Author: openjargon

Zip Co Ltd (ASX: ZIP) shares are falling on Monday morning.

At the time of writing, the buy now pay later provider’s shares are down 2% to $1.66.

What’s going on with Zip shares?

Investors have been selling the company’s shares this morning despite news that it will return to the benchmark ASX 200 index later this month.

After the market close on Friday, S&P Dow Jones Indices announced that it will remove Altium Limited (ASX: ALU) from the ASX 200 index when the electronic design software provider’s acquisition by Renesas Electronics Corporation completes.

Taking Altium’s place in the illustrious index next Monday on 22 July will be Zip.

This could be good news for Zip shares for a couple of reasons. One is that ASX 200 index funds will need to buy its shares to reflect the changes. This can add pressure to the buy side of the equation and propel its shares higher.

Another reason why it can be good news is that many fund managers have strict investment mandates. One common mandate is that they only invest in companies included in the ASX 200 index. This is to prevent the funds they manage from being invested in speculative stocks that could result in large losses.

So, if any of these fund managers have liked the look of Zip’s impressive performances in 2024, they will now be allowed to buy its shares.

Should you invest?

There’s no doubt that Zip’s transition to profitable growth has been remarkable.

At one stage, many in the market believed the company would never be able to reach this milestone. But it certainly has proven the doubters wrong in FY 2024 and appears well-placed to build on this in FY 2025.

However, Zip shares are up approximately 300% since this time year because of this transformation. So, is it now too late to invest?

Unfortunately, as things stand, the broker community thinks that its shares have rallied beyond fair value now. For example, Citi currently has a buy rating and $1.40 price target on its shares, and UBS has a buy rating and $1.55 price target on them.

Based on the latest Zip share price, this implies potential downside of 15.5% and 6.5%, respectively.

Though, it is possible that these recommendations could be updated in August if Zip outperforms expectations with its full year results. But until then, investors may want to approach this one with caution.

The post Zip shares fall despite return to ASX 200 index appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• Are ASX small-cap shares back in vogue amid a big shift?
• Is it too late to buy Zip shares at their 2-year highs?
• 3 ASX small-cap shares that soared 250% to 675% in FY24
• Shares vs. property: Which stocks and suburbs delivered the best growth in FY24?

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 positions in and has recommended Altium and Zip Co. 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.

Liontown Resources Ltd (ASX: LTR) shares are rising on Monday morning.

At the time of writing, the lithium developer’s shares are up 2% to $1.02

Why are Liontown shares roaring?

The company’s shares are lifting this morning after investors responded positively to the release of an announcement.

According to the release, Liontown Resources has concluded negotiations with Beijing Sinomine International Trade (BSIT) and executed a full-form offtake agreement.

BSIT is operating in the lithium chemicals industry. It is active in both hardrock lithium mining and refining of spodumene concentrates into battery-grade lithium chemicals.

The offtake agreement is for the supply of spodumene concentrate from Liontown’s flagship 100%-owned Kathleen Valley Lithium Project in Western Australia.

The company notes that the short-term agreement is for the supply of up to 100,000 dry metric tonnes (dmt). This is over a 10-month period to commence by 30 September 2024. Pricing will be determined using a formula-based mechanism that references market prices for battery-grade lithium carbonate.

But don’t worry if you’re concerned about this interfering with its existing offtake agreements. Management points out that the agreement with BSIT is in addition to existing long-term offtake contracts with Tesla, LG Energy Solution and Ford.

These existing offtake agreement will be progressively brought into effect over the next 12 months as Liontown ramps-up the Kathleen Valley Lithium Project to full production.

Agreement ‘de-risks sales’

Liontown Resources’ managing director and CEO, Tony Ottaviano, was pleased with the agreement.

He sees it as a way to de-risk the company’s ramp up to nameplate capacity. Ottaviano commented:

Securing a near-term offtake with an established lithium refiner to sell initial volumes over the ramp-up period, de-risks sales during our ramp-up of the plant towards nameplate capacity. This complements our existing long-term offtakes, which we will progressively bring into effect over the next 12 months as we increase production towards nameplate to support our offtake commitments.

Should you invest?

Bell Potter is positive on Liontown shares and sees value in them at current levels.

And while the broker has not yet responded to this update, it currently has a speculative buy and $1.85 price target on its shares. This implies potential upside of 80% for (high risk) investors from current levels.

The broker thinks very highly of the Kathleen Valley lithium project. It explains:

LTR’s 100% owned Kathleen Valley lithium project remains highly strategic with initial production imminent, a long mine life and tier-one location. LTR has offtake contracts with top tier EV and battery OEMs (Ford, LG Energy Solution and Tesla). Under our modelled assumptions, we expect that LTR is fully funded to free cash flow.

The post Why are Liontown shares roaring higher on Monday? appeared first on The Motley Fool Australia.

More reading

• These are the 10 most shorted ASX shares
• Top 5 investment themes exciting ASX shares investors in FY25
• Here 3 ASX lithium shares to watch for FY25
• Are Liontown Resources shares a buy after surging 9% this week?
• 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 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 Vanguard Australian Shares Index ETF (ASX: VAS) is a popular exchange-traded fund (ETF), with many investors appreciating the level of passive income that it produces.

Term deposits can be equally appealing because they can deliver a solid, guaranteed interest rate while also protecting people’s capital.

Both investment options come with positives and negatives, so let’s consider some of those.

Passive income yield

Every month, Vanguard updates investors on the VAS ETF dividend yield. At the end of May 2024, the Vanguard Australian Shares Index ETF offered a yield of 3.7% which, together with its franking credits, takes the yield to just under 5%.

The VAS ETF’s yield is comparable to the term deposit rate offered by ASX financial shares like AMP Ltd (ASX: AMP) and Judo Capital Holdings Ltd (ASX: JDO).

While each financial institution offers a different interest rate, the yield for a term deposit is fixed and guaranteed. In contrast, the Vanguard fund payout has the potential to grow over the longer term, but it can also be reduced in the shorter term.

If its holdings grow their profits and dividends, the VAS ETF distribution could be materially larger in five years. The term deposit yield will be entirely dependent on the RBA interest rate at the time, which has been hard to predict over the last few years.

What about capital?

Term deposits are designed to protect investor capital, so investors don’t suffer capital loss during the course of the term deposit.

The VAS ETF invests in a portfolio of ASX shares, including BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), Telstra Group Ltd (ASX: TLS), Coles Group Ltd (ASX: COL) and Macquarie Group Ltd (ASX: MQG).

Owning shares has the potential to deliver capital growth over the long term if those businesses can collectively perform. However, as everyone knows, volatility can quickly strike and cause a decline.

If you’re an investor thinking about a short-term investment, a term deposit may be a better choice because it removes the risk of capital loss while still offering decent cash returns.

However, for the longer term, we should keep in mind that ASX shares can provide inflation protection by growing their profits, dividends and share prices. The term deposit return is fixed with no growth potential unless someone reinvests their interest into the term deposit.

Investors can spend their VAS ETF distributions and still see larger distributions in the future because of underlying business growth.

Of course, there are other investments that people can consider to diversify a portfolio further, such as the ASX dividend share Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and an ETF like Vanguard MSCI Index International Shares ETF (ASX: VGS).

The post Should Aussies choose Vanguard Australian Shares Index ETF (VAS) or a term deposit for passive income? appeared first on The Motley Fool Australia.

More reading

• Buying shares and 5 other ways investors intend to spend tax cuts: report
• The 5 most popular ASX shares bought by investors
• Should I buy ASX shares now or wait? See what Lazard says
• How did the Vanguard Australian Shares Index ETF (VAS) perform in FY24?
• Buy and hold these ASX ETFs for 10 years+

Motley Fool contributor Tristan Harrison 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 Macquarie Group and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Coles Group, Macquarie Group, Telstra Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Vanguard Msci Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

AGL Energy Ltd (ASX: AGL) and Pilbara Minerals Ltd (ASX: PLS) shares are both interesting potential investments to think about because of the exposure they can provide to the growth of energy-related demand.

These businesses are constituents of the S&P/ASX 200 Index (ASX: XJO), but that doesn’t mean they’re immune to volatility. As the chart below shows, their share prices have declined significantly over the past few years.

In the last five years, the AGL share price has fallen around 50%, while the Pilbara Minerals share price has dropped 42% since August 2023. Of course, a lower share price doesn’t necessarily mean they excellent buys. But it’s still worth analysing and comparing both shares.

Energy prices are key

It can be quite difficult to predict what’s going to happen next with lithium prices or electricity prices.

AGL is an energy generator and retailer, so it benefits when energy prices go up. Pilbara Minerals is a major lithium miner, so it will benefit if lithium prices rise amid the rise of electric vehicles.

The broker UBS recently noted that near-term wholesale prices have increased. UBS also increased its expectation for wholesale electricity prices to $90MW per hour (up $10MW per hour), reflecting “a slower build out of renewable and transmission capacity, higher levelised cost of energy (LCOE) for new generation and an updated forecast of thermal generation and storage utilisation.”

The energy retailer’s net profit after tax (NPAT) is expected to grow at a compound annual growth rate (CAGR) of 9% between FY26 and FY29.

Sadly, lithium prices are not looking as positive. UBS said it sees a spot price for lithium spodumene of between US$1,050 to US$1,075 as a “fair reflection of a well-supplied market.”

UBS suggested that “continued downside risk remains while supply out of Africa is strong and demand for PHEV [plug-in hybrid electric vehicle] stagnates.”

The broker is wary of Pilbara Minerals’ recent announcement to expand the Pilgangoora operations with its P2000 project. Taking the production to 2mt per annum would reportedly see it rival Greenbushes as the world’s largest spodumene mine. However, “project announcements like this and Manono will likely push out a return to incentive based prices and keep prices near current marginal cost support levels.”

If electric car demand were to recover to a satisfactory level of growth, it could lead to higher lithium prices. AGL can benefit from increasing energy demand from areas like data centres, AI, electric vehicles and a growing population.

My verdict on AGL and Pilbara Minerals shares

Pilbara Minerals doesn’t seem to be doing itself or the lithium price any favours by aiming for such large annual production.

I don’t think it’s clear that the lithium price will recover to previous strong levels, particularly if supply keeps increasing.

AGL can benefit from rising energy prices, investments in energy storage, and growing demand from data centres.

If AGL can grow its profit and dividend in the coming years, I think the business could be a materially undervalued opportunity at today’s prices. That’s why I recently decided to invest in the ASX share, and it would be my pick today.

According to the UBS estimates, the AGL share price is valued at 10x FY25’s estimated earnings.

The post Are AGL or Pilbara Minerals shares a better buy? appeared first on The Motley Fool Australia.

More reading

• Top 10 most traded ASX shares and US stocks in June
• These are the 10 most shorted ASX shares
• Buying shares and 5 other ways investors intend to spend tax cuts: report
• Is it time to dive back into ASX lithium shares?
• Buy this ASX lithium stock and sell this one

Motley Fool contributor Tristan Harrison has positions in Agl Energy. 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.

Are you hunting ASX income stocks to buy? If you are, then it could be worth checking out the two stocks listed below.

They have both been named as buys and tipped to provide investors with good yields in the near term.

Here’s what analysts are saying about them:

Healthco Healthcare and Wellness REIT (ASX: HCW)

Bell Potter thinks that HealthCo Healthcare & Wellness REIT could be an ASX income stock to buy.

It is a real estate investment trust with a mandate to invest in hospitals, aged care, childcare, government, life sciences and research, and primary care and wellness property assets. Management notes that its objective is to provide shareholders with exposure to a diversified portfolio underpinned by attractive megatrends.

Bell Potter is a big fan and highlights its significant development pipeline and huge addressable market as reasons to buy. It said:

HCW has underperformed the REIT sector last 3 months (-10% vs. +22% XPJ) following bond yield reversion and is attractively priced at 20% discount to NTA (but only REIT to record flat to positive valuation movement at 1H24) with double digit 3 year EPS CAGR given high relative sector debt hedging and ability to grow its $1bn development pipeline via attractive YoC spread to marginal cost of debt. Longer term, HCW has significant scope for growth with an estimated $218 billion addressable market where an ageing and growing population should underpin long-term sector demand.

In respect to dividends, the broker is forecasting dividends per share of 8 cents in FY 2024 and then 8.3 cents in FY 2025. Based on the current Healthco Healthcare and Wellness REIT unit price of $1.16, this will mean dividend yields of 6.9% and 7.2%, respectively.

Bell Potter has a buy rating and $1.50 price target on its shares.

Universal Store Holdings Ltd (ASX: UNI)

Over at Morgans, its analysts think that Universal Store could be a great option for income investors.

It is the youth fashion retailer behind the eponymous Universal Store brand. In addition, it has potential to grow its smaller Perfect Stranger and Thrills brands.

Commenting on its bullish view, the broker 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. Although its core youth customers are far from buoyant, they continue to spend.

Morgans is forecasting fully franked dividends of 26 cents per share in FY 2024 and then 29 cents per share in FY 2025. Based on its current share price of $5.08, this will mean yields of 5.1% and 5.7%, respectively.

The broker has an add rating and $6.50 price target on the ASX income stock.

The post Why brokers say these ASX income stocks are top buys appeared first on The Motley Fool Australia.

More reading

• 3 high-yield ASX dividend shares to supercharge your passive income stream
• Very big dividend yields are expected from these ASX stocks
• Analysts say these ASX dividend shares are top picks in July
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• Forget CBA and buy these ASX dividend stocks

Motley Fool contributor James Mickleboro has positions in Universal Store. 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 ASX dividend stock Kelsian Group Ltd (ASX: KLS) has deviated significantly from its recent highs. The Kelsian share price is down around 50% from April 2021 and 25% over the last year, as shown in the chart below.

Kelsian describes itself as Australia’s largest integrated multi-modal transport provider and tourism operator. It has established bus operations in Australia, Singapore, the USA, London, and the Channel Islands. At 31 December 2023, it had 5,500 buses, 115 vessels, and 24 light rail vehicles.

The company has been operating for over 30 years. It claims to be a leader in sustainable public transport, with Australia’s largest zero-emission bus fleet and electrified bus depot.   

It may not be the most well-known ASX dividend stock, but I believe it could be a compelling option.

Passive income potential

Kelsian has impressively grown its annual dividend per share each year since 2021, which is pretty good considering all of the uncertainty and volatility of the last three years.

Looking at the last two declared dividends, it has a fully franked dividend yield of 3.3% and a grossed-up dividend yield of 4.8%.

The estimate on Commsec suggests the ASX dividend stock could pay an annual dividend per share of 22.7 cents in FY25, which would be a grossed-up dividend yield of 6.2%.

In the subsequent year of FY26, the transportation business is forecast to pay an annual dividend per share of 25 cents. This would represent a grossed-up dividend yield of 6.8% in the 2026 financial year.

So, the business is projected to see a pleasing level of dividend yield and passive income growth in the next couple of financial years.

Are the ASX dividend stock’s earnings going to grow?

I only want to consider investing in businesses whose earnings are likely to grow in the foreseeable future. Profit growth usually drives the share price higher and funds larger dividend payments.

In the FY24 first-half result, the business reported revenue grew by 44.9% to $982.7 million thanks to the acquisition of All Aboard America! and the new Sydney contracts from August 2023 and October 2023. It also reported underlying earnings before interest and tax (EBIT) growth of 29.4% to $58.1 million and statutory net profit after tax (NPAT) growth of 44.1% to $28.1 million.

Kelsian’s outlook commentary on the HY24 result said it’s “well-placed to continue to deliver growth underpinned by economies of scale, efficiencies and global procurement opportunities.”

The ASX dividend stock believes the longer-term list of growth opportunities is “significant”, with many markets “welcoming operational experts to support their decarbonisation agendas”.

Its new contracts in Western Sydney are “in the fastest population growth corridor in Sydney”, and this growth is expected to continue with the launch of a new international airport in 2026. The company is confident of more Sydney contracts, an expansion of routes and higher margins.

The All Aboard America! business provides “a multi-year runway that is both organic and inorganic.” Organic growth examples include “construction and technology sectors, employee shuttle and expansion to new cities.”

According to Commsec estimates, the Kelsian share price is valued at just 12x FY26’s estimated earnings. For a growing business, I believe that’s a very appealing valuation.

The post 1 ASX dividend stock down 50% to buy right now appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today

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.

Are you feeling wealthier these days? Or maybe you’re wondering how anyone is getting rich right now.

That may seem like a silly question in the midst of a cost-of-living crisis.

But according to the Australian Financial Review (AFR), the average wealth of Australian adults grew by nearly 10% in 2023. And that was more than twice the growth rate of 56 other countries.

These are the findings of the 2024 UBS Global Wealth Report.

Our wealth is building faster than other countries

On a median basis, our wealth grew by about 5% to US$261,805 per person. That translates to about $386,758 per person in Aussie currency, making us the second-wealthiest people on the planet.

We’ve moved up a spot this year and sit behind Luxembourg, which has the highest median wealth per person, at US$372,258 or AU$549,927.

Below us in third position is Belgium, with a median wealth per person of US$256,185 or AU$378,456.

According to UBS, 1.9 million Australians are currently officially millionaires in US dollar terms. Our country has the third-highest number of millionaires per capita, at 10% of the adult population.

UBS also predicts that this particular population cohort will grow by 21% over the next four years.

How to get rich in Australia?

Well, the bulk of it is ‘on paper’, so to speak.

Australians’ personal wealth is largely tied up in our properties and superannuation.

In fact, UBS says more than half of Australia’s wealth is held in non-financial assets, like real estate.

However, in our broader Asia-Pacific neighbourhood, 60% of people’s wealth is in financial assets like shares, bonds, and cash. In North America, 70% of people’s personal wealth is in these types of assets, too.

The relatively illiquid nature of our wealth is a bit of a problem in a cost-of-living crisis, right?

Our net worth is impressive, but there’s a problem…

We can’t get access to the equity in our homes unless we sell, or ratchet up our home loans, and we can’t access our superannuation until we reach the preservation age.

Home values have been moving higher across Australia for 17 consecutive months.

In June, the national median home value rose by another 0.7%, according to CoreLogic data. In FY24, Australian homeowners gained a median $59,000 in capital gains on paper.

Meantime, our superannuation balances are getting bigger thanks to share market gains in FY24.

The latest data from Chant West suggest the median growth superannuation fund will have risen in value by 9% over FY24.

The average superannuation balance among Australians aged 65 to 69 years (the cohort closest to the retirement age of 67) is $404,553. The median is $198,715.

Of course, all of this property and superannuation wealth sounds great, but it doesn’t help pay the next electricity bill, does it?

This is the problem with being asset-rich. If you’re also cash-poor, you don’t feel so wealthy when you’re struggling to pay for the essentials!

Particularly when you’re also trying to cover what the Reserve Bank estimates to be 30% to 60% higher mortgage repayments these days.

How the next generation is set to get rich

UBS values the coming global intergenerational wealth transfer from baby boomers to Gen Xers at US$83 trillion or AU$122.6 trillion.

And as we know, that money is already being distributed in Australia via the Bank of Mum and Dad.

Andrew McAuley, managing director at UBS Wealth Management Australia, said:

The inheritocracy, the bank of mum and dad, it’s real.

To be able to afford a house, young people are going to need help. The last of the Baby Boomers will have retired, and the oldest Baby Boomers will be starting to pass away.

There’s a real bulge of the population there, and … they’re the first big group who had super. Definitely, there’s going to be a transfer.

Wealth building via ASX shares

One of the great things about investing in ASX shares is the generous dividends many of our big companies pay.

ASX dividend shares can provide a reliable income stream as part of your investment portfolio. And there are big tax advantages if you stick to fully franked ASX shares.

Popular dividend stocks include BHP Group Ltd (ASX: BHP), Fortescue Ltd (ASX: FMG), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB).

The post It’s official, Aussies are getting richer! Here’s how appeared first on The Motley Fool Australia.

More reading

• Top 10 most traded ASX shares and US stocks in June
• Own BHP shares? Here’s your Q4 preview
• ‘Defining trend this decade’: 6 tips for buying AI stocks
• Top 4 reasons why more Aussies are managing their own superannuation
• Investing in ASX shares? Why CEO pay DOES matter when misaligned

Motley Fool contributor Bronwyn Allen has positions in BHP Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.