Author: openjargon

It’s not too often that an ASX share, even an ASX 200 energy stock, trades on a price-to-earnings (P/E) ratio of 4.5. After all, the average P/E ratio on the ASX right now is closer to 20. 

A company that is asking an earnings multiple of 4.5 is effectively asking investors to pay $4.50 for every $1 of earnings it brings in. That’s a compelling equation for any value investor to contemplate.

So today, let’s take a look at this ASX 200 energy stock in question and see if there’s anything to like.

The stock is none other than AGL Energy Ltd (ASX: AGL). AGL is one of the oldest names on the ASX and one of the most famous energy stocks on the market. It has had a rough trot in recent years, falling from over $21 a share in early 2020 to a multi-decade low of under $4 a share in late 2021.

Today, AGL shares have recovered substantially, but are still trading at half of what they were just four years ago – asking $10.20. Check all of that out for yourself below:

Yet despite this recovery, this ASX 200 energy stock remains at an arguably cheap share price. For some ASX shares, including some energy stocks, low earnings multiples are the norm. But for others, it could indicate that a company might be trading at a bargain price. So which is it for AGL?

Is this ASX 200 energy stock a buy at 4.5 times earnings?

Well, one ASX expert thinks it’s the latter.

Rafi Lamm is the co-founder of fund manager L1 Capital. Speaking to the Australian Financial Review (AFR) this week, Lamm noted AGL’s quality and future-proof nature, noting that the company was “well positioned to benefit from strong long-term electricity demand with the lowest cost baseload generation in NSW and Victoria”.

Lamm also views the current AGL share price as cheap, noting that its “multiple of 4.5 times earnings before interest and tax” is “well below its historic multiple of six times”.

The fund manager argued that AGL is set for “a solid recovery” in terms of earnings from FY2026 onwards thanks to rising wholesale electricity futures pricing:

Strong medium term free cash flow will enable solid dividends as well as a substantial investment in the energy transition, for example, in high returning battery storage.

No doubt this opinion will delight shareholders of this ASX 200 energy stock. But let’s see if Lamm’s call proves accurate.

At the current AGL share price, this ASX 200 energy stock has a market capitalisation of $6.86 billion, with a dividend yield of 4.80%.

The post Is this ASX 200 energy stock a buy at a P/E of 4.5? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen 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.

On Thursday, the S&P/ASX 200 Index (ASX: XJO) had another poor session and dropped into the red. The benchmark index fell 0.5% to 7,628.2 points.

Will the market be able to bounce back from this on Friday and end the week on a high? Here are five things to watch:

ASX 200 poised to rebound

The Australian share market looks set to end the week on a positive note despite a poor session on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open 50 points or 0.65% higher this morning. On Wall Street, the Dow Jones was down 0.85%, the S&P 500 fell 0.6%, and the NASDAQ was 1.1% lower.

Oil prices fall

ASX 200 energy shares Beach Energy Ltd (ASX: BPT) and Karoon Energy Ltd (ASX: KAR) could have a tough finish to the week after oil prices tumbled overnight. According to Bloomberg, the WTI crude oil price is down 1.7% to US$77.87 a barrel and the Brent crude oil price is down 2% to US$81.97 a barrel. Traders were selling oil in response to weak gasoline demand.

Buy Xero shares

The Xero Ltd (ASX: XRO) share price could be good value according to analysts at Goldman Sachs. In response to price increases in the UK, the broker has reiterated its conviction buy rating and $164.00 price target on the cloud accounting platform provider’s shares. It said: “Although we believe this pricing update was somewhat expected following the Australian plan announcement, we view it as another incremental positive for Xero and very supportive of our FY25/26 revenue forecasts.”

Gold price softens

ASX 200 gold shares including Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a subdued finish to the week after the gold price edged lower overnight. According to CNBC, the spot gold price is down 0.1% to US$2,362.8 an ounce. The precious metal appears to be in a holding pattern ahead of the release of US inflation data.

Pro Medicus shares rated hold

Analysts at Bell Potter have been impressed with the contract wins announced by Pro Medicus Limited (ASX: PME) this week. As a result, the broker has upgraded the health imaging technology company’s shares to a hold rating with an improved price target of $115.00 (from sell and $75.00). It said: “The announcement of recent contract wins provides a heightened degree of certainty for FY25 revenues and earnings, accordingly there is minimal risk of downgrades to consensus for FY25 following the FY24 earnings announcement.”

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

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Motley Fool contributor James Mickleboro has positions in Pro Medicus and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group, Pro Medicus, and Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended Pro Medicus. 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 options for income investors to choose from on the Australian share market.

To narrow things down, I have picked out three ASX dividend stocks that analysts rate as buys and are forecasting 6%+ dividend yields. Here’s what you need to know about them:

APA Group (ASX: APA)

The first ASX dividend stock for income investors to consider buying is APA Group.

It is an energy infrastructure business that owns and operates a $27 billion portfolio of gas, electricity, solar and wind assets. This includes 15,000 kilometres of natural gas pipelines that connect sources of supply and markets across mainland Australia.

Analysts at Macquarie are feeling positive about the company’s outlook and expect its long run of dividend increases to continue. The broker is forecasting dividends of 56 cents per share in FY 2024 and then 57.5 cents per share in FY 2025. Based on the current APA Group share price of $8.29, this equates to 6.75% and 6.9% dividend yields, respectively.

Macquarie has an outperform rating and $9.40 price target on its shares.

Dalrymple Bay Infrastructure Ltd (ASX: DBI)

Over at Morgans, its analysts think that Dalrymple Bay Infrastructure could be an ASX dividend stock to buy. It is the long-term operator of the Dalrymple Bay Coal Terminal, which has been Queensland’s premier coal export facility since 1983.

The broker currently has an add rating and $3.05 price target on its shares.

As for income, the broker is forecasting dividends per share of 22 cents in FY 2024 and then 23 cents in FY 2025. Based on the latest Dalrymple Bay Infrastructure share price of $2.76, this will mean yields of 8% and 8.3%, respectively.

HomeCo Daily Needs REIT (ASX: HDN)

Morgans is also expecting some big dividend yields from HomeCo Daily Needs shares. It is a property company focused on neighbourhood retail and large format retail assets.

The broker likes the company due to the resilience of its cashflows and its exposure to accelerating click and collect trends. Combined with its development pipeline, Morgans feels the company is well-positioned for growth.

It expects this to underpin dividends per share of 8 cents in FY 2024 and then 9 cents in FY 2025. Based on the current HomeCo Daily Needs share price of $1.21, this will mean yields of 6.6% and 7.4%, respectively.

Morgans currently has an add rating and $1.37 price target on the ASX dividend stock.

The post These buy-rated ASX dividend stocks offer 6%+ yields (and plenty of upside) appeared first on The Motley Fool Australia.

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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 and Macquarie Group. The Motley Fool Australia has recommended HomeCo Daily Needs REIT. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

When an Australian investor buys an ASX bank stock, they are probably doing so with the expectation of receiving steady, fat and fully franked dividend payments. This reputation naturally applies to Westpac Banking Corp (ASX: WBC) shares.

Westpac is Australia’s oldest bank and a prominent member of the big four ASX banks. As you would expect, this company has been delighting its investors with hefty dividend payments for decades.

But do Westpac’s dividends still come with full franking credits attached? This might seem like a silly question. However, we’ve already seen one member of the big four banks club recently drop its commitment to paying fully franked dividends.

As we discussed last month, the culprit is ANZ Group Holdings Ltd (ASX: ANZ). ANZ shares have transitioned away from paying out fully franked dividends.

This bank’s first partially franked dividend in decades was announced back in late 2019. Over subsequent years, ANZ’s dividends returned to being fully franked alongside those from Westpac shares and the other banks.. until late 2023. At that time, ANZ revealed that its final dividend for 2023 would only come partially franked at 56%. That payment was doled out on 22 December.

Its next dividend, the final 83 cents per share payout that shareholders will receive on 1 July, is also set to come partially franked. This time at 65%. So it seems a new norm has been established for ANZ.

But what about Westpac shares?

Do the dividends from Westpac shares still come with full franking credits?

Fortunately for Westpac shareholders, it’s a different story. All of the dividends this bank stock has paid out over the 21st century so far have come with full franking credits attached. Additionally, the bank has made no indication that it is planning on disrupting this status quo.

Earlier this month, Westpac revealed that its interim dividend for 2024 would come in at a fully franked 75 cents per share. That’s a happy 7.14% increase over 2023’s interim dividend of 70 cents (also fully franked).

Additionally, Westpac investors are also set to be treated to a supplemental special dividend. That’s to be worth an additional 15 cents per share. This too will come with those full franking credits attached.

This makes sense because in order for a company like Westpac to pay out fully franked dividends, the profits that the dividends are funded from must be taxed in Australia.

ANZ, unlike Westpac and the other big four banks, has significant operations outside Australia. As such, these operations make it difficult for ANZ to pay out fully franked dividends.

But Westpac’s business model is far more domesticated than ANZ’s. As such, this bank probably won’t struggle to keep its dividends fully franked going forward.

There’s never any certainty in the investing (or dividend) world. But judging by Westpac’s past dividend payouts, as well as its Australia-centric business model, the likelihood of Westpac’s dividends remaining fully franked is arguably high.

At the current Westpac share price, this ASX 200 bank has a trailing dividend yield of 5.67% on the table. This grosses up to 8.1% with the value of those full franking credits included.

The post Do the dividends from Westpac shares still come fully franked? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen 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.

When an investor searches for ASX dividend shares to add to their portfolio, the gold standard is arguably finding those rare stocks that have the potential to fund a lifetime of passive income.

After all, what could be better than buying a dividend share and never worrying about whether it will be able to scrape together enough cash for its next dividend?

Buying these lifelong sources of passive income can be thought of as investing in a coiled dividend spring.

But of course, finding these coiled springs is easier said than done. So today, let’s discuss two ASX dividend shares that I think have the potential to fund a lifetime of passive income.

2 ASX dividend shares to fund a lifetime of passive income

Washington H. Soul Pattinson and Co Ltd (ASX: SOL)

First up is Washington H. Soul Pattinson, or Soul Patts for short. I’ve long touted this stock as one of the best dividend shares on the ASX. This company owns a portfolio of underlying assets, which it manages on behalf of its shareholders, much as a listed investment company (LIC) does.

In Soul Patts’ case, these assets include major stakes in other ASX stocks, including New Hope Corporation Ltd (ASX: NHC) and TPG Telecom Ltd (ASX: TPG). They also include a huge blue-chip ASX share portfolio and other investments like private credit, venture capital, and unlisted companies.

My confidence in Soul Patts as a lifetime passive income payer comes from its almost flawless track record of delivering meaningful returns over many decades. For one, the company has a near-25-year streak of providing annual dividend pay rises – a streak unmatched on the ASX. It also hasn’t cut its dividend in more than 120 years.

Additionally, these fully-franked dividends have not come at the expense of growth. In an ASX release earlier this month, Soul Patts confirmed that its investors have enjoyed an average 12% per annum return over the 20 years to 30 April. That smashes the return of the S&P/ASX 200 Index (ASX: XJO) over the same period.

All of these factors add up to an ASX dividend share that I think has more than enough potential to be a lifelong passive income payer.

Coles Group Ltd (ASX: COL)

When I look for long-term ASX dividend shares, I like to turn to the consumer staples sector. If a company sells us things that we need — rather than want — to buy, I think it inherently makes its business model stronger and more robust than your average ASX share.

That is arguably true of Coles Group. As the second-largest grocer and supermarket operator in Australia, Coles will always be one of the top places customers head to for food, drinks and household essentials if it offers these products at competitive prices.

I believe Coles will continue to be able to do this, thanks to its significant investments in its supply chains and automation-driven distribution centres.

Coles’ rival Woolworths Group Ltd (ASX: WOW) is a larger business with more market share than Coles. However, Coles shares trade with a higher dividend yield right now and have a better history of maintaining consistent, fully-franked payouts.

For these reasons, I think Coles is another ASX dividend share that has the potential to be a spring of passive income that won’t run dry over a lifetime.

The post 2 ASX dividend shares that are coiled springs for a lifetime of passive income appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor Sebastian Bowen has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended 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.