Author: openjargon

Investing $100 into ASX shares each month might not sound like it could grow into something significant.

Particularly if you want to generate passive income.

After all, with an average dividend yield of 4%, a $100 investment would yield just $4 of dividend income.

However, you might be surprised to learn that by investing consistently each month for a long period, you could grow your wealth materially.

This is thanks to the magical power of compounding, which is what happens when you earn interest on interest or returns on returns.

Turning $100 a month into passive income with ASX shares

As I mentioned above, the key to growing your wealth is investing this relatively modest sum consistently. This allows you to take full advantage of compounding. But how much could it grow into one day?

Well, historically the share market has generated an average return of 10% per annum. While there is no guarantee that this will be the case in the future, we’re going to base our assumptions on this level of return.

With that in mind, if you were to invest $100 a month into ASX shares and earned the market return, you would see your investments grow to become worth approximately $20,000 in 10 years.

While you could generate some passive income at this stage, it really would be worth continuing to invest to grow your portfolio further. Especially now compounding is starting to show its power.

If you were to keep going for a further 10 years, bringing us to 20 years in total, your portfolio would have a market value of approximately $72,000.

Now you have a choice. You could switch your focus to income and invest in high yielding ASX dividend shares that average 6% yields. This would lead to passive income of around $4,500.

Alternatively, you could keep going with your $100 a month investments. This option certainly could be worth it. That’s because after another 10 years your portfolio would be worth almost $210,000.

At that point, a 6% dividend yield would generate passive income of $12,600.

Other options

Investors have plenty of options to speed up the process.

For example, if you were to invest $250 a month, all else equal, your portfolio would be worth $50,000 in 10 years, $180,000 in 20 years, and then $520,000 in 30 years. This would position you to generate significantly more passive income from your ASX shares.

Alternatively, investors could increase their contributions as the years go by and their salaries increase.

Ultimately, the keys to success are investing smartly, consistently, and patiently.

The post How much passive income could I earn by investing $100 a month in ASX shares? 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 200 shares today
• How the latest GDP data could bring ASX 200 investors interest rate relief
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today

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.

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

Shares of Nvidia (NASDAQ: NVDA) surged higher (again) on Wednesday, jumping as much as 5.2%. At the end of the day, the stock was still up 5.2%, putting its market cap above $3 trillion for the first time.

Several developments in the field of artificial intelligence (AI) helped fuel the stock’s relentless rise.

The poster child for AI

As the leading provider of graphics processing units (GPUs) used in artificial intelligence (AI), it seems any bit of positive news in the space can be a catalyst for Nvidia stock. The phenomenon was in full view today.

News broke that Taiwan Semiconductor Manufacturing, also called TSMC, is purchasing a high-NA extreme ultraviolet machine from ASML. This marks the latest in AI chipmaking technology, and Nvidia is TSMC’s second-largest customer, giving it full access to this top-of-the-line tech.

In an unrelated development, Hewlett Packard Enterprise reported the results of its fiscal second quarter (ended April 30), and the results blew past even the most bullish expectations. While the company generated modest year-over-year gains, it cited growing demand for AI as the catalyst for its better-than-expected results.

What’s good for the goose…

What do these developments have to do with Nvidia? Nothing, at least not directly. However, it does illustrate that the demand for AI continues to accelerate, bolstering the theory that it’s still very early days for AI. Consequently, what’s good for AI seems to be good for Nvidia.

The company has been among the biggest beneficiaries of AI adoption, as Nvidia’s processors are the gold standard for AI use cases. While estimates vary, Nvidia is credited with a market share of roughly 90% of the AI chip market.

Finally, excitement has reached a fever pitch ahead of Nvidia’s 10-for-1 stock split, which is scheduled to take place after the market close on Friday.

The adoption of generative AI continues to gain steam. While estimates vary wildly, the size of the market is expected to be between $2.6 trillion and $4.4 trillion in the coming years, according to global management consulting firm McKinsey & Company.

The growing body of evidence suggests there’s still plenty of room left for Nvidia to run.

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

The post Why Nvidia stock blasted to a $3 trillion market cap on Wednesday appeared first on The Motley Fool Australia.

More reading

• What is the dividend payout for Nvidia stock?
• Is Nvidia stock going to $1,500?
• Which ASX stock I’d rather buy than Nvidia at $1,148 per share
• Nvidia stock: 4 reasons to buy, 4 reasons to sell
• ‘Significant potential’: One unexpected ASX 200 AI share to buy now

Danny Vena has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ASML, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia has recommended ASML and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

A few ASX 200 shares are due to go ex-dividend soon. When this happens, it means that the rights to an upcoming dividend are settled.

As a result, if you are not on its share registry when the ex-dividend date is reached, you won’t be receiving the dividends when they are paid.

With that in mind, let’s now take a look at three ASX 200 shares that have ex-dividend dates next week.

Here’s when you will need to buy their shares if you want to receive these dividends:

ALS Ltd (ASX: ALQ)

Last month, this testing services company released its FY 2024 results and revealed a 6.8% increase in underlying revenue to $2,586 million.

And while ALS posted a massive $278.3 million decline in statutory net profit after tax to just $12.9 million, this was predominantly due to impairments and restructuring provisions, as well as other one-off items.

This didn’t stop the ALS board from declaring a final dividend of 19.6 cents per share, which represents a payout of $94.9 million.

If you want to receive this dividend, you will need to buy the ASX 200 share before it trades ex-dividend on 12 June. After which, you can look forward to receiving the partially franked dividend next month on 2 July.

Champion Iron Ltd (ASX: CIA)

Another ASX 200 share that released its FY 2024 results last month was Champion Iron. The Canadian iron ore miner reported FY 2024 revenue of C$1,524 million and EBITDA of C$553 million.

This allowed the Champion Iron board to declare a 10 Canadian cents (11 Australian cents) per share final dividend. Its shares will trade ex-dividend for this on 13 June. The company will then pay it to eligible shareholders on 3 July.

Incitec Pivot Ltd (ASX: IPL)

This agricultural chemicals and commercial explosives company reported its half year results in the middle of May.

Incitec Pivot posted a net loss after tax including individually material items (IMIs) of $148 million. However, these IMIs were largely non-cash impairments of the fertilisers business.

Net profit after tax excluding IMIs came in at $164 million for the six months. In light of this, the ASX 200 share was able to declare an unfranked interim dividend of 4.3 cents per share.

Incitec Pivot’s shares will be going ex-dividend for this on 13 June. It is then scheduled to be paid to eligible shareholders three weeks later on 4 July.

The post 3 ASX 200 shares with ex-dividend dates next week appeared first on The Motley Fool Australia.

More reading

• Leading brokers name 3 ASX shares to buy today
• Forget Fortescue and buy this ASX mining stock now
• 5 things to watch on the ASX 200 on Monday
• These ASX shares can rise 25% to 100%+
• 4 ASX 200 shares being scooped up by insiders

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.

Chances are that if you own ASX shares, or have ever been involved with the world of the ASX share markets, you would have heard about the wonders of franking credits and a ‘fully-franked dividend‘.

Whenever you hear someone discussing ASX dividend investing, it will only be a matter of time until franking comes up.

Franking is a unique feature of Australia’s tax system. And understanding franking and how it relates to personal finances is vital, particularly around this time of year when our tax lodgings are coming up.

So, let’s start at the beginning.

What are franking credits?

Franking credits were first introduced in the 1980s to correct what many saw as an unfair point of our tax system.

When a company pays a dividend, it can only do so from a pool of profits that have already been taxed at the corporate level. Before franking was introduced, dividend payments to shareholders were treated as ordinary income subject to income tax. This effectively meant they were taxed twice.

Recognising that this practice of taxing dividends twice was arguably unfair, the Federal Government introduced franking. Put simply, if a company today pays a dividend from a pool of cash that has already been taxed, that dividend comes with a receipt of sorts that confirms the tax already paid. That ‘receipt’ is officially known as a franking credit (sometimes called an imputation credit).

Those investors who receive these franking credits in recognition of the taxes that have already been paid can use them as a tax deduction against other income. If someone receiving the franking credits has no taxable income (a retiree, for example), they can claim the franking credits back as a cash refund.

Franking and tax time

Most ASX shares that pay dividends are taxed in Australia. As such, fully franked dividends are common on the ASX.

Telstra Group Ltd (ASX: TLS), Woolworths Group Ltd (ASX: WOW) and BHP Group Ltd (ASX: BHP) are some examples of shares that almost always fork out fully franked dividends. As are most of the ASX banks, including the Commonwealth Bank of Australia (ASX: CBA).

However, some companies have operations outside Australia and thus pay their taxes in other jurisdictions. If this is the case, these companies might only pay partially franked dividends or even completely unfranked dividends.

Franking credits are very valuable to almost every ASX investor. For example, let’s say an ASX share pays out a fully franked dividend worth a yield of 5%. In this scenario, the grossed-up yield with the value of the franking credits included would be approximately 7.14%. That extra return can make a big difference to an investor’s wealth over time.

Now, you might understand why almost every ASX investor loves a fully-franked dividend.

So, if you have ASX shares, double-check the franking credits you are entitled to receive and be sure to include them on your tax return.

The post Tax time: If you have ASX shares, here’s what you need to know about franking credits appeared first on The Motley Fool Australia.

More reading

• How much passive income could I earn by investing $100 a month in ASX shares?
• Why Nvidia stock blasted to a $3 trillion market cap on Wednesday
• 3 ASX 200 shares with ex-dividend dates next week
• 3 ASX shares set for dividend increases this year
• Are Woolworths shares a no-brainer buy?

Motley Fool contributor Sebastian Bowen has positions in Telstra 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 Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Australian share market is filled to the brim with dividend-paying shares.

However, not all of these ASX shares will be paying dividends that are larger than what they paid last year.

But three shares that analysts believe are destined to increase their dividends this year (and next) are listed below.

Here’s what they are forecasting for these ASX shares:

Deterra Royalties Ltd (ASX: DRR)

Deterra Royalties has been tipped to pay some big (and growing) dividends to investors. It is a mining royalties company, pocketing money from mining operations such as Mining Area C, operated by BHP Group Ltd (ASX: BHP), without lifting a shovel.

In FY 2023, the company rewarded its shareholders with a fully franked 28.9 cents per share dividend.

According to a recent note out of Morgan Stanley, its analysts are forecasting Deterra Royalties to increase its dividend to 32.7 cents in FY 2024 and then 39 cents in FY 2025. Based on the current Deterra Royalties share price of $4.58, this will mean dividend yields of 7.1% and 8.5%, respectively.

Morgan Stanley also sees plenty of upside for this ASX share. It currently has an overweight rating and $5.60 price target.

Suncorp Group Ltd (ASX: SUN)

Another ASX share that could be destined to grow its dividends is Suncorp. It is one of Australia’s largest insurance companies, operating brands including AAMI, Apia, Bingle, GIO, Shannons, and Vero.

In FY 2023, the insurance giant paid shareholders a fully franked 60 cents per share dividend.

Analysts at Goldman Sachs believe that a big increase is coming in FY 2024, with another more modest increase the year after. It is forecasting fully franked dividends per share of 78 cents in FY 2024 and then 83 cents in FY 2025. Based on the current Suncorp share price of $16.19, this will mean dividend yields of 4.8% and 5.1%, respectively.

Goldman has a buy rating and $17.54 price target on its shares.

Telstra Corporation Ltd (ASX: TLS)

Finally, a third ASX share that looks set to increase its dividend this year and next is telco giant Telstra.

In FY 2023, the company’s return to growth allowed the Telstra board to increase its dividend to a fully franked 17.5 cents per share.

Goldman Sachs believes this trend can continue thanks to the strength of its mobile business. As a result, it is forecasting fully franked dividends of 18 cents per share in FY 2024 and then 18.5 cents per share in FY 2025. Based on the current Telstra share price of $3.53, this equates to yields of 5.1% and 5.25%, respectively.

The broker has a buy rating and $4.25 price target on its shares.

The post 3 ASX shares set for dividend increases this year appeared first on The Motley Fool Australia.

More reading

• Are Telstra shares now a brilliant bargain?
• ‘Undervalued’: 3 ASX 300 shares to buy following significant share price falls
• Buy Rio Tinto and these ASX dividend stocks for 5%+ yields
• 2 ASX income shares with 20%+ upside and 6%+ dividend yields
• Here is the earnings forecast through to 2026 for Telstra 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 positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Every so often, the share market throws up some amazing investment opportunities.

Could Woolworths Group Ltd (ASX: WOW) shares be one of these right now?

With its shares down 21% from their highs, let’s see what analysts are saying about the supermarket giant.

Are Woolworths shares a no-brainer buy?

The team at Goldman Sachs thinks that investors should be fighting to get hold of Woolworths shares while they are down in the dumps.

A recent note out of the investment bank reveals that the broker has a conviction buy rating and $39.40 price target on the retailer’s shares.

Based on the current Woolworths share price of $31.99, this implies potential upside of 23% for investors over the next 12 months.

Let’s put that into context. If you were to invest $10,000 into the company’s shares, this would turn into $12,300 if Goldman Sachs’ is on the money with its recommendation and valuation.

But the returns won’t stop there. Your $10,000 investment would also generate income from dividends.

Goldman is forecasting fully franked dividends of $1.08 per share in FY 2024, $1.14 per share in FY 2025, and then $1.23 per share in FY 2026. This represents dividend yields of 3.4%, 3.55%, and 3.85%, respectively.

And in respect to dividend income, this would yield approximately $340, $355, and $385 of dividends for those financial years.

Why Woolies?

Goldman believes that recent weakness means that Woolworths shares are trading at an attractive level for a value entry point. Particularly given the company’s quality and its defensive earnings.

In addition, the broker is positive about Woolworths’ growth outlook due largely to its customer loyalty. It believes this is among the stickiest that you will find in Australia, which bodes well for the future. Goldman summarises:

WOW is the largest supermarket chain in Australia with an additional presence in NZ, as well as selling general merchandise retail via Big W. We are Buy rated on the stock as we believe the business has among the highest consumer stickiness and loyalty among peers, and hence has strong ability to drive market share gains via its omni-channel advantage, as well as its ability to pass through any cost inflation to protect its margins, beyond market expectations. The stock is trading below its historical average (since 2018), and we see this as a value entry level for a high-quality and defensive stock.

The post Are Woolworths shares a no-brainer buy? appeared first on The Motley Fool Australia.

More reading

• Would I be crazy to buy Coles shares at $16?
• About to retire? I’d buy these ASX dividend shares for income
• Here’s how the ASX 200 market sectors stacked up last week
• How I’d try to turn an empty portfolio into $300k by buying cheap ASX shares, starting now
• 3 ASX 200 blue-chip shares to buy now

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 Goldman Sachs Group. 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.

The Wesfarmers Ltd (ASX: WES) share price has surged 34% over the past 12 months to close at $65.40 on Wednesday.

Shares in the retail conglomerate have soared despite challenging economic times as sticky inflation and high interest rates continue to take a toll on consumer spending.

Wesfarmers has outperformed other retailers over the same period, including Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL), which dropped by 16% and 7%, respectively.

So, is it too late to buy Wesfarmers shares?

Strong retail business

Wesfarmers owns a diversified portfolio of retail businesses, including Officeworks, Bunnings, and Kmart, which helps the company perform defensively through various economic cycles.

In the company’s half-year FY2024 results announcement, Wesfarmers managing director Rob Scott highlighted:

Wesfarmers’ retail divisions executed strongly during the half, responding effectively to changing customer needs as households increasingly sought out value.

In this environment, the retail divisions’ core offer of everyday products with market-leading value credentials supported growth in sales and customer transaction numbers.

Weak lithium prices add pressure

While its retail business is going strong, its lithium project is affected by weak global commodity prices.

Wesfarmers is investing in a lithium mining project at Mt Holland, which is in the ramp-up stage. The project’s profitability largely depends on fluctuations in global commodity prices and foreign exchange rates.

Unfortunately, the lithium price plummeted last year, falling 67% from US$45,000 per tonne of lithium carbonate to approximately US$14,500 per tonne today. As my colleague Bronwyn noted here, the outlook remains uncertain as the global lithium price is closely tied to the demand for electric vehicles.

Wesfarmers acknowledged these challenges. In the half-year results briefing, Scott added:

Strong operating performance continued in WesCEF, with good plant availability and production rates during the period. As previously indicated, earnings for the half were impacted by lower global commodity prices relative to the elevated pricing environment over recent years.

The Mt Holland concentrator was successfully commissioned during the half, and operations recently entered the ramp-up phase. Good progress continued on the construction of the Kwinana lithium hydroxide refinery.

How cheap are Wesfarmers shares now?

Wesfarmers shares are trading at 27 times FY24’s estimated earnings, which is at the high end of its historical trading range of 15 to 30 times. The company offers a fully-franked dividend yield of 3%.

Comparing Wesfarmers to its peers, based on earnings estimates provided by S&P Capital IQ:

• Woolworths shares are valued at 22x FY24’s estimated earnings.
• Coles shares are valued at 26x FY24’s estimated earnings.

The outperformance of Wesfarmers compared to its peers prompted Goldman Sachs to downgrade the consumer discretionary stock in favour of staples recently. In this downgrade report summarised by my colleague Bronwyn, Goldman Sachs analysts Lisa Deng and James Leigh highlighted:

… our Buy thesis of resilient retail (Bunning and Kmart) businesses generating ~A$2.0-A$2.5 billion free cashflow to invest behind growth opportunities (Digital and Health) is now fully factored in.

Foolish takeaway

Wesfarmers owns several high-quality retailers with strong customer loyalty. It also invests in diverse industries, including healthcare, chemicals, and industrial businesses.

However, its current valuation isn’t cheap relative to its history, making this a tricky investment decision.

While the Wesfarmers share price may not be a bargain, the company has been an excellent dividend payer over the years. At the current price, Wesfarmers offers a fully franked dividend yield of 3%.

I think it might still be worth considering for long-term dividend investors.

The post Up 34% in a year, is it too late to buy Wesfarmers shares? appeared first on The Motley Fool Australia.

More reading

• 2 great ASX All Ords shares that I’d like to buy
• Do Wesfarmers shares pay a decent ASX dividend?
• ASX retail shares mixed amid modest April sales growth
• ASX investors may choose supermarkets over Wesfarmers shares after ACCC inquiry: broker
• Why did Goldman Sachs just downgrade Wesfarmers shares?

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