Author: openjargon

The team at Morgans has been busy picking out its best ASX 200 share ideas for May.

The first two ASX 200 shares we looked at can be found here. Read on for three more picks:

CSL Ltd (ASX: CSL)

Morgans thinks that this biotech giant would be a great option this month. Especially given its attractive valuation and strong earnings per share growth outlook. It said:

While shares have struggled of late, we continue to view CSL as a key portfolio holding and sector pick, offering double-digit recovery in earnings growth as plasma collections increase, new products get approved and influenza vaccine uptake increases around ongoing concerns about respiratory viruses, with shares trading at 25x, a substantial discount (20%) to its long-term average.

The broker has an add rating and $315.35 price target on CSL’s shares.

ResMed Inc. (ASX: RMD)

Another ASX 200 share that Morgans is tipping as a strong buy is sleep disorder treatment company ResMed.

Its analysts feel that concerns over weight loss drugs disrupting its market are unwarranted. As a result, it believe ResMed’s long-term growth outlook remains very positive. It said:

While weight loss drugs have grabbed headlines and investor attention, we see these products having little impact on the large, underserved sleep disorder breathing market, and do not view them as category killers. Although quarters are likely to remain volatile, nothing changes our view that the company remains well placed and uniquely positioned as it builds a patient-centric, connected-care digital platform that addresses the main pinch points across the healthcare value chain.

The broker has an add rating and $34.11 price target on its shares.

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

A third ASX 200 share that is on Morgans’ best ideas list this month is investment house Soul Patts.

The broker likes the company due to its positive long term track record and diversified business. It explains:

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 the company’s shares.

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

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More reading

• Aussie investors: 3 ASX shares to buy and hold forever
• 3 ASX 200 shares I want to buy if the stock market crashes again
• 3 reasons CSL stock is a great long-term investment
• 3 excellent ASX 200 blue-chip shares to buy in May
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor James Mickleboro has positions in CSL and ResMed. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, ResMed, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended ResMed and Washington H. Soul Pattinson and Company Limited. 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.

Owning National Australia Bank Ltd (ASX: NAB) shares has been pleasing when it comes to receiving passive income in the form of dividends.

The ASX bank share sector collectively has quite a high dividend payout ratio, which pushes up the dividend yield. The other side to the equation is having a reasonable price/earnings (P/E) ratio.

The NAB share price has risen strongly over the past year, as we can see in the chart below.

After the bank’s recent release of the FY24 first-half result, let’s consider how big the dividend payouts might be in the future.

HY24 payout recap

NAB reported that its cash earnings of $3.55 billion for the six months to 31 March 2024 were down 12.8% year over year and down 3.1% half-on-half.

However, the diluted cash earnings per share (EPS) of $1.12 didn’t drop as much – it fell 1.6% half-on-half and 12.3% year on year.

NAB decided to grow its interim dividend per share by 1.2% year over year to 84 cents per share. This was the same dividend as the FY23 second-half dividend. It represents a cash dividend payout ratio of 75%, which is generous and leaves some profit within the business for more growth.

That means the business currently has a fully franked dividend yield of around 5% and a grossed-up dividend yield of approximately 7%.

How much passive income would 200 NAB shares pay?

If NAB were to repeat the last two declared dividends as the next two dividends, it would be an annual payout of $1.68. Owning 200 NAB shares would mean receiving $336 of cash and $480 of grossed-up dividends if we include the franking credits.

But that’s assuming the dividends don’t change in the coming years. Some analysts think the NAB dividend may grow in the next few years.

The estimate on Commsec suggests the bank could pay a passive income of $1.70 per share in FY25 and $1.71 per share in FY26.

That means that if an investor owned 200 NAB shares, it could pay $340 in cash dividends and $486 in grossed-up dividends, with the franking credits as a bonus.

Outlook for NAB shares

The NAB dividend could be heavily influenced by how the economy performs for the foreseeable future. NAB had this to say regarding the economic outlook:

In Australia, household consumption growth slowed sharply in the second half of 2023, impacted by interest rates and cost of living pressures. This is weighing on real GDP growth which is expected to remain below-trend over the near term.

However, some relief is anticipated later this year with expected tax cuts and a forecast easing in monetary policy from November should inflation continue to moderate. Following 1.5% GDP growth over 2023, growth of 1.7% is forecast over 2024, before improving to around 2.25 % in 2025.

Pressure has eased in the labour market and wage growth is expected to slow from elevated rates in 2023. The unemployment rate is expected to continue to drift higher, peaking at around 4.5% by end 2024, but most indicators of labour demand remain healthy suggesting employment will continue to grow.

The post How much passive income would I make from 200 NAB shares? appeared first on The Motley Fool Australia.

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More reading

• 3 ASX 200 shares I want to buy if the stock market crashes again
• Why Judo Capital, NAB, Paladin Energy, and Perpetual shares are falling today
• Why Graincorp, Lindsay Australia, NAB, and Sims shares are sinking today
• Why is the NAB share price sinking today?
• 5 things to watch on the ASX 200 on Tuesday

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.

Rather than ‘sell in May and go away’, I like to ‘buy while the cash is cold and hold’ — there has to be something catchier… nevertheless, the point still stands. No old saying will prevent me from pulling the trigger on buying if there are looming opportunities in the market.

The fight against inflation waged by the Reserve Bank of Australia continues to threaten a ‘genuine’ recession. Warren Buffett recently said the investment landscape isn’t ‘attractive’. And I haven’t purchased any individual shares since February… that’s bearish, right?

I don’t think so.

It might mean those no-brainer buys are harder to find, but I reckon a keen-eyed investor can spot a beauty even now.

Why buy ASX dividend shares?

I try not to place too much emphasis on income in my portfolio. While still in my younger years, my goal is to maximise wealth growth. Hence, I’m not looking for companies with the highest dividend yield, trying to squeeze out every last dollar I can to fund my next year of activities.

However, if I can find a great quality company that just happens to pay dividends… That’s the investing equivalent of finding loose chips in the bottom of the Maccas bag after devouring your fries. You weren’t expecting it, but you’re glad to see them.

After a while, those dividends add up. I’ve purchased other ASX shares with money solely sourced from dividends. It feels like I’ve stumbled upon some sort of money glitch. Whatever ‘math’ you want to call it, investments funded by income from ASX dividend shares are pretty magical.

I’ve prattled on long enough. Here’s what I’m buying this month.

My bottom drawer buy

It mightn’t be a dividend aristocrat, but it’s close enough for me. Sonic Healthcare Ltd (ASX: SHL) has steadily grown its dividends for 30 years. That’s worthy of some sort of term. Maybe dividend stalwart is fitting.

The laboratory, pathology, and radiology services provider is a cornerstone of healthcare systems worldwide. However, investors have sold down the stock by more than 40% from its all-time high as COVID testing revenues have evaporated.

In my view, the market is overlooking the quality of Sonic’s base business. Pathology and laboratory testing is a difficult industry to crack. The value typically accrues to the players with the greatest scale — that’s what Sonic Healthcare is in multiple markets.

Due to the sell-off, this ASX dividend share is currently trading on a dividend yield of 4%.

Pouncing on the pullback

Macquarie Group Ltd (ASX: MQG) posted a lacklustre full-year result last week. Net profit for the 12-month period was down 32% versus the prior year, prompting the financial dynamo to dial back its final dividend by 14.4% to $3.85 per share.

The Macquarie share price is now roughly 5% below its 52-week high.

At first glance, the result appears worthy of selling. But let’s not be hasty.

I believe Macquarie will still be a frontrunner in the long term. The company houses an immense array of expertise in funding and managing infrastructure. Such skills could be in high demand over the coming decades.

This ASX dividend share is yielding 3.4%.

The post 2 magnificent ASX dividend shares I’ll be buying more of in May appeared first on The Motley Fool Australia.

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More reading

• 2 cheap ASX 200 shares I’d buy for growth and dividends
• Are Macquarie shares in the buy zone?
• Forget NAB and buy these ASX dividend shares
• 5 things to watch on the ASX 200 on Monday
• Want $500 in monthly passive income? Buy 938 shares of this ASX 200 stock

Motley Fool contributor Mitchell Lawler has positions in Macquarie Group and Sonic Healthcare. 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 Macquarie Group. The Motley Fool Australia has recommended Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

On Wednesday, the S&P/ASX 200 Index (ASX: XJO) continued its winning run and pushed higher. The benchmark index rose 0.15% to 7,804.5 points.

Will the market be able to build on this on Thursday? Here are five things to watch:

ASX 200 expected to fall

The Australian share market looks set for a subdued session on Thursday following a mixed night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 16 points or 0.2% lower this morning. In the United States, the Dow Jones was up 0.45%, but the S&P 500 was flat and the Nasdaq fell 0.2%.

Oil prices rise

ASX 200 energy shares including Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a good session after oil prices charged higher overnight. According to Bloomberg, the WTI crude oil price is up 1.1% to US$79.22 a barrel and the Brent crude oil price is up 0.7% to US$83.77 a barrel. This was driven by a surprise stockpile decline in the United States.

CBA Q3 update

The Commonwealth Bank of Australia (ASX: CBA) share price will be on watch on Thursday when the banking giant releases its third quarter update. One area of focus for investors will be productivity. Goldman Sachs recently commented: “In light of the soft revenue growth environment, it has become increasingly important for the sector to take a more proactive approach in cost management. Adding to this challenge has been stickier than expected inflation which was a headwind to costs in FY23 with its impact broadly based across i) staff, ii) third party, iii) and investment spend. Overall we are of the view the key to offsetting these inflationary pressures will be the banks’ ability to deliver productivity improvements.”

Gold price softens

It looks set to be a subdued day for ASX 200 gold shares Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) after the gold price softened overnight. According to CNBC, the spot gold price is down 0.3% to US$2,316.4 an ounce. The precious metal appears to be in a holding pattern while waiting for rate cut clues.

Westpac goes ex-dividend

Westpac Banking Corp (ASX: WBC) shares are going ex-dividend on Thursday and look likely to drop into the red. Earlier this week, Australia’s oldest bank released its half year results and posted a 4% year on year decline in net operating income to $10,590 million. However, this couldn’t stop the bank from increasing its fully franked interim dividend by 7.1% to 75 cents per share and declaring a special fully franked 15 cents per share dividend. These dividends will be paid to eligible shareholders on 25 June.

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

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More reading

• Here are the top 10 ASX 200 shares today
• Want the massive Westpac dividend? Here’s why you need to hurry
• Woodside shares are down 17% in 6 months. Is now the right time to buy?
• Morgans names the best ASX 200 stocks to buy in May
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation and Woodside Energy 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 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.

I think that buy and hold investing with ASX shares is one of the best ways to grow wealth.

Let me now demonstrate why.

Buy and hold ASX shares

Over the long term, the share market has delivered investors an average annual return of 10% per annum.

And while there is no guarantee that it will continue doing the same in the future, we’re going to assume that it does for the purpose of this article.

Based on that return, if you are able to invest $10,000 into ASX shares each year and earned the market return, you would grow your portfolio to $175,000 after 10 years thanks to the power of compounding.

But why stop there? Compounding really starts to work its magic the longer you leave it. So, if we fast forward another 10 years of doing the same, your portfolio would have become worth almost $650,000.

But which ASX shares would be good options for a buy and hold investment? Three to consider are as follows:

CSL Ltd (ASX: CSL)

The first ASX share that could be a great buy and hold option is CSL.

It is the biotechnology giant behind the CSL Behring, CSL Vifor, and CSL Seqirus businesses. These are leaders in their respective fields and provide world-class plasma therapies, iron deficiency and nephrology treatments, and vaccines.

UBS thinks investors should be buying its shares at present. The broker currently has a buy rating and $330.00 price target on CSL’s shares.

Nextdc Ltd (ASX: NXT)

Another ASX share that could be a great long term option for investors right now is NextDC.

It is a leading data centre operator with world class operations across the Asia Pacific. Thanks to the shift to the cloud and the artificial intelligence boom, demand for data centre capacity is growing rapidly. This has many analysts predicting that NextDC will grow its earnings very strongly over the next decade.

One of those is Morgans, which has an add rating and $19.00 price target on its shares.

Pro Medicus Limited (ASX: PME)

Finally, this health imaging technology company could be a quality option for investors.

It is a leading provider of radiology information systems (RIS), Picture Archiving and Communication Systems (PACS), and advanced visualisation solutions across the globe.

Goldman Sachs is very bullish on the company’s long term outlook. So much so, it recently put a buy rating and $134.00 price target on its shares.

The post Aussie investors: 3 ASX shares to buy and hold forever appeared first on The Motley Fool Australia.

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More reading

• 3 ASX 200 shares I want to buy if the stock market crashes again
• Here are the top 10 ASX 200 shares today
• Morgans names the best ASX 200 stocks to buy in May
• 3 reasons CSL stock is a great long-term investment
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has positions in CSL, Nextdc, and Pro Medicus. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Goldman Sachs Group, and Pro Medicus. The Motley Fool Australia has recommended CSL and Pro Medicus. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Through the Australian share market, we can buy passive interests in a diversified set of operations via a single investment.

With an investment in Wesfarmers Ltd (ASX: WES) stock, we have just that. The holding company boasts a portfolio containing some of Australia’s strongest retail, healthcare, and chemicals brands.

These include Bunnings, Kmart/Target, Officeworks, Priceline Pharmacy, and Flybuys just to name a select few. When you own Wesfarmers stock, you own pieces of these companies, too.

Wesfarmers has a long history of creating value for its shareholders. Its share price is up 81% since May 2019. A $10,000 investment back then is now worth $18,100, plus $1,667 in dividends.

But what about the future? Here, I’ll explain.

Diversification: Good for risk and value

One major reason for Wesfarmers’ success is its highly diversified operations. Most people think of diversification as spreading their risk across a number of assets.

But diversification also provides many sources of value. Wesfarmers has 37 brands operating under its wings. It has fingers in many pies.

Goldman Sachs touched on this in a recent note, stating many Wesfarmers’ divisions remained “under-appreciated by the market”, including digital, retail media and the WES health platform.

Goldman also expects a respective 6% and 11% growth in sales and earnings before interest and tax (EBIT) for the Bunnings franchise in FY 2025/2026.

This could generate “strong annual free cash flow of $2.5 billion–$3 billion to fund two new high-growth and high-return platforms, Health and Lithium…”.

These are two points to take note of.

Speaking of Bunnings and Kmart

Wesfarmers’ portfolio is filled with low profit margin, high sales volume companies. They have wide consumer penetration, as a result.

Goldman cited volume and consumer penetration in its view on Wesfarmers stock. It said the company had the “largest volume of consumer data assets”, which included “14.2 million total loyalty members across Flybuys, Priceline and PowerPass”.

Both Bunnings and Kmart fit this mould, too. For instance, Bunnings made up 44% of the company’s revenues in the six months to 31 December 2023 but comprised 58% of the group’s EBIT. Kmart was 22% and 29%, respectively.

Bunnings’ H1 FY 2024 EBIT margin was 12.9%, whereas Kmart’s was 10%.  But sales volume was tremendously high — $9.9 billion and $5.9 billion respectively.

Both companies subsequently have stellar returns of capital (ROC), tallying 66% for Bunnings and 59% for Kmart. That means every $1 Wesfarmers invests into Bunnings and Kmart returns 66 and 59 cents on that dollar, respectively. This is a competitive advantage.

Dividends increasing

Aside from the capital appreciation, a final tailwind for Wesfarmers is the company’s dividend. The fully franked payment of $1.94 per share gives an ungrossed dividend yield of around 2.84%, as I write.

However, it’s the recent increase that’s worth noting.

The company’s half-year sales growth was flat at 0.5%. But it grew net profit after tax (NPAT) by 3%. That means each $1 of new revenues brought in $6 of additional profit for the half – quite the result.

The Wesfarmers board increased its dividend by 3.4% to $0.91 per share. Goldman Sachs sees this trend continuing through FY 2025/2026 as “cost optimising and digitalisation initiatives drive margin expansion”.

Foolish takeaway

Wesfarmers stock has proven to be a superb long-term investment. Based on performance, I believe it can continue to beat the S&P/ASX 200 Index (ASX: XJO) over time.

Since January this year, the Wesfarmers share price has climbed more than 20% into the green.

The post Is Wesfarmers stock a good long-term investment? appeared first on The Motley Fool Australia.

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More reading

• 3 ASX 200 shares I want to buy if the stock market crashes again
• Would I still buy Wesfarmers shares as they hit all-time highs?
• New record high: Is it too late to buy Wesfarmers shares?
• Where will the next $75 billion come from for Wesfarmers shares?
• If you invested $10,000 in Wesfarmers shares a decade ago, here’s what it would be worth now

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