Author: therawinformant

The Archtis Ltd (ASX: AR9) share price has surged after the company announced a new services contract today.  

Archtis wins new contract

Archtis has won a new 3-month services contract with KPMG to provide information security services with a Commonwealth national security agency.

Archtis will provide $400,000 worth of resources and subject matter experts under the deal, which starts immediately. This will see the company contribute to security architecture, information sharing, integration and cross-domain services. It will be part of a consortium of industry leaders assembled by KPMG. 

Archtis management said the contract recognised the company’s development of services and intellectual property.

What does Archtis do?

Archtis is an Australian-based cyber security technology company that specialises in the safe and secure sharing of classified information. Since its establishment in 2006, the company has provided cyber security consulting and infrastructure and software development services to Australian government clients.

In a bid to commercialise its services, Archtis launched its software-as-a-service (SaaS) Kojensi platform last year to service government, defence and commercial clients. The company released an update for the fourth quarter of FY20 which highlighted strong progress in commercialising its platform.

The company has been growing sales momentum after renewing a government contract and also securing its first commercial contract with the defence industry. This follows a deal with Curtin University in May which will see Artchis expand into the education and space sector. Archtis also completed a $2.26 million capital raise in early June to expand its platform to new markets.

Foolish Takeaway

At the time of writing, the Archtis share price is trading at almost 9.7% higher for the day at around 51.0 cents. Shares in the company have been sold down after hitting an intra-day high of 58 cents earlier. Since mid-July, the Arcthis share price has surged more than 236% with tradee reaching an all-time high of 60 cents.

More reading

• The Archtis share price has doubled in a week! Here’s why
• Analysts back archTIS share price to outperform

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The BrainChip Holdings Ltd (ASX: BRN) share price has been rising to new multi-year highs thanks to the development of its ground-breaking Akida Neuromorphic System-on-Chip. At the time of writing, the Brainchip share price has jumped nearly 18% today alone to 33 cents.

As the ASX tech share announced new partnerships and arrangements to cement its position as a leading artificial intelligence (AI) specialist, investor attention has been growing at a rapid rate.

What’s been happening with the Brainchip share price?

It’s hard to believe the Brainchip share price has once again risen like a phoenix from the ashes.

Founded in 2011, the United States-based tech company hit an all-time low of 1.1 cent in January 2015. With a vision to mimic the human brain through a microchip, this prompted former Australian mining company, Aziana Limited, to acquire the tech company at a discounted rate.

In the months following the deal, the Brainchip share price reached a record high of 46 cents in November 2015.

However once again, the company’s shares plummeted in value due to the uncertain economic environment caused by COVID-19. Brainchip shares were trading at 3 cents in March 2020.

For the brave investor who bought the company’s shares during the bear market and held onto them until today, a gain of 1000% would be showing on the right side of their holdings. Impressive returns for just five months of patience.

What has fuelled Brainchip’s share price rise?

Defying challenging market conditions, the world’s only pure-play AI company has been making tailwinds.

Last week, Brainchip announced its partnership with Magik Eye Inc. to combine its AI processing unit with revolutionary 3D depth sensing technology. The collaboration further strengthens the capabilities of Brainchip’s promising Akida neuromorphic processor and opens up new market opportunities for revenue.

The week before, Brainchip entered a put option agreement with LDA Capital Limited, a US-based investment group. The agreement provides a financing facility of up to $29 million over the next 12 months. The drawdown will strengthen Brainchip’s balance sheet and support the commercialisation of its pioneering Akida technology.

In its most recent quarterly update to the market, the company advised it had completed the wafer fabrication, assembly and test operations of the Akida device. The early access program and proof-of-concept engagements are expected to commence this month.

The company is expected to release its 1H20 results some time this week.

Is Brainchip a bargain buy?

Investing in small-cap shares that mature to become a dominant force with large recurring revenues can be life changing for an early investor.

Indeed, it is considered a risky play which is why I would never recommend more than 5% of your portfolio in 1-2 companies with a market capitalisation of less than $500 million.

Having said that, I believe today’s Brainchip share price has huge potential to materially grow in the future. Cutting-edge technology mixed with insatiable demand is an investor’s dream.

I would certainly be a buyer of the Brainchip share price today with a view to holding for the long term.

Remember, successful investing requires immense discipline and patience.

More reading

• Brainchip share price rockets 30% in a week
• Brainchip share price surges 9% on new financing facility
• 3 unloved ASX growth shares that could make you rich

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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With so many shares to choose from on the ASX, it can be hard to decide which ones to buy.

The good news is that brokers across the country are doing a lot of the hard work for you.

Three top shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of the Macquarie equities desk, its analysts have retained their outperform rating and $21.25 price target on this infant formula company’s shares. The broker notes that a2 Milk Company is looking to acquire a 75% stake in Mataura Valley Milk. It sees value in its plans and believes it could strengthen its relationship with China. I think Macquarie is spot on and would be a buyer of a2 Milk Company’s shares for the long term.

BWX Ltd (ASX: BWX)

Analysts at Citi have retained their buy rating and lifted the price target on this personal care products company’s shares to $5.05. According to the note, the broker was pleased with BWX’s performance in FY 2020 and its guidance for the year ahead. It also appear happy with the company’s growth plans in the European market and its opportunities in the Australian grocery channel. While I think its shares are looking fully valued now, they could be decent long term options.

Redbubble Ltd (ASX: RBL)

A note out of Morgans reveals that its analysts have upgraded this ecommerce company’s shares to an add rating with a massive target price increase from 54 cents to $4.33. The broker made the move after Redbubble reported explosive growth during the pandemic. It believes the company is in the right place at the right time and appears optimistic that its growth will continue in FY 2021 thanks to the accelerating shift to online shopping. I’m sitting on the fence with Redbubble. I’m not as convinced that its strong growth will continue into 2021.

More reading

• Could these 2 ASX growth shares that crashed last week be a buy?
• Four companies that got crushed (and why you had to own them)
• 3 ASX 200 growth shares to buy right now
• 3 ASX share reports I loved this week
• Is the A2 Milk share price still a good buy after strong full year results?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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COVID-19 has created many tailwinds for adaptive sectors such as tech, retail and consumer staples. Here are three ASX shares that could represent good value at today’s prices and continue to deliver shareholder value throughout and post the COVID-19 pandemic. 

1. Dicker Data Ltd (ASX: DDR) 

Dicker Data is a wholesale distributor of computer hardware, software, cloud and emerging technologies in Australia. In the company’s AGM market update on 23 July, it highlighted that the recent surge in remote work has resulted in a significant increase in demand for the company’s remote and virtual working solutions across its hardware and software portfolios. For the company’s unaudited half-year results, its revenue was up 18.1% and net profit after tax up 23.5%. The new status quo of working from home will bring about continued demand for remote and virtual working solutions. I believe Dicker Data’s earnings tailwinds makes it a better pick than similar ASX shares such as Rhipe Ltd (ASX: RHP). 

2. Electro Optic Systems Holdings Ltd (ASX: EOS) 

EOS manufactures products within the aerospace and defence markets. The company has faced a challenging first half as its earnings have been materially impacted by COVID-19. Its customers, suppliers and EOS itself have faced significant volatility around the timing of contracts being signed and delivered. As such, Electro Optic Systems expects to report a first half loss of negative $18.2 million and a net loss after tax of $12.7 million. 

Electro Optic Systems forecasts that the FY20 profit will likely fall in the range of $20-$30 million EBIT. This is somewhat consistent with its prior guidance of $27 million EBIT. Despite the challenges with the timing of contracts and cash flows, it believes the risk-weighted pipeline remains strong at $3 billion, with the order backlog unchanged. Its outlook for FY21 is for strengthening growth as activity deferred from FY20 is caught up, backlog is processed and pipeline awards are made. I believe the near-term volatility of the Electro Optic Systems share price could present a good buying opportunity given the ‘stickiness’ of earnings in the defence market and the upbeat FY21 outlook. 

3. People Infrastructure Ltd (ASX: PPE) 

People Infrastructure provides workforce management and human resources outsourcing services in the health and community care, information technology and general staffing sectors. The business faces potential near-term risks for sectors that are dependent on government funds and employer support schemes, and a broader reduction in demand for staffing services. This could dampen its earnings in 2020.

Notwithstanding the risks, its revenues could also accelerate given an increase in staffing service demand and a recovery of key sectors such as IT and nursing. All things considered, the company currently expects its FY2020 normalised earnings before interest, taxes, depreciation and amortisation (EBITDA) to be in the range of $24 to $25 million. This would represent a year-on-year increase of 34.8% to 40.5%. The company currently trades at a price-to-earnings (P/E) ratio of approximately 12. Given its valuation and growth potential, I believe the People Infrastructure share price could be a cheap ASX share to buy amid COVID-19. 

More reading

• 3 exciting small cap ASX shares to watch in FY 2021
• 2 high yield ASX dividend shares to buy today
• Buy these generous ASX dividend shares for income in 2021
• 2 top ASX tech shares to buy and hold beyond 2026
• 3 ASX dividend shares offering generous yields

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited and People Infrastructure Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The identitii Limited (ASX: ID8) share price surged 77% higher in morning trade, after the company signed an agreement with Mastercard.

What does Identitii do?

Identitii is an Australian financial technology (FinTech) company. It is based in Sydney and was founded in 2014. Identitii uses blockchain and tokenisation technologies to connect banks and businesses with data to process, reconcile and report on payments. Its core Overlay+ platform collects and shares information on financial transactions.

It creates an ecosystem in which suppliers, buyers, banks and regulators can access their required data. Identitii reduces the exposure to regulatory risk for these companies, without replacing existing technology systems.

The Mastercard agreement

Identitii has signed a five-year master services agreement (MSA) with Mastercard International Incorporated (Mastercard). Under the agreement, Identitii will license its Overlay+ platform to Mastercard. This will enable Identitii to sell to and work with any Mastercard-linked business in the world.

Identitii CEO John Rayment said:

We are thrilled to announce that we have signed an agreement with Mastercard, who we have had a relationship with since participating in their Start Path program in 2018. What the MSA does is give us the opportunity to license our Overlay+ platform to any Mastercard business globally.

It is the first step in a process, following which we agree specific statements of work which outline how Overlay+ will be used to address particular needs in their business. We look forward to providing an update on specific projects in due course.

How has the Identitii share price performed lately?

Back in late July, Identitii announced that an entitlement issue had raised $1.908 million in Q4. The company will raise an additional $1.908 million in Q1 FY 2021.

Cash receipts from customers during Q4 amounted to $0.183 million. This was down 62% from Q3, mainly due to short term delays in professional services contracts as a result of the coronavirus pandemic.

The Identitii share price has trended downward since it launched October 2019 at $0.34, falling to below $0.09 in July. Today it rose 72% to 0.49 in early morning trade, and is currently trading at $0.31.

More reading

• Could these 2 ASX growth shares that crashed last week be a buy?
• 2 ASX shares to buy for growth and income
• Top fund manager sees sharp fall in global dividend payouts
• Why Australian Ethical Investment’s share price has slid 32% in August
• Is today’s Santos share price a buy for its dividend?

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The A2 Milk Company Ltd (ASX: A2M) and Audinate Group Ltd (ASX: AD8) both experienced challenging trading sessions last week following their FY20 results.

Could these 2 ASX growth shares present a buying opportunity at today’s prices? Or could the subtle sell-off mean that more time is needed?

Well-rounded result from a2 Milk

The a2 Milk share price fell 5% last week following its FY20 full year report. The company reported that COVID-19 has had a modest positive impact on its revenue, while favourable foreign exchange movements further propped up earnings. The company highlighted a 32.8% increase in revenue to NZ$1.73 billion and 34.1% increase in net profit after tax (NPAT) to NZ$385.8 million. 

From a geographic perspective, a2 Milk continues to build its market leading position in Australia within fresh milk and infant nutrition segments. The ANZ segment revenue increased 14.6% to NZ$965.7 million. China still represents a significant runway for a2 Milk’s growth with its investments in brand, trade activities and people driving strong sales momentum. Its ‘China and other’ segment revenue did the heavy lifting for its FY20 earnings and soared 65.1% to NZ$699.4 million.

The US market continues to scale meaningfully, with a distribution and national footprint of over 20,000 stores. Its revenue was up 91% to NZ$66.1 million, however, increased marketing investment and distribution growth resulted in an earnings before interest, taxes, depreciation and amortisation (EBITDA) loss of NZ$50.5 million. The impact of COVID-19 in the US market is significant as consumers become more value conscious. 

The a2 Milk share price had a considerable run up leading into earnings season. Being priced to perfection combined with the uncertainty of FY21 performance may have led to the sell-off last week. Its Asia-Pacific segment will continue to be a growth engine for the business, while the US market will require more time. All things considered, I believe a2 Milk represents fair value at today’s price, but feel that more time is needed to see where the share price is headed, post-earnings. 

Underwhelming earnings from Audinate 

Audiante develops and sells digital audio visual networking solutions that distribute high-quality digital audio and video signals over computer networks. The company announced its FY20 results on Thursday last week, which then saw its share price fall more than 8%. 

Audiante is a very challenging company to value, given its $400 million market cap, 7.1% increase in revenue to $30.3 million and EBITDA of $2.0 million. Despite what appears like stretched valuations and lacklustre growth, the company is a leader in the digital media networking space with a total addressable market of more than A$1 billion. Its products have 8x market adoption versus its closest competitor.

I believe the way in which the market could value this company is very similar to the likes of Altium Limited (ASX: ALU) in its early days. However, despite Audinate’s position in the market, I would like to see the company deliver better growth figures before considering it an ASX growth share to buy.

More reading

• 3 ASX 200 growth shares to buy right now
• 3 exciting small cap ASX shares to watch in FY 2021
• 3 ASX share reports I loved this week
• Is the A2 Milk share price still a good buy after strong full year results?
• The ASX 200 fell 0.1% today, Suncorp shines

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of A2 Milk and Altium. The Motley Fool Australia has recommended AUDINATEGL FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Finding ASX shares that offer both growth and income prospects today is a lot harder than it used to be.

Former dividend growth stars like Ramsay Health Care Limited (ASX: RHC) and Medibank Private Ltd (ASX: MPL) have been forced to cut their dividend this year, breaking multi-year (multi-decade in Ramsay’s case) streaks of growth.

Other former dividend heavyweights like Westpac Banking Corp (ASX: WBC) and Sydney Airport Holdings Pty Ltd (ASX: SYD) have canned their dividend completely in 2020 so far.

So where to find the kind of dividend growth shares that can offer both growth and income in 2020? Well, I’ve found 2 ASX shares that I think offer just that

2 ASX growth and income shares:

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

Soul Patts (as its more commonly known) is one of the oldest companies on the ASX. It was incepted prior to Federation and officially listed on the ASX (then the Sydney Stock Exchange) back in 1903. What attracts me to Soul Patts is the company’s unrivalled history as a dividend payer. The company has paid a consistent dividend for over 40 years and has increased this dividend every year since 2000 (including in 2020). It is able to pull this off because it has a wide asset base of its own.

Soul Patts is an investing conglomerate, holding its own portfolio of ASX shares. These include substantial stakes in TPG Telecom Ltd (ASX: TPG), New Hope Corporation Limited (ASX: NHC) and Brickworks Limited (ASX: BKW). It also has a portfolio of unlisted assets, which include retirement villages and swimming centres.

If Soul Patts can pay a dividend through the global financial crisis as well as the 2020 coronavirus crisis, I think it can handle anything. Thus, I think Soul Patts’ shareholders can expect plenty of dividends as well as some growth for many years into the future.

2) iShares S&P 500 ETF (ASX: IVV)

This exchange-traded fund (ETF) is another option for investors to consider for both growth and income. IVV tracks the S&P 500 index, which is the most popular index in the world. It holds 500 of the largest companies listed in the United States.

Legendary investor Warren Buffett has called it a ‘slice of America’. Any US company you can think of is probably in the S&P 500. The FAANG stocks like Apple and Amazon.com are there, as well as established companies like Coca Cola, American Express, Visa, Microsoft, Johnson & Johnson, Procter & Gamble and (of course) Buffett’s own Berkshire Hathaway. Even Tesla might be joining its ranks soon.

The S&P 500 is an index known for prioritising growth over dividend income. Indeed, IVV’s trailing dividend yield today is only around 1.73%. But that hasn’t stopped IVV returning an average of 16.38% per annum over the past 10 years. As the index grows into the future, the dividends should follow. So for a growth and income share today, I think IVV is another top choice for ASX investors.

More reading

• 3 must-have ASX income shares for your portfolio
• Here’s how much money you can actually make from investing in ASX shares
• Where to hunt for ASX dividend share income in 2020
• 3 Warren Buffett ASX dividend shares you can buy right now
• I think Soul Patts is the best ASX dividend share

Sebastian Bowen owns shares of American Express, Coca-Cola, Johnson & Johnson, Ramsay Health Care Limited, Tesla, Procter & Gamble, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Johnson & Johnson. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Leading fund manager Janus Henderson has reported a sharp fall in global dividends declared in the June quarter. Australia was reported to account for a significant amount of the decline in the Asia Pacific region.

Global dividends fall by 24% in June quarter

According to a study undertaken by Janus Henderson, global dividends fell by $129.02 billion to $527.8 billion in the June quarter. The 24% decline (in AUD) was the worst since Janus Henderson first launched the dividend study back in 2009.

Janus Henderson found that 27% of companies that paid a dividend during the June quarter cut their dividends. And of this subset of companies, more than half made the decision to totally cut any dividend payment at all.

Financial services and consumer discretionary were the most impacted industries. Within Europe and the UK, some financial companies were impacted by regulatory bans on dividends. In Australia, the industry was subject to regulatory pressures.

In contrast, companies in the healthcare and communications sectors displayed a much higher degree of resilience to any dividend cut due to COVID-19.

Janus Henderson anticipates headline global dividends to fall by around 17% in a best-case scenario in 2020. A worst-case scenario could see them drop by 23%.

Australia heads the Asian dividend decline

Australia suffered the greatest impact within the Asian region, and more dividend cuts are anticipated in Australia in the September and December quarters. In comparison, the Japanese market was relatively insulated from any dividend cuts.

The decision of Australian retail bank giant Westpac Banking Corp (ASX: WBC) to scrap its interim dividend accounted for a staggering 60% of the entire dividend decline across the APAC region. Westpac did, however, note in its third quarter results that it would consider issuing a dividend when finalising its annual results. Westpac’s financial year ends 30 September 2020.

The dividends decision was made under new APRA guidelines to provide a buffer to banks from any excessive COVID-related impact. Meanwhile, Commonwealth Bank of Australia (ASX: CBA) cuts its dividend by 50%

Rio Tinto leads the list of top Aussie dividend payers

Janus Henderson also noted the top the top 6 dividend payers in Australia, with Rio Tinto Limited (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG)  and Woolworths Group Ltd (ASX: WOW) topping the list. They were followed by CSL Limited (ASX: CSL), QBE Insurance Group Limited (ASX: QBE) and Brambles Limited (ASX: BXB).

Jane Shoemake, investment director, global equity income for Janus Henderson, said:

Despite it being a quiet period for Australian dividends, our most recent report shows the lower payouts in Australia made a significant impact. This is where the benefits of taking a globally diversified approach to income investing becomes clearest. Some payments were just deferred, and we have already seen some returning, albeit with a wide margin of uncertainty. Some of those that have been deferred will be paid in full, some will be paid but at a reduced level, and others will be cancelled outright.

More reading

• 6 ASX giants pay $1 billion for ripping off customers
• Here are the highlights of this ASX reporting season
• ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower
• The Westpac share price is on the slide today. Here’s why
• Which ASX bank share is the best buy for dividend income?

Phil Harpur owns shares of CSL Ltd. and Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Australian Ethical Investment Limited (ASX: AEF) share price holds the unfortunate title of being the worst performer on the S&P/ASX 300 Index (ASX: XKO). Down 1.8%  at the time of writing, Australian Ethical’s share price has dropped 32% so far in August. That compares to a 3% gain for the ASX 300.

Like most shares trading on the ASX, Australian Ethical was savaged by the COVID-19 driven market rout. Australian Ethical’s share price tumbled 59% from February 18 to March 23. From that low, shareholders enjoyed meteoric rise through June 19. The share price gained 316% to reach an all-time high of $9.07 per share. Shares have dropped 54% since that high, but the Australian Ethical share price is still up 5% year-to-date.

What does Australian Ethical do?

The company is one of Australia’s leading ethical wealth managers. It has provided investors with ethical wealth management products since 1986. Its investments are guided by the Australian Ethical Charter which underpins the company’s culture and vision.

As at June 30 2020, Australian Ethical had more than $4 billion in funds under management, across superannuation and managed funds.

The company listed on the ASX in 2002.

Why is the share price down 32% in August?

Australian Ethical’s share price began its slide in late June, after the fund manager released its guidance for FY 2020. While still forecasting an increase in underlying profit after tax before performance fees, the forecast profit growth was less than half the 38% delivered in its first half.

The selloff continued after financial services company IOOF Holdings Limited (ASX: IFL), announced on August 7 that it had sold approximately 14.2 million shares or 72% of its holdings in Australian Ethical. At a total consideration of $74.5 million, IOOF received an average of $5.25 per share. That’s well above the current share price of $4.14.

Atop its reduced forward guidance and IOOF’s major divestment, it’s worth noting that momentum works in both directions. When a company’s share price is falling, it may trigger investor’s pre-set stop losses. It will also likely raise red flags for other shareholders, who may be drawn to the companies making headlines, like gold and technology shares.

While Australian Ethical’s share price kept climbing in the first months of the global pandemic, it’s also possible that investors have temporarily shifted their ethics to the backburner.

More reading

• Opthea share price bounces with Nasdaq listing on the cards
• What’s driving Arena REIT’s huge weekly share price gain?
• These were the worst performing ASX shares last week
• Why Australian Ethical, Northern Star, ResMed, & TPG Telecom are dropping lower
• Australian Ethical share price crashes 15% lower after IOOF selldown

Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Australian Ethical Investment Ltd. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Santos Ltd (ASX: STO) share price goes ex-dividend tomorrow. This when shares start selling without the value of its dividend payment. But before you rush out to buy at today’s Santos share price, let’s look a little closer at what the the natural gas producer’s dividend offers.

What’s the dividend yield on today’s Santos share price?

Santos announced a disappointing half year result last week on the back of tumbling oil prices. The interim dividend was similarly disappointing, slashed by 65% on the same period last year to just US 2.1 cents per share (cps).

This means that Santos shares currently yield around 1.8% at the current exchange rate, fully franked. Although I wouldn’t be lining up for a 1.8% dividend yield, there are some positive signs for the Santos dividend going forward.

Are good things coming for the Santos dividend?

As the major global economies start to spool up again following their COVID-19 forced holding patterns, it is fair to assume that demand for energy, and energy prices, will continue to recover. The price of brent crude oil has been steadily ticking upwards over the last few months and currently sits around US$44 per barrel.

In addition, guidance provided by Santos has the company targeting record production for the full 2020 year of up to 88 million barrels of oil equivalent (mmboe). Year on year, this would be production growth of up to 16.5%.

Because Santos offers a ‘sustainable’ dividend policy which aims to pay out between 10% and 30% of free cash flow, if these factors can drive higher sales revenue going forward, investors may be in for a jump in the dividend pay-out.

A history of poor dividend returns

Still, 10% to 30% of free cash flow seems to me like poor recompense for investors who have helped to fund billions of dollars in risky capital expenditure. In fact, since 2016, Santos has paid out just US$459 million in dividends and has written down its assets by a staggering US$3.4 billion. In this light, Santos looks like little more than a fiery furnace of capital destruction.

Commodity producers are often prone to cyclical earnings fluctuations which can make dividends unpredictable and Santos is no exception. There may be good things coming for the company, but I won’t be rushing to add Santos to my dividend portfolio today.

Fortunately, there are several other big companies going ex-dividend on 25 August to consider, including:

• Domino’s Pizza Enterprises Ltd. (ASX: DMP)
• InvoCare Limited (ASX: IVC)
• Netwealth Group Ltd (ASX: NWL)

More reading

• 5 things to watch on the ASX 200 on Monday
• These beaten down ASX energy shares could mirror the tech share price boom
• 5 things to watch on the ASX 200 on Friday
• Why CSL, Iress, Santos, & Webjet shares are dropping lower
• Santos share price slumps as interim dividend slashed

Regan Pearson has no position in any of the stocks mentioned.

You can follow him on Twitter @Regan_Invests. 

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Netwealth. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited and InvoCare Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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