Author: openjargon

The interim Australia and New Zealand Banking Group Ltd (ASX: ANZ) dividend was revealed this morning.

The S&P/ASX 200 Index (ASX: XJO) bank stock reported its half-year results for the six months ending 31 March before market open.

In good news for passive income investors, management opted to increase the ANZ dividend despite a dip in the company’s half-year cash profits.

In early afternoon trade today, the ANZ share price is down 0.8% following the results, with shares trading for $28.53 apiece. That’s trailing the 0.4% gains posted by the ASX 200 at this same time.

Here’s what’s happening on the passive income front.

The boosted ANZ dividend

With ongoing mortgage competition in the banking sector, ANZ saw its net interest margin (NIM) shrink by 0.02% over the six months to 1.63%.

That didn’t help its cash profit, which dipped 1.0% year on year to $3.55 billion.

Still, management rewarded shareholders with an interim ANZ dividend of 83 cents per share, franked at 65%. That’s up 2.5% from last year’s interim dividend of 81 cents per share, though that one came with 100% franking credits.

And it came in ahead of the consensus estimates of 81 cents per share.

At the current ANZ share price of $28.53, this equates to an instant partly franked yield of 2.9% from the interim dividend alone.

If you’re hoping to bank this passive income, you’ll need to own shares at market close this Friday 10 May. ANZ shares trade ex-dividend on Monday 13 May.

You can then expect to see that payout land in your bank account on 1 July.

That is, unless you’d prefer to reinvest that cash and put it to work for you via the magic of compounding.

In that case, ANZ’s Dividend Reinvestment Plan (DRP) is in effect for this payout. Management said the big four bank intends to provide shares under the DRP through an on-market purchase.

If we add in the final dividend of 94 cents per share, paid on 22 December, ANZ shares trade on a partially franked yield (partly trailing, partly pending) of 6.2%.

What did management say?

Commenting on the bank’s performance and the ANZ dividend, CEO Shayne Elliot said:

We’ve driven a lot of productivity gains, and we take those gains by getting more efficient and some of those go back to our shareholders in the form of dividends and others, a lot of it, gets reinvested into the business and that’s really what we’re able to do again this year.

Atop the boosted interim dividend, ANZ announced plans to buy back up to $2 billion of shares on-market as part of its capital management plan.

The post Hunting for passive income? Here’s everything you need to know about the boosted ANZ dividend appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 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
• Own ANZ shares? Here’s your first-half results preview

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.

Pilbara Minerals Ltd (ASX: PLS) shares are down 22% from their all-time high. Undeterred, one practised fund manager selects the heavily shorted company as the pick of the lithium crop.

The Western Australian miner has come under intense pressure since November 2022. At the time, lithium carbonate was fetching around USD$85,000 per tonne. Fast forward 18 months, miners are now confronted with prices that are lucky to be one-fifth of those glory days.

Short sellers have been banking on the lithium downfall to print returns. Not only is Pilbara Minerals among the most shorted ASX-listed companies, it is the most shorted… and has been for a long time now.

Still, a fundie who is familiar with finding short targets believes Pilbara Minerals shares are being misplaced.

Best-of-breed ASX lithium pick

Sage Capital is an investment management firm located in Sydney. The youthful equity manager was formed in 2019 by ex-Tribeca portfolio manager Sean Fenton.

Fenton is no stranger to making money by identifying overvalued equities. For 15 years, Fenton guided Tribeca’s Alpha Plus fund, chasing S&P/ASX 200 Index (ASX: XJO) outperformance by implementing a mix of short selling and going long (buying) listed Aussie companies.

While Fenton switched out Tribeca for his firm, the approach remains the same.

The astute fund manager describes the strategy as one that’s grounded in exploiting behavioural biases, saying:

People panic when things start going wrong and get overconfident when things go well. All those different biases can lead to poor investment decisions. A lot of what we do is about exploiting those poor decisions made by people and trying to remove them from our own processes.

A prime example of this is Fenton’s backing of Pilbara Minerals shares. In a case of what might be throwing the baby out with the bathwater, the fundie thinks the Pilgangoora mine operator is cut from a different cloth to its lithium peers.

Fenton partly favours the $12.6 billion lithium company for its robust balance sheet. As of 31 December 2023, Pilbara Minerals held $2.14 billion in cash and cash equivalents, towering over its $452.5 million worth of debt — a net cash position of $1.6 billion.

The positive view, however, does not extend to other ASX lithium shares. Sage Capital has shorted others in the space, including Lake Resources N.L (ASX: LKE), Core Lithium Ltd (ASX: CXO), and Sayona Mining Ltd (ASX: SYA).

Contrarian take on Pilbara Minerals shares

Apparently, Sean Fenton and his team don’t mind being the odd ones out.

As noted by my colleague, James Mickleboro, Pilbara Minerals is still the most shorted ASX share heading into the week. Nearly 22% of the company’s shares are sold short — twice the short interest attracted by Liontown Resources Ltd (ASX: LTR), a pre-production lithium name.

Likewise, the Pilbara Minerals share price has underperformed the ASX 200 over the past year, as shown above.

Yet, Fenton believes shorters are barking up the wrong tree. He believes short sellers are piling on Pilbara Minerals because of its premium price tag. However, he thinks the premium is warranted, calling it a ‘low-risk way to play’ lithium demand.

The post Why Pilbara Minerals shares are a buy for this lithium short seller appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• These are the 10 most shorted ASX shares
• What would I have now if I’d invested $10,000 into Pilbara Minerals shares in April?
• Here are the top 10 ASX 200 shares today
• Are Pilbara shares worth buying right now?
• These are the 10 most shorted ASX shares

Motley Fool contributor Mitchell Lawler 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.

One of the smartest things ASX shares investors can do is learn from the mistakes of others.

The odds are we’re all going to stuff up in similar ways when making investment decisions, especially when we’re new to the game.

The Fool has a complete guide to buying ASX shares for beginners, and in this article, we’re going to hear from a few professional investors about what they have learned over many years of trading.

In a blog published on the ASX, they reveal what they wish they’d known before starting investing.

Invest in quality ASX shares, ETFs and other securities

Arian Neiron, CEO of VanEck Asia Pacific, an issuer of exchange-traded funds (ETFs), says buying quality ASX shares, ETFs and other securities should be the primary goal of every investor, and this requires thorough research. 

Company fundamentals become critical when the tide turns [the market falls].

Investors need a strong reason why they invested in a company in the first place, and to be able to ‘stress test’ their thesis [when things don’t work out as you expect].

Take the money and run on speculative investments

Neiron recommends keeping speculative companies “as satellite positions rather than in the portfolio core”, and taking profits when it is sensible to do so.

For speculative investments that go on a momentum run, I also learned to take profits.

Investors can really fall in love with an investment, but they need to know when to fold and move on.

Don’t be overwhelmed by choice

Ord Minnett Private Wealth Advisor Vera Lin says it’s easy for new investors to suffer “decision fatigue” given there are so many investment choices available to them.

On the ASX alone, investors can buy many types of securities, including individual ASX shares, ETFs, listed investment companies (LICs), shares options and so much more.

Over the years, I’ve learned that investing is much simpler than many people realise and that there are lots of good investment experts and advisers out there who can help you.

Keep it simple, stupid (the KISS principle)

Lin also advocates keeping your investment strategy simple.

I fancied myself as an analyst and an economist when I started investing.

I was trying to pick stocks, predict macro changes, and time the market, only to realise that approach is so unnecessary and unsuccessful for most people.

Start investing in ASX shares and other securities early  

Caroline Gurney, CEO of Future Generation, wishes she had become serious about investing earlier.

Hindsight is a wonderful thing, but had I known about the power of compounding returns over years and decades, I would have invested more and spent less, and started my investing journey earlier.

Educate yourself

New investors need a commitment to education, but this does not have to be arduous, says Gurney:

Even simple things like reading your annual superannuation statement or reading the quarterly report from a fund you invest in can make a big difference to your market knowledge.

Consider your personal values

Future Generation has two philanthropic LICs trading on the ASX. Gurney suggests that new investors consider their personal values when building an investment strategy. 

Looking back, I didn’t think enough about my personal values when I began investing and thought philanthropy was something only for wealthy people.

I didn’t realise that investors, large and small, can potentially build wealth while helping others at the same time through listed philanthropic funds.

Another popular values-based investment trend today is environmental, social, and corporate governance (ESG) investing, whereby investors favour ASX shares or ETFs that represent companies actively seeking to reduce their carbon emissions, or whose businesses are less harmful to society or the environment.

The post Buying ASX shares? Experts reveal what they wish they knew before investing appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Paladin Energy share price hits a 12-year high: Too late to buy?
• Why the ASX 200 is predicted to leap higher in 2024 despite higher interest rates
• The ASX 200 telco and energy stocks set to benefit from AI
• Goldman says this ASX 200 share can rise 20% and offer a juicy dividend yield
• Down 10% since mid-March, are Medibank shares a buy or a sell?

The Paladin Energy Ltd (ASX: PDN) share price is having a very strong session.

At the time of writing, the uranium miner’s shares are up 7% to a 12-year high of $16.74.

This means the company’s shares are now up an impressive 155% since this time last year.

To put that into context, a $10,000 investment into Paladin Energy shares a year ago would now be worth approximately $25,500 today.

Why is the Paladin Energy share price at a 12-year high?

Investors have been scrambling to buy the company’s shares over the last 12 months due to booming uranium prices.

There have been a number of catalysts for this. This includes production shortfalls in Kazakhstan, which is the largest producer of the chemical element, and forecasts for very strong growth in demand thanks to many countries embracing nuclear power as part of their decarbonisation plans.

In addition, recent news that the United States is banning Russian supplies has sparked further concerns over the supply/demand balance.

And while all this is happening, Paladin Energy has been busy restarting its Langer Heinrich Mine (LHM) in Namibia. In fact, it just recently announced that commercial uranium concentrate production and drumming were achieved at the LHM. It is now focused on its production ramp-up and building a finished product inventory, ahead of shipments to customers.

Is it too late to invest?

Unfortunately, most brokers now believe that the Paladin Energy share price has peaked or is close to peaking. At least for the time being.

For example, a recent note out of Bell Potter reveals that its analysts have a buy rating but a $1.65 (now $16.50 following its reverse stock split). This is a touch below where the company’s shares are currently trading.

The broker highlights that “at full capacity LHM will be a top ten producer supplying 6Mlbs pa by FY26 (BPe).”

Elsewhere, the team at Citi put a buy rating and $17.00 price target on the company’s shares last week. This implies potential upside of just 1.5% for investors from current levels.

And finally, the most bullish broker is arguably Morgan Stanley. It has an overweight rating and $17.45 price target on the uranium producer’s shares. Based on its current share price of $16.74, this suggests modest upside of 4.2% over the next 12 months.

All in all, based on these recommendations, investors may want to wait for a pullback before considering an investment in Paladin Energy’s shares.

The post Paladin Energy share price hits a 12-year high: Too late to buy? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• These 2 ASX uranium shares just smashed multi-year highs!
• Here are the top 10 ASX 200 shares today
• Is ASX uranium the new lithium?
• Guess which 3 ASX 200 stocks just earned major broker upgrades!
• Here are the top 10 ASX 200 shares today

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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.

The S&P/ASX 200 Index (ASX: XJO) is charging higher again today.

In late morning trade the benchmark index is up 0.5% at 7,721.2 points.

If it can hold these gains through close, today will mark the fourth consecutive day of gains for the ASX 200.

If you’re reading this before 2:30pm AEST, one important variable in today’s trading that remains to be seen is what the Reserve Bank of Australia (RBA) chooses to do with interest rates.

Markets have broadly priced in that the central bank will hold rates steady at the current 4.35% to keep a lid on inflation.

If the RBA surprises with a rate cut, stocks will likely fly higher.

Should the RBA opt to hike interest rates, stocks will likely sink in afternoon trade.

However, long-term investors would do well to remember that the ASX 200 gained 9.3% in 2023 when the RBA hiked interest rates five times.

And 2 April this year saw the benchmark index hit new record highs of 7,901.2 points despite sticky inflation and ongoing high rates.

With that in mind, here’s why these experts aren’t losing sleep over the prospect of high rates.

Why the ASX 200 could boom amid high interest rates

As The Australian Financial Review reports, UBS equity strategist Richard Schellbach now forecasts the ASX 200 will end 2024 at 8,000 points, or 3.6% above current levels.

And these figures don’t include the dividend payouts many blue-chip companies pay their shareholders.

According to Schellbach:

The positive view I had on equity markets this year has played out a bit faster than I had expected. We’re in an environment where equity market valuation multiples are likely to overshoot on the upside.

As for how a potential RBA interest rate hike this year would impact markets, Schellbach said, “Often that would spook the markets.” However in this, “These higher interest rates we’re seeing are a product of what ultimately is a good story to equities, which is that the economy is strong … reflecting a slightly better profit growth story for equities.”

Betashares chief economist David Bassanese also predicts a strong run for the ASX 200, forecasting it will reach 8,250 points by the end of 2024. That’s 6.9% above current levels.

He expects one or more rate cuts from the RBA this year.

According to Bassanese (quoted by the AFR):

As soon as the RBA does finally pivot to start signalling rate cuts and the rest of the economy starts to improve, generic consumer stocks will improve and that’s what’s going to be driving our market higher.

The overall outlook is still one of a soft landing for the global economy and Australian economy… focusing on the big picture, it’s still a bullish outlook.

The post Why the ASX 200 is predicted to leap higher in 2024 despite higher interest rates appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today
• What can ASX 200 investors expect from the RBA interest rate call tomorrow?
• These are my top ASX 200 share picks for growth right now
• 5 things to watch on the ASX 200 on Monday

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.

Artificial intelligence (AI) stands out as a clear and promising investment trend with long-term tailwinds, according to Wilson Asset Management Lead Portfolio Manager, Matthew Haupt.

Haupt runs the WAM Leaders (ASX: WLE) listed investment company (LIC). The investment strategy revolves around “picking inflection points and positioning the portfolio ahead of those changes”.

Haupt has identified one ASX 200 telco stock and one ASX 200 energy stock that he thinks will do well in the rapidly growing AI era.

Which ASX 200 telco and energy stock?

Haupt says AI is a valuable productivity tool, particularly in sales operations.

As AI continues to influence hardware advancements, his team of analysts anticipate significant benefits for ASX 200 telco stock Telstra Group Ltd (ASX: TLS) and ASX 200 energy stock Santos Ltd (ASX: STO).

He says:

Investments in companies like Telstra and Santos offers investors an attractive opportunity to participate in the growth of AI, but at reasonable valuations and while benefiting from the certainty of established businesses.

Let’s dig deeper.

Why Telstra?

Haupt says Telstra should be able to capitalise on the business sector’s need for better and faster connectivity to enable their artificial intelligence systems and processes to run smoothly.

He explains:

Leading mobile communications provider Telstra commands 99% of data connectivity through its subsea cables and is expanding its infrastructure with fibre optic cables to enhance data transfer speeds and bandwidth.

With AI driving the need for faster and more robust connectivity, Telstra stands poised to capitalise on this, offering investors exposure to this trend.

The Telstra share price is $3.60 at the time of writing, up 0.14% for the day so far. The ASX 200 telco stock has lost 17% of its value over the past year.

According to CBA data, Telstra’s price-to-earnings (P/E) ratio is 18.64x.

Why Santos?

Haupt says Santos is well-positioned to leverage the surge in electricity demand that will result from AI advancements.

He says:

Forecasts suggest electricity demand is set to double over the next decade – a demand Santos can meet with its low-cost energy solutions.

Renowned for being best in class, and boasting a motivated management team, Santos presents a compelling investment opportunity to capitalise on the evolving AI landscape.

The Santos share price is $7.46 at the time of writing, down 0.27% for the day so far. The ASX 200 energy stock has risen 2.2% over the past year.

According to CBA data, Santos shares are trading on a P/E of 12.04x.

Fellow Wilson Asset Management portfolio manager Oscar Oberg says AI will accelerate revenue growth and/or reduce operational costs for many companies.

He names 4 other ASX shares that are set to benefit directly from AI.

The post The ASX 200 telco and energy stocks set to benefit from AI appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Almost ready to retire? I’d buy cheap ASX dividend shares for income
• Forget NAB and buy these ASX dividend shares
• 5 things to watch on the ASX 200 on Monday
• Why are ASX 200 energy shares getting smashed in May?

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 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.

There are few things better than making an investment in an ASX 200 share that delivers strong returns and an attractive dividend yield.

Well, the good news is that Goldman Sachs thinks it has found one that does exactly that. In addition, it boasts a market leadership position and defensive earnings.

Which ASX 200 share offers all this?

The ASX 200 share in question is Dan Murphy’s and BWS owner Endeavour Group Ltd (ASX: EDV).

According to the note, Goldman was pleased with the company’s quarterly sales update, noting that it revealed a second consecutive quarter of market share gains in the alcohol retail market. It said:

EDV reported in-line 3Q24 results of A$2.9B sales +2.2% YoY, where the key highlight was Retail reversion back to market share gain vs COL for second consecutive quarter and Hotel gaming revenues turning back into slight positive, implying margin support for 2H.

In light of the latter, the broker reiterates its view that the market is undervaluing its Hotels business. It adds:

Bottom line, we continue to believe that EDV’s Hotel’s business is under-valued with current market cap implying 4.0x FY25 EV/EBIT. As company continues to focus on driving higher ROIC from a range of options illustrated at the Hotels Strategy Day, we expect the stock to re-rate.

Big returns ahead

The note reveals that Goldman Sachs has reaffirmed its buy rating on the ASX 200 share with an improved price target of $6.30. Based on the current Endeavour share price of $5.24, this implies potential upside of 20% for investors over the next 12 months.

But wait, there’s more! As I mentioned at the top, Goldman is tipping this ASX 200 share to provide investors with an attractive dividend yield.

The note shows that the broker is forecasting fully franked dividend yields of 4.1% in FY 2024, 4.2% in FY 2025, and then 4.6% in FY 2026. This boosts the total potential 12-month return beyond 24%.

Commenting on why it thinks Endeavour would be a top pick right now, the broker concludes:

Our Buy thesis on the stock is based on the following key drivers: 1) Market share gain (already 40% market share) in defensive alcohol retail from consumer data and loyalty advantages; 2) Organic reopening beneficiary with its hotels/pubs business back to pre-COVID sales/property. We believe EDV is trading at a relatively attractive valuation, with potential downside from EGM tax changes already fully priced in. We are Buy rated on EDV.

The post Goldman says this ASX 200 share can rise 20% and offer a juicy dividend yield appeared first on The Motley Fool Australia.

More reading

• Why Goldman Sachs says these ASX 200 dividend stocks are buys in May
• Analysts say these 4 ASX dividend stocks are buys this month
• Why Ampol, Endeavour, Northern Star, and Santos shares are falling today
• Woolworths shares outperform on $468m Endeavour selldown and capital return
• 5 things to watch on the ASX 200 on Wednesday

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

The Medibank Private Ltd (ASX: MPL) share price has dropped around 10% in the last couple of months, as we can see on the chart below. In this article, I’m going to look at whether the ASX healthcare share is a buy or if it’s one to avoid after announcing a business update.

Medibank is the largest private health insurer in Australia, with its Medibank and ahm brands.

Let’s first consider why some investors may be negative on the company.

Why be negative on Medibank shares?

Writing on The Bull, Dylan Evans from Catapult Wealth said:

Group revenue from external customers of $4.024 billion in the first half of fiscal year 2024 was up 3.3 per cent on the prior corresponding period. Group operating profit of $319.4 million was up 4.2 per cent. Across the industry, our concern is rising premiums may price existing customers out of private health insurance and deter others from joining funds.

However, there are some reasons to be positive about the business.

Positive update from the ASX healthcare share

At the Macquarie Australia Conference, Medibank shared some interesting insights.

Firstly, it did note that the average health insurance premium increase from 1 April 2024 will be 3.31% but that “remains below inflation and wage growth in Australia.” That suggests revenue growth for the business over the next 12 months.

APRA statistics released in late February showed “continued industry resilience” with an increase of approximately 277,000 Australians having resident private health insurance hospital cover in the 12 months to 31 December 2023. This included an increase of around 96,000 people under the age of 30, which is “critical to the long-term sustainability of Australia’s health system, reflecting the benefit of recent reform and the growing importance of health among consumers.”

Resident industry policyholder growth was 2.06% over the 12 months to 31 December 2023 compared to 1.9% growth for the 12 months to 30 September 2023, which it called resilient in the face of ongoing costs of living pressures.

However, Medibank did note that the industry continues to be competitive, which is expected to persist in the fourth quarter, which is “historically a strong quarter for growth”.

The ASX healthcare share then said:

Despite this competition, Medibank remains disciplined in its approach by targeting profitable growth in priority segments, including corporate, families and new to industry customers, where we are seeing continued positive momentum. Based on our performance in the March 2024 quarter, we remain on track in our aim to deliver our resident policyholder growth outlook of 1.2% – 1.5% for FY24.

For me, that’s a key part of the equation – policyholder growth. If Medibank’s policy numbers are growing, then it can benefit from increased scale and hopefully deliver a bigger profit and dividend.

Another element of short-term profitability is claims (costs). The company said the risk equalisation outcome in the three months to March 2024 continued to reflect the “benefit of favourable age claiming patterns for Medibank”. Claims growth per policy unit for FY24 among resident policyholders is expected to be at the lower end of its guidance range of between 2.2% and 2.4% for FY24.

Trends impacting claims in the first half of FY24 have “continued into the second half, including particular softness in non-surgical and extras claims, and this is anticipated to result in claims continuing to be below” expectations in the second half of FY24.

Foolish takeaway

The Medibank share price looks relatively attractive to me – revenue is rising, claims are subdued and the company continues to pay a good dividend. The Commsec estimate puts the FY25 grossed-up dividend yield at 6.8%.

The post Down 10% since mid-March, are Medibank shares a buy or a sell? appeared first on The Motley Fool Australia.

More reading

• 3 ASX stocks to benefit from Australia’s ageing population
• If I were a retiree, I’d buy these ASX shares this 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 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.

ANZ Group Holdings Ltd (ASX: ANZ) shares are falling on Tuesday.

In early trade, the banking giant’s shares were down almost 3% to $27.99.

They have since recovered but remain down 0.5% at the time of writing.

Why are ANZ shares falling?

Investors have been hitting the sell button today after the bank released its first half results for FY 2024.

In case you missed it, the bank 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.

Although ANZ’s shares are falling today, this result was actually slightly ahead of the consensus estimate of $3,531 million.

However, with the bank’s share price rallying this month in response to the release of solid results from other banks, it’s possible that the market had already priced in an earnings beat (and some more).

Not even a larger than expected interim dividend (85 cents per share partially franked) and a $2 billion on-market share buyback has been enough to keep its shares afloat.

Broker reaction

Analysts at Goldman Sachs have had a quick look at the result and appeared to be pleased. While the bank’s profits fell short of their expectations, they note that it was above the consensus estimate. It commented:

ANZ reported 1H24 cash earnings (company basis) from continued operations were slightly down -7% on pcp to A$3,552 mn, and was -3.5% below GSe and +1% higher than Visible Alpha Consensus Estimates (VAe). The miss to GSe was driven largely by higher expenses, partially offset by a lower BDD charge.

One disappointment that could be weighing on ANZ shares is the bank’s net interest margin, which fell short of expectations. However, Goldman believes it is a one-off. It said:

ANZ’s 1H24 group reported NIM was down -9 bp hoh to 1.56% (vs.GSe/VAe of 1.61%/1.62%). However, the miss was predominantly due to the impact of Markets activities, with the NIM ex-Markets activities down -2 bp hoh to 1.63%. The -7 bp drag from Markets activities was split -5 bp from mix (growth in Markets AIEA) and -2 bp from rate (funding costs recognised in NII with associated revenue in OOI).

Furthermore, Goldman highlights that margin weakness in the retail business appears to have stabilised. Though, other sides of the business are still showing a spot of weakness. It adds:

ANZ provided an analysis of quarterly NIM trends which suggests ANZ’s Australia Retail NIMs have stabilised while Australia Commercial, Institutional and NZ Divisions continue to deteriorate.

Finally, the broker was pleased with the bank’s larger than expected capital returns. It said:

The proposed interim DPS of A83¢ was ahead of GSe/VAe (A81¢), and will be franked at 65%, representing a payout ratio of 70% (GSe 66%). ANZ also announced a A$2 bn on-market buyback (GSe A$1.5 bn in total). ANZ’s pro-forma CET1 ratio also adjusting for the completion of the buyback would be 11.85%. ANZ’s NSFR rose to 118%, from 116% in 2H23, and its LCR was 134% up from 132% in 2H23.

Goldman currently has a buy rating and $27.69 price target on ANZ’s shares. Though, that could change once it has updated its financial model to reflect this result.

The post ANZ shares tumble despite $3.5b half-year profit appeared first on The Motley Fool Australia.

More reading

• 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
• Own ANZ shares? Here’s your first-half results preview
• Here’s how I’d aim for a tonne of passive income from $20,000 in an ASX share portfolio

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.