Author: openjargon

Telstra Group Ltd (ASX: TLS) shares have been well and truly out of form in recent times.

So much so, this week the telco giant’s shares hit a two-year low this month.

This weakness hasn’t gone unnoticed by analysts at Goldman Sachs.

In fact, the broker has been looking at its earnings forecasts to make sure it isn’t missing something. Particularly after New Zealand telco Spark New Zealand Ltd (ASX: SPK) downgraded its earnings guidance.

The good news is that Goldman remains confident that Telstra can deliver on expectations. As a result, it feels that its shares could be dirt cheap at current levels.

What did the broker say?

Commenting on the recent Telstra share price weakness, the broker said:

Following the underperformance of Telstra shares YTD (-8% vs. ASX200 +3%), alongside the recent downgrade in SPK FY24 guidance, we outline why we remain confident in our forecast $8.61bn in EBITDA (+$351mn yoy) for TLS in FY25E.

Goldman believes the key to achieving this will be increasing mobile phone plans in-line with inflation. And while there are doubts around doing this in the current environment, the broker feels it is the most likely outcome. It said:

The key uncertainty to this growth is whether a full CPI mobile price rise will be introduced in Jul-24. We think this is the most likely outcome, given (1) Strong operating trends and NPS through to Feb-24; (2) TLS price-premium vs. history provides some scope to increase; (3) The Government owned, monopoly NBN recently announced CPI price rises of +4.1%; (4) Telstra returns are significantly below supermarket peers WOW/COL (who have faced price gouging accusations).

As mobile makes up 70% of estimated earnings, that is the segment doing the heavy lifting. However, the broker also expects growth from other areas.

It expects the Fixed Enterprise business to add EBITDA of $30 million in FY 2025, which represents 9% of total EBITDA. This is being underpinned by the soon to be announced Fixed Enterprise restructure.

Goldman is also forecasting an $83 million increase from the InfraCo/Amplitel business, representing 24% of EBITDA. It highlights that this “growth is largely locked in, given it relates to CPI (NBN Recurring) and internal data/customer growth.”

Big returns on offer with Telstra shares

In light of the above, the broker has retained its buy rating and $4.55 price target on the company’s shares. This implies potential upside of 25% for investors over the next 12 months.

In addition, the broker is forecasting a 4.9% dividend yield in FY 2024 and then a 5.2% dividend yield in FY 2025. This boosts the total potential 12-month return to approximately 30%.

The post Why Telstra shares could be dirt cheap in May appeared first on The Motley Fool Australia.

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More reading

• 3 safe ASX dividend shares to own for the next 10 years
• 5 things to watch on the ASX 200 on Wednesday
• What does the latest 3G news mean for Telstra shares?
• The ASX 200 telco and energy stocks set to benefit from AI
• Almost ready to retire? I’d buy cheap ASX dividend shares for 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 Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Coles Group and Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ANZ Group Holdings Ltd (ASX: ANZ) shares have been on a good run.

Since this time last week, the banking giant’s shares have risen 3.15%.

But can they keep rising from here? Let’s see what one leading broker is saying about the big four bank following the release of its half-year results.

Half-year results review

As a reminder, ANZ released its results on Tuesday and reported a cash profit of $3,552 million for the six months ended 31 March. This represents a 1% decline compared to the second half of FY 2023.

Despite this decline, the bank increased its partially franked interim dividend to 85 cents per share and announced a $2 billion on-market share buyback.

Are ANZ shares a buy?

This is harder to answer than normal.

That’s because Goldman Sachs has responded to the result by retaining its buy rating on the bank’s shares.

However, the broker’s improved price target of $28.15 (from $27.69) is a touch below the current ANZ share price of $28.79.

So, if you were looking for share price returns, you may not be seeing any over the next 12 months.

However, if you are looking for a source of income, then ANZ’s shares could be worthy of a closer look.

Goldman Sachs is forecasting dividends per share of $1.66 in both FY 2024 and FY 2025. This equates to partially franked dividend yields of 5.75% for investors.

What did the broker say?

Goldman remains positive on ANZ and its shares due to potential productivity benefits, institutional business, and discount to the rest of the sector. It explains:

We reiterate our Buy on ANZ, given i) we are seeing evidence of ANZ’s ability to derive productivity benefits (A$201 mn in 1H24) and management noted there remains a large pipeline available which can be used to offset cost inflation. Furthermore, ii) the improving profitability of ANZ’s Institutional business remains a key driver of our positive investment thesis. We continue to see upside for Group returns due to accretive mix shifts in the Institutional business towards higher ROE Payments and Cash Management business. Finally, the stock still trades at a 30% discount to the sector (ex-dividend adjusted) versus a 15-yr average discount 13%.

Is anyone else bullish?

One leading broker that sees scope for ANZ shares to rise further is Jefferies.

This morning, the broker has responded to the bank’s results by retaining its overweight rating with an improved price target of $31.00 (from $29.00).

The post Analysts give their verdict on ANZ shares: Should you buy? appeared first on The Motley Fool Australia.

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More reading

• Hunting for passive income? Here’s everything you need to know about the boosted ANZ dividend
• ANZ shares tumble despite $3.5b half-year profit
• ANZ share price on watch amid first-half earnings beat and $2b buyback
• 5 things to watch on the ASX 200 on Tuesday
• Brokers say these ASX dividend stocks are buys

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.

If you have a low tolerance for risk but want better yields than those offered with term deposits and savings accounts, then it could be worth checking out the ASX dividend shares in this article.

These companies have defensive earnings, strong business models, and positive outlooks. This could make them safe options for income options to buy today. They are as follows:

APA Group (ASX: APA)

When looking for safe options, it is hard to look beyond utilities. In fact, many investors class them as safe haven assets and rotate funds into their shares when market volatility increases.

But APA Group has more to offer than just that. The energy infrastructure company’s growing cashflows as allowed it to increase its dividend each year for almost 20 years.

The good news is that analysts at Macquarie believe this strong run can continue. It is forecasting further dividend increases to 56 cents per share in FY 2024 and 57.5 cents per share in FY 2025. Based on the current APA Group share price of $8.55, this equates to 6.5% and 6.7% dividend yields, respectively.

Macquarie also sees room for its shares to climb higher. It has an outperform rating and $9.40 price target on them.

Coles Group Ltd (ASX: COL)

Another ASX dividend share that boasts defensive qualities is supermarket giant Coles.

As we saw through the pandemic, Coles is capable of growing its earnings through any part of the economic cycle. This bodes well for its dividends in the future.

Morgans is bullish on the company and is forecasting fully franked dividends of 66 cents per share in FY 2024 and then 69 cents per share in FY 2025. Based on the current Coles share price of $16.26, this implies dividend yields of 4% and 4.25%, respectively.

As well as a good yield, the broker highlights that “the stock is looking more attractive following the recent pullback in the share price.” It has an add rating and $18.95 price target on its shares.

Telstra Corporation Ltd (ASX: TLS)

A final safe ASX dividend share for income investors to look at is telco giant Telstra. As with the others, it has defensive earnings and a positive growth outlook.

In fact, it is for exactly these reasons that Goldman Sachs is tipping Telstra as a buy. It believes “the low risk earnings (and dividend) growth that Telstra is delivering across FY22-25, underpinned through its mobile business, is attractive.”

As for dividends, the broker is forecasting fully franked dividends of 18 cents per share in FY 2024 and then 19 cents per share in FY 2025. Based on the current Telstra share price of $3.64, this equates to yields of 4.9% and 5.2%, respectively.

Goldman has a buy rating and $4.55 price target on Telstra’s shares.

The post 3 safe ASX dividend shares to own for the next 10 years appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Brokers say these high yield ASX 300 dividend shares are top buys
• What does the latest 3G news mean for Telstra shares?
• The ASX 200 telco and energy stocks set to benefit from AI
• Almost ready to retire? I’d buy cheap ASX dividend shares for 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 Goldman Sachs Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Apa Group, Coles Group, Macquarie Group, and Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Market sentiment is often discussed as a reason for broad market gains or losses in a given trading day.

While there are many measurable financial factors that feed into sentiment, such as economic growth, there are also softer factors like human emotions, and we can’t always count on them being rational!

In an article published on the ASX, two experts discuss how emotion plays into ASX shares investing.

How emotion drives the market

Karl Siegling, chief investment officer of listed investment company (LIC) Cadence Capital, says human emotions such as hope, fear, and greed can determine whether ASX shares become cheap or expensive.

He says:

The collective emotions of individuals, which is ‘the market’, play an extremely important role in investing.

The sooner that investors understand how important emotion is, and how likely we are as individuals to make decisions based on emotion, the sooner they will become better investors.

After a lifetime of investing, Siegling says it’s “a myth” that stock prices are based purely on value, saying:

Investors are always told to ‘buy low and sell high’.

So, we study finance or accounting at university and learn different techniques to value companies.

There’s this myth that all we need to do is learn the correct formula to value companies and we can lead a rich, healthy and wealthy life.

ASX shares investors need to understand that industry cycles can take years to play out. This means they could be waiting for a long time to see substantial price gains.

In the movies, everything in the share market happens very quickly. In real life, when you buy a share, you are buying part of a company.

Companies move much slower than people realise. When a business starts improving, that improvement can play out over many years.

It sometimes takes years for a stock to go from being unloved to being loved.

How emotion influences ASX shares trading decisions

Felicity Thomas, a senior private wealth advisor at Shaw and Partners, says emotion can drive rash investment decisions.

For example, the fear of missing out (FOMO) can prompt people to buy ASX shares that are rapidly rising instead of buying them based on fundamental analysis.

She says:

Emotional investing often leads to poor investment decisions, like buying shares during euphoric phases [for the market] and selling low during panic phases.

A lot of investors want quick wins but it is important to maintain a long-term perspective.

Despite short-term volatility, history has shown that the share market tends to grow over time.

Thomas says patience and a disciplined approach can help ASX shares investors stick to their investment plans.

As a young investor, Thomas only invested money she did not need for living expenses.

She also kept some cash on the sidelines.

There are pros and cons to keeping some cash in your investment portfolio.

Today’s high interest rates mean cash is certainly earning better returns than in previous years. However, inflation — which erodes the buying power of cash — also remains high.

The post Why emotion is key to becoming a wealthy ASX shares investor: Experts appeared first on The Motley Fool Australia.

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More reading

• Morgans names the best ASX 200 stocks to buy in May
• At 14 cents, has the Core Lithium share price become a bit of a joke?
• 3 reasons CSL stock is a great long-term investment
• 5 things to watch on the ASX 200 on Wednesday
• This ASX 200 gold stock can rise 30% and could be a takeover target

Motley Fool contributor Bronwyn Allen 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.

Every month, analysts at Morgans pick out their best ASX stock ideas.

These are the ASX stocks that the broker thinks offer the highest risk-adjusted returns over a 12-month timeframe. Morgans notes that they are supported by a higher-than-average level of confidence.

Among its best ideas for May are the two ASX 200 stocks listed below. Here’s what the broker is saying about them:

Nextdc Ltd (ASX: NXT)

Morgans thinks that this data centre operator could be an ASX 200 stock to buy this month.

The broker is expecting another strong result from the company in FY 2024 and then expects more of the same in the coming years thanks to structural tailwinds. The broker explains:

NXT should deliver another good set of results in FY24 with some upside risk to guidance, in our view. Structural demand for cloud and colocation remains incredibly strong. NXT’s new S3 and M3 data centres are now open. Consequently, we expect significant new customer wins over the next six-to-twelve months (including CSP options being exercised). Sales should drive the share price higher. NXT looks comfortably on-track to generate over $300m of EBITDA in the next three to five years.

Morgans has an add rating and $19.00 price target on the company’s shares. Based on the current NextDC share price of $17.09, this implies potential upside of 11% for investors over the next 12 months.

Woodside Energy Group Ltd (ASX: WDS)

Another ASX 200 stock that Morgans has on its best ideas list is energy giant Woodside.

The broker believes that the market is undervaluing its shares at present and that this has created a buying opportunity for investors. Particularly given its high-quality earnings and healthy balance sheet. It said:

A tier 1 upstream oil and gas operator with high-quality earnings that we see as likely to continue pursuing an opportunistic acquisition strategy. WDS’s share price has been under pressure in recent months from a combination of oil price volatility and approval issues at Scarborough, its key offshore growth project. With both of those factors now having moderated, with the pullback in oil prices moderating and work at Scarborough back underway, we see now as a good time to add to positions.

Increasing our conviction in our call is the progress WDS is making through the current capex phase, while maintaining a healthy balance sheet and healthy dividend profile. WDS still has to address long-term issues in its fundamentals (such as declining production from key projects NWS/Pluto), but will still generate substantial high-quality earnings for years to come.

Morgans has an add rating and $36.00 price target on the ASX 200 stock. This suggests potential upside of 29% for investors. A 5.8% dividend yield is also expected.

The post Morgans names the best ASX 200 stocks to buy in May appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• 3 ASX dividend stocks to buy for an income boost
• Here are the top 10 ASX 200 shares today
• 4 ASX shares exposed to the ‘largest technological change ever seen’
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor James Mickleboro has positions in Nextdc and Woodside Energy 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 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.