASDAQ fell 0.35%.

US Federal Reserve raises interest rates

The US Federal Reserve has completed its monetary policy meeting and has decided to increase interest rates by 0.25%. This is the 10th increase since March 2022, taking the central bank’s benchmark borrowing rate to a target range of 5%-5.25%. Looking ahead, while the Fed hasn’t ruled out further hikes, it looks set to hit pause for the time being.

Oil prices continue to fall

ASX 200 energy shares Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could have another tough session after oil prices continued to fall on Wednesday night. According to Bloomberg, the WTI crude oil price is down 4.5% to US$68.32 a barrel and the Brent crude oil price is down 4.3% to US$72.08 a barrel. Demand concerns continue to weigh heavily on oil prices.

NAB half-year results

The National Australia Bank Ltd (ASX: NAB) share price will be on watch today when the banking giant releases its half-year results. According to a note out of Goldman Sachs, its analysts are expecting the bank to report cash earnings (before one-offs) growth of 21.5% to $4,227 million. This is ahead of the consensus estimate of $4,151 million. Goldman also expects an interim dividend of 84 cents per share.

Gold price rises

ASX 200 gold shares Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) could have a decent session after the gold price edged higher overnight. According to CNBC, the spot gold price is up 0.4% to US$2,031.7 an ounce. Traders were buying gold amid hopes the US Fed will pause its rate hikes.

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

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More reading

• Should you buy the dip in the Santos share price?
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Why are ASX 200 gold shares going gangbusters today?
• Investing for passive income? Here’s your dividend yield if you bought BHP shares in July

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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