Author: openjargon

Two years ago, ASX lithium shares were a hotbed for incredible returns. Today, the once dazzling sector is ground zero for some of the poorest performances on the Australian share market over the past year.

The electrifying commodity lithium has experienced an unceremonious price collapse. From its peak in November 2022, the price of lithium carbonate is down roughly 85%, bringing it back in line with prices witnessed in 2021 — a change undoubtedly challenging the economic viability of many recent lithium developments.

Booms and busts are common among commodities. However, the companies involved need to survive if investors are to benefit from lithium prices rising again.

So, how financially insulated are some of the most popular lithium names?

Financial fitness of ASX lithium shares

There is no better position than being a company with positive free cash flows during distressing times — that is, more cash coming in than going out. Realistically, such companies can benefit from weak conditions by making strategic acquisitions while competitors struggle.

Conversely, hard times are the enemy if a company is short on cash and has low cash flows. It can pay to understand which businesses are financially sound and which are possibly limping along.

The table below briefly summarises the financial standing of several popular ASX lithium shares.

Western Australian mining giant Mineral Resources may look to be in a precarious financial position based on the above. As of 31 December 2023, the iron ore and lithium miner showed a highly indebted balance sheet and negative free cash flows, producing a forecast cash runway of 11 months.

Since then, Mineral Resources has taken action by ceasing operations at its Yilgarn Hub and selling 49% interest in its Onslow Iron project for $1.3 billion. Core Lithium took a similar course of action in January, suspending mining at its Finnis mine to conserve capital.

In comparison, Pilbara Minerals and IGO are still cash flow positive with little or no debt. This may suggest these two ASX lithium shares are better placed to weather extended weakness. However, it’s worth noting that even these miners are experiencing declines in their free cash flows.

This year, companies like Liontown Resources, Vulcan Energy Resources, and Patriot Battery Metals have turned to debt and equity markets to shore up their balance sheets. In doing so, they have likely extended their cash runways beyond the figures above.

Is the worst yet to come?

If we can roughly estimate how long a company can sustain itself, the next question to consider is how long the tough times will last.

Unfortunately, none of us are fortune tellers. Nevertheless, analysts have crunched the numbers to obtain a best guess, and the general consensus is bleak.

Analysts from Citi, UBS, and Wood Mackenzie all expect lower lithium prices to come. For example, Wood Mackenzie thinks spodumene could hit rock bottom at around US$1,000 per tonne and stay suppressed until 2028.

If true, even ASX lithium shares with the most fortified financials may face pressure.

However, if the International Energy Agency’s estimates are accurate, the ones that survive could flourish. According to its Global Critical Minerals Outlook 2024 report, a lithium supply deficit is expected by 2030 as demand for electric vehicles takes hold, as shown above.

The post Which ASX lithium shares are financially primed to survive this rut? appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy today
• This ASX stock just announced a special dividend with a 20% yield
• Should you buy Liontown shares after its update?
• Top broker says Pilbara Minerals shares are ‘a super buy at these levels’
• Is it time to buy FY24’s worst-performing ASX shares?

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

Many of Australia’s top brokers have been busy adjusting their financial models and recommendations again. This has led to the release of a number of broker notes this week.

Three ASX shares that brokers have named as buys this week are listed below. Here’s why their analysts are feeling bullish on them right now:

BHP Group Ltd (ASX: BHP)

According to a note out of Goldman Sachs, its analysts have retained their buy rating and $48.40 price target on this mining giant’s shares. The broker believes the Big Australian’s shares are attractively priced even though they trade at a premium to rival Rio Tinto Ltd (ASX: RIO). Goldman thinks this premium is justified due to its ongoing superior margins and operating performance, particularly in Pilbara iron ore where it maintains superior free cash flow per tonne compared to peers. In addition, the broker remains very positive on copper and met coal and likes the optionality of BHP’s US$20 billion+ copper pipeline. The BHP share price is trading at $43.41 today.

Guzman Y Gomez Ltd (ASX: GYG)

A note out of Morgans reveals that its analysts have initiated coverage on this quick service restaurant operator’s shares with an add rating and $30.80 price target. The broker is feeling positive about Guzman Y Gomez due to its strong long term growth potential and operating leverage. In respect to the former, the broker believes the company can achieve its aspirational target of 1,000 restaurants in Australia. This is by opening 30-40 restaurants each year. Though, it is worth noting that Guzman Y Gomez’s shares are trading at approximately 400x estimated FY 2025 earnings based on Morgans’ estimates. The Guzman Y Gomez share price is fetching $25.10 on Wednesday afternoon.

Liontown Resources Ltd (ASX: LTR)

Analysts at Bell Potter have retained their speculative buy rating and $1.85 price target on this lithium developer’s shares. This follows news that the company has secured funding through a five-year US$250 million convertible note to LG Energy Solution. The broker believes the funding is a sensible solution to remove the onerous terms associated with traditional bank debt. In light of this, it thinks the company is fully funded to free cash flow. Outside this news, Bell Potter is very positive on the 100% owned Kathleen Valley lithium project. It notes that it remains highly strategic with initial production imminent, a long mine life, and tier-one location. The Liontown share price is trading at 93 cents this afternoon.

The post Top brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

More reading

• Why APA Group, Chalice Mining, Guzman Y Gomez, and Monadelphous shares are falling
• I’d buy BHP shares to generate $1,000 of monthly passive income
• Down 18% since listing, should you buy Guzman Y Gomez shares now?
• Should you buy Liontown shares after its update?
• Is it time to buy FY24’s worst-performing ASX shares?

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

Investors who own ASX bank shares, like National Australia Bank Ltd (ASX: NAB), look forward to two dates on the financial calendar more than most. Bank stocks like NAB are well known for paying some of the largest, fattest, and most consistent dividends on the ASX.

So it makes sense that bank shareholders would hold a special affinity for the day that they receive these fat, and usually fully franked, dividends.

Well, luckily for NAB shareholders, today is one of the two days this year that they will receive a dividend payment.

Back in May, we covered NAB’s latest earnings report, covering the half-year ended 31 March. As we went through at the time, these earnings were well-received, with NAB shares surging as a result. This surge was despite the bank reporting a 0.9% drop in operating income to $10.14 billion for the six months to 31 March. That was alongside a 12.8% decline in cash earnings to $3.55 billion.

Despite these sobering metrics, NAB still announced an additional $1.5 billion share buyback program. As well as an increase to its interim dividend for 2024.

How much is the latest NAB dividend worth?

The bank revealed that its latest dividend would be worth 84 cents per share, fully franked. That’s a 1.3% rise over last year’s interim dividend, which was worth 83 cents per share. It’s also the same value as NAB’s last dividend. That was the final payment of 84 cents per share that we saw doled out back in December. Both of these payments came fully franked as well.

As we warned back in May, the ex-dividend date for this latest NAB dividend was set for 7 May. So if you didn’t own NAB shares as of 6 May’s market close, you’ll miss out on this shareholder paycheque.

But for eligible investors, the long wait for this dividend is finally over. Today is dividend payday. Yep, shareholders will be getting the proverbial cheque in the mail sometime this Wednesday. If someone owned 500 NAB shares right now (worth approximately $17,810 at current pricing), they can expect to receive $420 in dividend cash today.

If shareholders instead selected the optional dividend reinvestment plan (DRP) by 9 May, they will receive additional NAB shares in lieu of the traditional cash payment.

At the time of writing, NAB shares are down 0.17% at $35.63 each. At this pricing, NAB is currently trading on a dividend yield of 4.72%.

The post Own NAB shares? Here’s how much you’re about to get paid in dividends appeared first on The Motley Fool Australia.

More reading

• Own NAB shares? You just got a 44% return in FY24
• What is the outlook for ASX 200 dividend shares in FY25?
• These were the five best ASX bank shares to own in FY24
• Retirement planning guide: 710,000 Aussies to retire over next 5 years
• Which ASX shares to buy if interest rates rise (and which to avoid)

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

The S&P/ASX 200 Index (ASX: XJO) stock APA Group (ASX: APA) has dropped today after revealing a painful $145 million writedown. APA is currently down 0.69% at $7.90, while the ASX 200 is up 0.13%.

APA is an energy infrastructure business that owns and operates a large network of gas pipelines around Australia. It also has energy generation assets including solar, wind and gas, plus electricity transmission assets.

Impairment of APA’s Sydney ethane pipeline

APA announced today that it expected to recognise a non-cash impairment of approximately $145 million, before tax, to the Moomba Sydney ethane pipeline (MSEP).

This impairment would result in a full write-down of the MSEP’s current book/balance sheet value. APA intends to include this accounting charge in its financial statements for the year ended 30 June 2024, being FY24. However, the result is still subject to finalisation upon completion of the auditor’s review process.

APA noted the impairment was “non-cash”, representing approximately 1% of its market capitalisation, and had no impact on its liquidity. It also affirmed there was no change to APA’s FY24 distribution guidance or its FY24 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) guidance.

The ASX 200 stock expects to pay an FY24 annual distribution of 56 cents per security and generate underlying EBITDA of between $1.87 billion and $1.91 billion.

Why is the asset being impaired?

The MSEP is a ‘single user’ pipeline, which was used to transport ethane to plastics manufacturer Qenos Pty Ltd. This company recently entered into voluntary administration and has announced that it does not expect to restart its manufacturing facility.

APA noted that Qenos is the only likely customer with demand for ethane to be transported along the MSEP. The MSEP is the ASX 200 stock’s only asset that transports ethane and APA’s only long-distance single-user pipeline.

Could the pipeline be used for something else?

The energy infrastructure business said a range of potential alternative uses for the MSEP were being assessed, including the possible conversion of the asset to transport and store natural gas, to service the growing demand for capacity on APA’s east coast gas grid.

However, APA warned it would take some time to fully assess the potential alternative uses of the MSEP.

APA pointed out that accounting standards required an assessment of the asset’s carrying value to be finalised before completing the FY24 accounts. So, the company has taken a conservative approach and assumed the pipeline will not be utilised for the foreseeable future. Therefore, it expects to impair the asset’s full balance sheet value.

APA share price snapshot

Since the start of 2024, the APA share price has fallen 7.3%, and the ASX 200 has risen 1.5%.

The post ASX 200 stock slips on $145 million impairment appeared first on The Motley Fool Australia.

More reading

• Why APA Group, Chalice Mining, Guzman Y Gomez, and Monadelphous shares are falling
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• Shares vs. property: Which delivered the best growth in FY24?
• Here are the top 10 ASX 200 shares today
• What the RBA minutes imply for the ASX 200 and higher interest rates

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

The S&P/ASX 200 Index (ASX: XJO) is back on form and edging higher on Wednesday. At the time of writing, the benchmark index is up 0.2% to 7,731.9 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are falling:

APA Group (ASX: APA)

The APA Group share price is down 1% to $7.88. Investors have been selling this energy infrastructure company’s shares after it announced a non-cash impairment of approximately $145 million to the Moomba Sydney Ethane Pipeline (MSEP). The expected impairment would result in a full write down of the current book value of the MSEP. Management notes that the impairment is non-cash, represents approximately 1% of APA’s market capitalisation, and has no impact on liquidity. Furthermore, there is no change to its FY 2024 distribution or underlying EBITDA guidance.

Chalice Mining Ltd (ASX: CHN)

The Chalice Mining share price is down 11% to $1.34. This is quite a turnaround for the mineral exploration company’s shares. They were up as much as 8% this morning before sinking deep into the red. Investors were buying its shares after it announced a non-binding memorandum of understanding (MOU) with Mitsubishi Corporation. This MOU will see two parties work together with the intention of forming a potential strategic partnership to develop the 100%-owned Gonneville PGE-Nickel-Copper-Cobalt Project in Western Australia. However, given how MOUs are non-binding, investors don’t appear to see much value in the announcement at this stage.

Guzman Y Gomez Ltd (ASX: GYG)

The Guzman Y Gomez share price is down 1% to $25.25. Investors continue to sell down this quick service restaurant operator’s shares due to concerns over its sky-high valuation. Not even a bullish broker note out of Morgans has been enough to stop its shares from falling today. Morgans has initiated coverage on the company with an add rating and $30.00 price target.

Monadelphous Group Ltd (ASX: MND)

The Monadelphous share price is down 3% to $12.69. This appears to have been driven by a broker note out of Bell Potter this morning. According to the note, the broker has downgraded this mining services company’s shares to a hold rating (from buy) with a trimmed price target of $14.00 (from $15.40). Its analysts said: “We have adopted a conservative short-to-medium term outlook for EC division activity, reflecting a quietening major project development pipeline, with limited visibility on near-term contract awards.”

The post Why APA Group, Chalice Mining, Guzman Y Gomez, and Monadelphous shares are falling appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy today
• ASX 200 stock slips on $145 million impairment
• Down 18% since listing, should you buy Guzman Y Gomez shares now?
• Guess which ASX mining stock is jumping 8% on deal with Mitsubishi
• Why Guzman Y Gomez, MacMahon, Strike Energy, and WiseTech shares are sinking

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

S&P/ASX 200 Index (ASX: XJO) retail shares got a late morning boost today, thanks to some thrifty Aussie shopping habits in May.

This follows the 11:30 a.m. AEST release of the Australian Bureau of Statistics’ (ABS) retail sales data for May.

In the minutes following the report’s release, the benchmark index gained 0.2%, with most ASX 200 retail shares joining the mini rally.

Here’s what we know.

Discounts driving sales growth

According to the ABS, Australian retail turnover rose 0.6% in May. That’s a marked improvement from the 0.1% increase in April and the 0.4% decline in March.

While that result is offering some tailwinds for ASX 200 retail shares today, investor reaction is likely muted as much of the growth was attributed to the big retailers’ sales events during the month.

“Retail turnover was boosted this month by watchful shoppers taking advantage of early end-of-financial year promotions and sales events,” Robert Ewing, ABS head of business statistics, said.

“Retail businesses continue to rely on discounting and sales events to stimulate discretionary spending, following restrained spending in recent months,” Ewing added.

And while it’s good to see growth figures for May, the bigger picture is less rosy.

“Despite the seasonally adjusted rise, underlying spending remains stagnant with retail turnover flat in trend terms. Compared to May 2023, trend is only up 1.5%,” Ewing said.

Digging into the market segments for ASX 200 retail shares, clothing, footwear, and personal accessory retailing had the largest rise (up 1.6%) after falling in March and April.

Household goods retailing increased by 1.1%, while sales at department stores decreased by 0.9%.

“Many retailers started end-of-financial year sales early, offering larger discounts than usual and noted that shoppers remain price-sensitive in response to persistent cost-of-living pressures,” Ewing added.

How are these ASX 200 retail shares tracking?

Drilling down to a few specific ASX 200 retail shares, the Wesfarmers Ltd (ASX: WES) share price jumped 0.3% on the ABS sales data, though it has since given back those gains, currently at $64.12 a share.

Wesfarmers subsidiaries include household names such as Bunnings Warehouse, Kmart Australia, Officeworks, and Priceline.

Shares in furniture and electrical goods retailer Harvey Norman Holdings Ltd (ASX: HVN) gained 0.4% following the ABS release and are currently at $4.22.

And ASX 200 home electronics retail share JB Hi-Fi Ltd (ASX: JBH) gained 0.7% following the sales data. At the time of writing, JB Hi-Fi is managing to hold onto those gains, currently at $61.22 a share.

The post How ASX 200 retail shares just got a boost from ‘watchful shoppers’ appeared first on The Motley Fool Australia.

More reading

• ASX passive income: How to make $1,000 per month
• What is the outlook for ASX 200 dividend shares in FY25?
• Can Wesfarmers shares keep beating the ASX 200 index?
• Which ASX shares to buy if interest rates rise (and which to avoid)
• 3 reasons to buy Wesfarmers shares like there’s no tomorrow

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 positions in and has recommended Wesfarmers. The Motley Fool Australia has positions in and has recommended Harvey Norman and Wesfarmers. The Motley Fool Australia has recommended Jb Hi-Fi. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to end its losing streak. At the time of writing, the benchmark index is up 0.3% to 7,738.8 points.

Four ASX shares that are rising more than most today are listed below. Here’s why they are pushing higher:

Cettire Ltd (ASX: CTT)

The Cettire share price is up 11% to $1.35. This is despite there being no news out of the online luxury products retailer. However, it is worth noting that its shares have been on fire this week. Investors appears to have been buying stocks that were sold off in the last financial year. Nevertheless, Cettire’s shares remain down by over 55% since this time last year despite this week’s heroics. That weakness was driven by concerns over its business model and a sudden deterioration in its performance because of consumer spending headwinds.

Deterra Royalties Ltd (ASX: DRR)

The Deterra Royalties share price is up 1.5% to $4.08. This appears to have been driven by a broker note out of Goldman Sachs this morning. Its analysts have upgraded the mining royalties company to a buy rating with a $4.70 price target. This implies potential upside of 15% from current levels. The broker feels that a recent selloff has created a buying opportunity for investors.

G8 Education Ltd (ASX: GEM)

The G8 Education share price is up 3% to $1.22. This strong gain also appears to have been by a broker note this morning. According to a note out of Macquarie, its analysts have upgraded the childcare centre operator’s shares to an outperform rating with an improved price target of $1.35. Macquarie believes the company could be performing better than expected thanks to improving occupancy rates and lower wage increases.

Red Hill Minerals Ltd (ASX: RHI)

The Red Hill Minerals share price is up 11% to $7.34. This morning, this mining company announced a very large special dividend. Red Hill Minerals recently received $200 million from Mineral Resources Ltd (ASX: MIN) following the first shipment of ore from the Onslow Iron Project to China Baowu Steel Group. Its board has decided to return proceeds to shareholders through a special fully franked $1.50 per share dividend. Based on its current share price, this represents a 20% dividend yield. Its shares are scheduled to trade ex-dividend next week on 9 July. After which, the payment will be made to eligible shareholders later this month on 19 July.

The post Why Cettire, Deterra Royalties, G8 Education, and Red Hill shares are pushing higher appeared first on The Motley Fool Australia.

More reading

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• Why Arcadium Lithium, Baby Bunting, Cettire, and Qualitas shares are racing higher
• Why Cettire, Collins Foods, Liontown, and Northern Star shares are dropping 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 Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Cettire. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The BHP Group Ltd (ASX: BHP) share price dropped almost 4% over the past year, underperforming the S&P/ASX 200 Index (ASX: XJO) which rose by 6.8% during the same period.

This underperformance extends over the longer term as well. Over the last five years, BHP shares have gained 5.5%, whereas the ASX 200 has increased by 14.6%.

The primary reason for the share price decline is the drop in global commodity prices, particularly for BHP’s key metals: iron ore and copper.

Iron ore prices fell from US$144 per tonne in January 2024 to below US$100 per tonne in April 2024 due to ongoing weakness in China’s property and industrial sectors. While prices have recovered somewhat, the current price is around US$108 per tonne, down 25% from its peak.

Copper prices also took a breather after reaching near-record highs of US$10,890 per tonne in May 2024 and are now trading at US$9,483 per tonne.

BHP shares offer a fully-franked dividend yield of 5.44% at the current share price. Considering the tax benefits from franking credits, this translates to generating an additional $1,000 of monthly passive income (before tax) by investing less than $180,000 today.

Dividend history

While BHP’s current dividend yield is attractive, its value hinges on the consistency of its dividend payments. Let’s review BHP’s dividend payment history.

Like any mining stock, BHP’s earnings are subject to commodity cycles, which can significantly impact its dividend payments. For instance, in FY16, the dividend per share dropped sharply from $1.69 to 40 cents and took three years to recover to its previous high.

However, long-term shareholders who held onto its shares through the ups and downs of mining cycles have generally seen their dividends grow over time.

All this time, BHP has offered 100% franking credits on its dividend payments, which is an added bonus for tax-conscious investors.

Valuations

No matter how high the dividend yield might be, it’s equally important to protect your invested capital. Watching the share price decline after purchasing is never a pleasant experience.

Let’s examine BHP’s current valuations using FY25 estimates from S&P Capital IQ. At present, BHP shares are valued at:

• A price-to-earnings (P/E) ratio of 10x, compared to its historical range of 7x to 20x.
• A price-to-book (P/B) ratio of 3x, compared to its historical range of 0.9x to 4x.

Note that the historical trading range excludes FY16 valuations, which appear to be outliers, with a P/E ratio as high as 53x and a P/B ratio of 8x.

Compared to BHP’s usual trading ranges, some may argue that the current P/B ratio suggests a potential downside. Economic uncertainties always loom, so it’s crucial to consider the risks involved.

But, all things considered, I can safely say that BHP’s valuation multiples are near or below their mid-points in terms of PER and PBR.

Foolish takeaway

For long-term dividend investors, I think BHP’s current share price offers a compelling opportunity. As a global leader in an essential industry with a consistent dividend history, BHP provides attractive dividend yields at reasonable valuation multiples.

The post I’d buy BHP shares to generate $1,000 of monthly passive income appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy today
• 5 things to watch on the ASX 200 on Wednesday
• What is the outlook for ASX 200 dividend shares in FY25?
• 3 cheap ASX passive income shares I’d buy to target $1,000 a month
• What went right and what went wrong for the BHP share price in FY 2024?

Motley Fool contributor Kate Lee 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.