Author: openjargon

The share market has historically delivered investors a return of 10% per annum.

While this is a great return, there are some ASX shares that have been tipped to rise significantly more than this over the next 12 months.

Let’s take a look at three ASX shares that analysts believe have market-beating potential:

Arcadium Lithium (ASX: LTM)

If you’re looking for exposure to the beaten down lithium industry then it could be worth checking out Arcadium Lithium.

That’s the view of analysts at Bell Potter, which see significant value in the lithium giant’s shares at current levels. It said:

LTM provides the largest, most diversified exposure to lithium in terms of mode of upstream production, asset locations, downstream processing and customer markets. It is a key large-cap leverage to lithium prices and sentiment, which we expect to improve over the medium term. The group has a strong balance sheet and growth portfolio.

Bell Potter has a buy rating and $9.50 price target on the ASX share. This implies potential upside of almost 50% for investors from current levels.

IDP Education Ltd (ASX: IEL)

Goldman Sachs is sticking with this language testing and student placement company after a disappointing trading update last week.

While it expects another tough year in FY 2025, it believes IDP Education’s growth will resume the following year. In light of this, it thinks that now could be the time for patient investors to load up. It said:

IEL remains well placed to capitalise as conditions normalise into FY26E, with IEL selectively investing for growth while SP competitors come under significant pressure. In our view the regulatory headwinds are cyclical, while structural SP growth can resume off the FY25E baseline.

Goldman has a buy rating and $21.75 price target on its shares. This suggests that upside of 42% is possible for investors over the next 12 months.

Universal Store Holdings Ltd (ASX: UNI)

A third ASX share that could be destined to deliver big returns is youth fashion retailer Universal Store.

Morgans is a big fan of the company and believes it has a very positive long term growth outlook. It said:

Our positive view about the fundamental long-term appeal of Universal Store as a retail proposition and investment opportunity is undiminished. The growth opportunities are in place. Universal Store’s women’s banner Perfect Stranger is performing well, justifying an acceleration in its network expansion; the prospect of building out the wholesale distribution channels acquired with CTC is compelling; and customers continue to respond well to the Universal Store banner, rendering its plan to grow this network to more than 100 stores more than reasonable.

Morgans has an add rating and $6.50 price target on its shares. This implies potential upside of 27% for investors between now and this time next year.

The post These ASX shares could rise 25% to 50% appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Brokers name 3 ASX shares to buy now
• Why IDP Education, Novonix, PYC, and Regis Resources share are racing higher
• Goldman Sachs names 2 ASX 200 shares to buy now
• Why Core Lithium, IDP Education, Seek, and Skycity shares are sinking today

Motley Fool contributor James Mickleboro has positions in Universal Store. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Idp Education. 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.

Got $10,000 in savings and looking to turn that into a $1,900 annual passive income stream?

That may sound like a lofty goal. But it’s quite achievable if you invest in the right basket of ASX dividend shares.

Now to get $1,900 a year in extra income from an initial $10,000 investment implies a 19% dividend yield. So, barring a stroke of excellent good fortune, you’re unlikely to achieve that in year one.

But by tapping into the power of compounding you could be enjoying that passive income landing in your bank account sooner than you may think.

Below, we’ll look at three top ASX dividend stocks you might wish to consider. But do keep in mind that a properly diversified portfolio will hold more than just three stocks. While there’s no magic number, 10 is a decent yardstick. That will help to lower the overall risk of your ASX dividend portfolio.

Also, remember that the yields you generally see quoted are trailing yields. Future yields may be higher or lower, depending on a range of company-specific and macroeconomic factors.

With that said…

Three ASX dividend stocks for passive income

The first company I’d buy for passive income is the S&P/ASX 200 Index (ASX: XJO) bank stock Australia and New Zealand Banking Group Ltd (ASX: ANZ).

ANZ paid a partly franked final dividend of 94 cents per share on 22 December and will pay the interim dividend of 83 cents per share on 1 July. The ASX 200 bank stock traded ex-dividend on 13 May, so we’re a bit late to score that payout.

With a full-year payout of $1.77 a share, ANZ trades on a partly franked trailing yield of 6.1% at Friday’s closing price of $29.18. The ANZ share price is up 28% in 12 months.

The second company I’d buy for passive income is ASX coal stock Yancoal Australia Ltd (ASX: YAL).

Over the past 12 months, Yancoal has paid two fully franked dividends, totalling 69.5 cents a share. At Friday’s closing price of $6.27 a share, Yancoal trades on a fully franked trailing yield of 11.1%. The Yancoal share price is up 39% in 12 months.

And the third dividend stock I’d buy for passive income is ASX 200 mining giant Fortescue Metals Group Ltd (ASX: FMG).

Fortescue shares delivered a fully franked final dividend of $1.00 a share on 28 September and an interim dividend of $1.08 a share on 27 March for a 12-month payout of $2.08 a share.

At Friday’s closing price of $24.37, Fortescue shares trade on a fully franked trailing yield of 8.5%. The Fortescue share price is up 21% in 12 months.

So, how long will it take before we can sit back and enjoy $1,900 a year in passive income without touching or initial capital investment?

To the maths!

Assuming you buy an equal number of each of these three ASX dividend stocks, you could expect to earn a yield of 8.6%.

That would see your $10,000 of invested savings return $860 a year in passive income. Or slightly less than half our goal of $1,900.

With an 8.6% yield, you’ll need to build that investment up to $22,093 before you can withdraw $1,900 a year without drawing down that capital.

Which means you’ll need to be a bit patient and reinvest those dividends at first.

Now atop the dividends, I’d also expect Fortescue, Yancoal and ANZ to continue to deliver share price gains over time. However, I wouldn’t expect them to deliver the same kinds of outsized gains they have over the past 12 months. But I think that an accumulated annual gain (dividends plus share price appreciation) of 10% is realistic, if not conservative.

Tapping into the power of compound interest, that would see your initial $10,000 in savings grow to $22,182 in eight years.

Then, you can sit back and enjoy an extra $1,907 in annual passive income.

The post How to earn $1,900 in passive income with just $10,000 in savings appeared first on The Motley Fool Australia.

More reading

• Fortescue shares rally amid claims of green tech theft
• Guess which ASX All Ords stock has rocketed 37% in a year AND pays an 11% dividend yield!
• Should you buy the 3 highest-yielding dividend shares in the ASX 200?
• Why this top broker says ANZ shares can deliver 10%+ returns in FY25
• Are ASX 200 bank shares a good investment right now?

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.

There are a lot of ASX dividend shares to choose from on the local market.

But which ones could be top buys this month? Let’s take a look at four that analysts are recommending:

APA Group (ASX: APA)

The first ASX dividend share that has been tipped as a buy is APA Group. It is an energy infrastructure business that owns and operates a $27 billion portfolio of gas, electricity, solar and wind assets.

Macquarie is bullish on the company and has an outperform rating and $9.40 price target on its shares.

As for dividends, the broker is forecasting dividends of 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 $8.58, this equates to 6.5% and 6.7% dividend yields, respectively.

Aurizon Holdings Ltd (ASX: AZJ)

Another ASX dividend share that has been given the thumbs up is Aurizon. It transports a range of commodities across its vast rail network to customers across Australia.

Ord Minnett rates the company highly and has an accumulate rating and $4.70 price target on its shares.

In respect to income, the broker is forecasting partially franked dividends of 18.6 cents per share in FY 2024 and then 24.4 cents per share in FY 2025. Based on the current Aurizon share price of $3.77, this will mean dividend yields of 4.9% and 6.5%, respectively.

Coles Group Ltd (ASX: COL)

Analysts at Morgans think that Coles could be an ASX dividend share to buy right now.

The broker currently has an add rating and $18.70 price target on its shares.

As well as decent upside, the broker is forecasting some attractive yields. It expects 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 $16.98, this implies yields of approximately 3.9% and 4%, respectively.

Dexus Convenience Retail REIT (ASX: DXC)

A fourth ASX dividend share that analysts are tipping as a buy is Dexus Convenience Retail REIT. It owns a portfolio of service station and convenience retail assets across Australia.

Morgans is also positive about this one and has an add rating and $3.23 price target on its shares.

As for dividends, the broker is forecasting dividends per share of 21 cents in both FY 2024 and FY 2025. Based on its current share price of $2.68, this implies yields of 7.8%.

The post 4 top quality ASX dividend shares to buy in June appeared first on The Motley Fool Australia.

More reading

• 3 of the best ASX blue chip shares to buy in June
• 3 lower-risk ASX dividend shares for retirees
• Buy these ASX 200 dividend stocks in June for an income boost
• With 6%+ yields, here are 2 ASX dividend shares to consider buying now
• Bell Potter names the best ASX shares to buy in June

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 Macquarie Group. The Motley Fool Australia has positions in and has recommended Apa Group, Coles Group, and Macquarie Group. The Motley Fool Australia has recommended Aurizon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

There was a time when buying CSL Ltd (ASX: CSL) shares meant buying into a healthcare company that always seemed to be rising in value.

To illustrate, CSL shares first hit $100 each back in 2015. By 2018, they were at $200 and by early 2020, they’d hit $300.

But ever since the pandemic took hold in March 2020, the CSL share price has been stuck in the mud. Today, this ASX 200 healthcare stock is trading at just under $289 a share, the same price the company was asking four Junes ago.

Put another way, since early 2020, there has only been CSl’s rather miserly 1.13% dividend yield (at today’s pricing anyway) to keep investors company as they waited in vain for some capital growth.

Back in October last year, CSL even got back down to below $230 a share (albeit briefly). Check this all out for yourself below:

But perhaps investors won’t have to wait too much longer to see CSL break out of its four-year funk. That’s the view of one ASX expert, anyway.

ASX expert says $500 CSL shares are “absolutely” possible

As reported in the Australian Financial Review (AFR) last week, Roy Hunter, portfolio manager of the SG Hiscock Medical Technology Fund, is exceptionally bullish on CSL. When asked if CSL could get to $500 a share in the next few years, Hunter responded, “Absolutely”.

Here’s some more of what Hunter had to say on this ASX 200 healthcare giant’s shares:

…I think it’s a fool’s errand to bet against the ongoing success of a company like CSL. Its core plasma business looks set to deliver strong growth and margin expansion over the next few years.

However, the FY24 result will be an important determinant of whether the share price hits $500 within a three-year time frame.

The pressure that CSL shares have been under over recent years has arguably stemmed from its previously sky-high earnings multiple, and the growth rates that ASX investors anticipate the ~$140 billion company will be able to maintain going forward.

To illustrate, despite CSL’s share price stagnation over the past four years, the company still trades on a lofty price-to-earnings (P/E) ratio of 37.6 today.

Hunter addressed these concerns as well:

The market is getting somewhat impatient and questions will start to be asked about whether the company has entered a phase of structurally lower growth, in which case you will see some valuation headwinds.

The stock needs to see valuation multiple expansion to reach this target, and it will only be rewarded by the market if you see an acceleration of growth and margin expansion.

So, reading between the lines here, Hunter seems to be arguing that CSL shares could indeed hit $500 over the next few years. But to do so, a lot has to go right for the company.

Let’s see what happens after CSL’s next earnings report, which is due later this winter on 13 August.

The post CSL shares can ‘absolutely’ head to $500: ASX expert appeared first on The Motley Fool Australia.

More reading

• 3 of the highest quality ASX shares to buy for a retirement portfolio
• Are these 2 ASX healthcare shares the best that money can buy?
• Could the CSL share price end 2024 above $300?
• How much passive income would a $10,000 investment in CSL shares generate?
• How you could retire rich by investing like Warren Buffett with ASX shares

Motley Fool contributor Sebastian Bowen has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Having some ASX blue chip shares in your investment portfolio is always a good thing.

But which ones could be great options for investors in June?

Let’s look at three that brokers rate very highly right now:

Coles Group Ltd (ASX: COL)

Analysts at Bell Potter think that supermarket giant Coles would be a great blue chip share to buy. Particularly given recent investments to strengthen its market position. It said:

Costs are expected to remain elevated but should moderate through FY24 and FY25 as general inflation tapers off. In the medium term, 1) higher immigration should support grocery spending, and 2) Coles is entering a period of elevated capex intensity as it reinvests to modernise its supply chain and to catch up to competitors on online and digital offerings, which should help Coles maintain its market position.

Bell Potter has a buy rating and $19.00 price target on Coles’ shares.

Qantas Airways Limited (ASX: QAN)

Goldman Sachs sees Qantas as a top ASX blue chip share to buy right now. The broker believes its shares are undervalued based on its structurally stronger earnings and in comparison to global airline peers. It explains:

QAN is trading 4% below pre-COVID market capitalization with the enterprise value still 7% lower despite a structurally improved earnings capacity. Relative to regional/ US peers (median PE of 9.1x), QAN is trading on a 29% discount at 6.4x FY25 PE. This is more than 2x below the historical 5Y average discount of 14%. We expect this gap to narrow as QAN delivers earnings that are sustainably above pre-COVID levels and demonstrates ability/ willingness to distribute capital to shareholders while renewing the fleet.

Its analysts have a conviction buy rating and $8.05 price target on its shares.

Washington H Soul Pattinson & Company Ltd (ASX: SOL)

This investment house could be a great ASX blue chip share to buy according to analysts at Morgans. The broker highlights its track record of strong returns and appears to believe this can continue in the future. It said:

SOL’s investment portfolio includes a diversified pool of assets ranging from listed equities (both large cap and emerging companies), private equity, property and structured yield. On a 20-year horizon, SOL’s annualised TSR is 12.5% vs the All Ords accumulation index of 9%. SOL has a 20-year history of increased dividend distributions, with a 20-year CAGR of c.8%. In our view, SOL’s management team continues to deliver both organic and inorganic growth over the long term. We continue to like the SOL story, particularly its track record of growing distributions.

Morgans has an add rating and $35.60 price target on its shares.

The post 3 of the best ASX blue chip shares to buy in June appeared first on The Motley Fool Australia.

More reading

• Top ASX shares to buy in June and hold for retirement
• Here’s where I see the Qantas share price ending in FY 2025
• Why I’d back up the truck on Soul Patts shares right now
• Bell Potter names the best ASX shares to buy in June
• 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 positions in and has recommended Goldman Sachs Group and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Coles Group and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

When it comes to investing, few names command as much respect and admiration as Warren Buffett.

Known as the Oracle of Omaha, Buffett’s investment philosophy centres around value investing, seeking out companies with strong fundamentals, competitive advantages, and capable management teams.

His phenomenal performance over 50 years speaks for itself.

Curious about what Warren Buffett looks for when selecting companies to invest in? I’ve done the research for you and found some ASX companies that could meet his investment criteria.

Before jumping in, though, a reminder that this is just the first step of the screening process for idea generation purposes. Please remember to do further research before investing your hard-earned money.

What did Warren Buffett say?

Buffett is known as a value investor, but he really doesn’t differentiate value investing from growth investing so much. For him, investing is one process where he allocates his capital to excellent companies selling at reasonable valuations.

Buffett had this to say in his early investment letters:

Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now.

In determining great businesses, he famously uses the return on capital employed (ROCE) measure. While here he meant ROCE in a true sense — meaning without undue leverage, accounting gimmickry etc — for simplicity, I will just use the reported return on equity (ROE) from the companies.

Based on the above, I’ve used the following criteria:

• Price-to-earnings (P/E) ratio of below 15x using FY24 earnings estimates from S&P Capital IQ
• Reported ROE of 15% or higher
• Simple business model that even I can understand how they make money

Now, here’s the list of three companies that came out of this basic screening process.

BHP Group Ltd (ASX: BHP)

Let’s start with a major ASX company that many of us are familiar with: BHP. The mining giant makes its money from producing and selling copper, iron ore, coal and other basic resources across the globe.

While BHP has to endure the cyclical nature of the commodities it mines, the miner is most likely to generate higher revenues and profits in a couple of decades from today.

Based on its financials for the 12 months ending December 2023, BHP boasts an ROE of 19%. Although its ROE tends to fluctuate between single digits and north of 40% throughout the commodities cycle, on average, it generates double-digit ROE.

The BHP share price is traded at just about 11 times based on its FY24 earnings estimates.

Nick Scali Ltd (ASX: NCK)

Next up is furniture maker Nick Scali selling through its Nick Scali and Plush brands.

The company has provided high-quality lounges and other furniture to Australians over decades, and now it is ready to expand its markets to the bigger UK market by acquiring Fabb Furniture.

Although there’s nothing too sexy about selling furniture, one of Warren Buffett’s famous investments in the past was in Nebraska Furniture Mart, founded in 1937 by a Russian immigrant, Rose Blumkin. Certainly, he doesn’t mind boring businesses.

Nick Scali has an astonishing ROE history, hovering around 50%, and the company is trading at a forward P/E ratio of 14 times on FY24 estimates by S&P Cap IQ.

Super Retail Group Ltd (ASX: SUL)

Last on my list is Super Retail Group, a retailer behind popular chains like Super Cheap Auto, Macpac, Rebel and BCF.

As my colleague Sebastian pointed out, its business tends to cope better with economic cycles than other consumer discretionary companies.

Super Retail Group has grown its earnings per share from 70 cents in FY19 to $1.15 in FY23. Even in the challenging business environment, the company reported a solid half-year result, increasing half-year revenues by 3.2%.

Over the last ten years, its ROE has moved between 8% and 27%. According to its half-year FY24 report, it is standing at approximately 20%.

The Super Retail Group shares are trading at a forward P/E ratio of 13 times.

The post 3 ASX stocks Warren Buffett could buy today appeared first on The Motley Fool Australia.

More reading

• Analysts name 3 ASX income stocks to buy now
• Guess who just slapped a buy rating on BHP shares?
• 5 things to watch on the ASX 200 on Thursday
• Why is the BHP share price tumbling on Wednesday?
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Kate Lee has positions in Nick Scali. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Super Retail Group. The Motley Fool Australia has positions in and has recommended Super Retail Group. The Motley Fool Australia has recommended Nick Scali. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Rural Funds Group (ASX: RFF) is an ASX dividend stock that everyone should pay attention to, in my opinion. It’s one ASX share I have bought myself recently and plan to hold forever.

The farmland real estate investment trust (REIT) is unique on the ASX. There are plenty of operating agriculture companies, but their profit and performance can often be quite volatile. Rural Funds can provide a higher level of stability because its underlying earnings are based on consistent rental income rather than variable commodity-linked revenue.

Why it looks like a buy now

Every business has an underlying balance sheet value, which can be measured with the net asset value (NAV) metric. This is a net total of the assets minus the liabilities.

Every result, Rural Funds tells investors what its adjusted NAV is, which includes the market value of its water entitlements (rather than at cost).

Rural Funds disclosed that its adjusted NAV on 31 December 2023 was $3.07 per unit, which was up around 5% from 30 June 2023, primarily due to the asset revaluations.

At the current Rural Funds share price, it’s at a discount of around 33% to the December 2023 NAV. I think that’s a compelling discount.

It’s challenging to say precisely how much the ASX dividend stocks’ farms are worth without Rural Funds going through a sales process, but another way to judge it would be to look at the distribution yield.

The business currently pays an annual distribution of 11.73 cents per unit, which translates into a distribution yield of 5.8%. I think that’s a solid starting point for the passive income.

Why I’d hold Rural Funds shares forever

Farmland has been a valuable asset for many centuries, if not thousands of years. I believe it will continue to be a useful asset for a long time to come, so I’m comfortable with the idea of owning Rural Funds shares for the rest of my life.

The business has rental growth built into its contracts, with some contracts linked to CPI inflation and others having a fixed annual increase. This can help drive rental income higher over time, offsetting the higher cost of debt and hopefully helping fund larger distributions in future years.

Another tailwind for the business is that the Australian and global population continues climbing, which should be a helpful tailwind for food demand, which can help increase the underlying value for Rural Funds’ farms.

Overall, I think this ASX dividend stock is a solid candidate to own for the ultra-long term.

The post 1 incredible ASX dividend stock to buy now and hold forever appeared first on The Motley Fool Australia.

More reading

• 2 of the best ASX dividend stocks for income investors to buy in June
• Here’s how I’d target a $2,000 second income by investing $35 a week
• 2 cheap ASX dividend shares I’d buy in retirement
• Analysts say these 4 ASX dividend shares are buys
• Why I keep loading up on these 2 ASX passive income machines

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