Category: Stock Market

ASX dividend shares that generate relatively stable profits may deliver more consistent investment income than the broader ASX share market, which could appeal to retirees.

If I were in retirement, I’d want to own stocks that are more likely to continue delivering dividends, even during a downturn. Life expenses continue regardless of what’s happening with the economy.

With that in mind, I think the three ASX shares below are candidates for passive income.

Metcash Ltd (ASX: MTS)

Metcash has three divisions – food, liquor and hardware.

With the food division, it supplies IGA supermarkets around the country, and it recently acquired a food distribution business that supplies business customers like cafes, restaurants, hotels, hospitals, and so on.

The liquor division supplies various independent liquor chains, such as Cellarbrations, The Bottle-O, IGA Liquor, Porters Liquor, Thirsty Camel, and Duncans.

I believe the food and liquor segments can provide defensive earnings with largely consistent demand.

Its hardware division includes several businesses, including Mitre 10, Home Timber & Hardware and Total Tools. Australia’s growing population helps drive long-term demand for hardware.

The business is committed to a dividend payout ratio of 70% of underlying net profit after tax (NPAT). According to Commsec, the ASX dividend share is predicted to pay a grossed-up dividend yield of 7.8% in FY25.

Wesfarmers Ltd (ASX: WES)

This business owns various leading retailers, including Bunnings, Kmart, Officeworks, Priceline and Target.

Wesfarmers’ biggest profit generators – Bunnings and Kmart – are very well suited to capture market share in the current economic conditions because of their focus on providing customers with value for household products.

The company is investing in new industries, such as healthcare and lithium, that can help diversify and grow Wesfarmers’ earnings for retirees (and all other shareholders).

One of Wesfarmers’ aims is to grow its dividend over time, and it has delivered that since the onset of COVID-19. The FY24 half-year dividend was hiked by 3.4% to 91 cents per share, and the Commsec projection suggests a grossed-up dividend yield of 4.5% for FY25.  

APA Group (ASX: APA)

APA owns vast gas pipelines around Australia that transport half of the nation’s gas usage. It also owns other gas-related assets, including gas-powered energy generation. APA has a growing portfolio of renewable energy (solar and wind) and electricity transmission assets.

It has grown its distribution every year since 2004, giving it one of the longest growth streaks on the ASX. The ASX dividend share’s cash flow is increasing over time as more pipelines and other assets are completed or acquired.

APA has guided its payout will be 56 cents per security, which translates into a distribution yield of 6.5%.

The post 3 lower-risk ASX dividend shares for retirees appeared first on The Motley Fool Australia.

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• These buy-rated ASX dividend stocks offer 6%+ yields (and plenty of upside)

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

ASX investors woke today to news that the European Central Bank had cut interest rates.

In a broadly expected move, the ECB lowered the official interest rate by 0.25%, taking it from 4.00% to 3.75%. This marks the first easing by the ECB since 2019.

The bank noted that since its council meeting in September “inflation has fallen by more than 2.5% and the inflation outlook has improved markedly”.

Explaining its decision, the ECB stated:

Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady.

But the inflation genie is not yet securely back in its bottle.

The ECB cautioned:

At the same time, despite the progress over recent quarters, domestic price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year.

Indeed, inflation in the EU in May picked up more than expected with rising wages expected to keep the pressure on rising prices for some time yet. This could see interest rates in the EU remain higher for longer.

Addressing the sticky inflation, ECB president Christine Lagarde said (quoted by The Australian Financial Review), “Inflation is expected to fluctuate around current levels for the rest of the year. It is then expected to decline towards our target over the second half of next year.”

Still, consensus expectations are for the next ECB interest rate cut in September.

But to achieve that, inflation in the EU is going to need to continue to moderate.

According to the ECB:

The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. It will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim.

What does the ECB interest rate cut mean for ASX investors?

There’ll be some ASX companies that could directly benefit from lower borrowing costs in the EU.

But as a whole, ASX investors are waiting to reap some bigger benefits from interest rate cuts by the RBA and the US Fed.

Now the RBA will remain focused on Australia’s own inflationary data. But it’s worth noting that the ECB’s rate cut follows on the Bank of Canada’s 0.25% cut the day before, which brough Canada’s cash rate down to 4.75%.

And with more central banks opting to ease ahead of the US Fed, it could nudge the RBA board in the same direction.

As Doug Porter, chief economist at the Bank of Montreal, said following the Bank of Canada’s interest rate cut:

There is safety in numbers. If central banks see their counterparts heading that way, that gives them some comfort that they’re not completely misreading the situation. I think it does make it easier for other central banks to start cutting too.

European stock markets broadly closed higher on the news. Here in Australia, the S&P/ASX 200 Index (ASX: XJO) is up 0.2% in morning trade.

The post European Central Bank cuts interest rates. What does it mean for ASX investors? appeared first on The Motley Fool Australia.

More reading

• Which companies are in the VanEck Morningstar Wide Moat ETF (MOAT) portfolio?
• Time to pounce? 1 phenomenal ASX stock that hasn’t been this cheap in a while
• Life360 shares tumbles after Wall Street debut
• Analysts name 3 ASX income stocks to buy now
• Buy this quality ASX 100 stock that deserves a re-rating like CSL and Goodman

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 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 VanEck Morningstar Wide Moat ETF (ASX: MOAT) has been a high-performing fund for several years. An exchange-traded fund (ETF)‘s performance is decided by the underlying companies’ returns, so how the portfolio is constructed is important.

Since its inception in June 2015, the ASX ETF has delivered an average annual return of 15.3%, compared to 14.1% for the S&P 500 Index (SP: .INX) over the same time period.

While the holdings within the ETF do steadily change, the portfolio is always focused on solid businesses with excellent economic moats that are expected to endure and succeed for many years.

Companies inside the MOAT ETF

The VanEck Morningstar Wide Moat ETF looks to invest in a portfolio of at least 40 “attractively priced US companies with sustainable competitive advantages”, according to Morningstar’s equity research team.

It currently has 54 holdings across a range of industries. The biggest position in the portfolio right now (with a 3.47% allocation) is Teradyne, and the smallest positions, both with a weighting of 1.04%, are Adobe and Fortinet. There are numerous holdings with a position size of at least 2.25%, which are as follows:

• Teradyne (3.47%)
• Alphabet (3.22%)
• International Flavors & Fragrances (3.06%)
• Rtx (2.99%)
• Tyler Technologies (2.79%)
• Charles Schwab (2.73%)
• Altria Group (2.64%)
• Corteva (2.64%)
• Biogen (2.51%)
• Pfizer (2.48%)
• Transunion (2.45%)
• Allegion (2.43%)
• Campbell Soup (2.42%)
• Medtronic (2.38%)
• Equifax (2.35%)
• Agilent Technologies (2.31%)
• US Bancorp (2.28%)

As we can see, the position size is quite evenly distributed, which reduces the risk of being overconcentrated in any particular stock.

How are stocks selected?

Businesses are only chosen for the MOAT ETF portfolio if they are trading at an attractive price relative to Morningstar’s estimate of fair value. In other words, they only buy a stock if they think it’s much cheaper than they believe it’s actually worth.

The analysts assign an economic moat rating to each of the approximately 1,500 companies under its coverage. For Morningstar, this is where a company has a sustainable competitive advantage that allows it to generate positive earnings for shareholders over an extended period. Only 14% of the companies monitored have a “wide moat” rating.

To earn a wide moat rating, analysts think that the company’s “excess normalised returns must, with near certainty, be positive ten years from now. In addition, excess normalised returns must, more likely than not, be positive 20 years from now.”

There are several different types of moat, including cost advantage, intangible assets (patents, brands, regulatory licenses), switching costs, network effects, and efficient scale.

The investment style seems to be working well – in the five years to 31 May 2024, the MOAT ETF has delivered an average return per annum of 16.2%. Of course, past performance is not a guarantee of future performance.

The post Which companies are in the VanEck Morningstar Wide Moat ETF (MOAT) portfolio? appeared first on The Motley Fool Australia.

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Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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 positions in and has recommended Adobe, Alphabet, Charles Schwab, Fortinet, Tyler Technologies, and U.S. Bancorp. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Biogen, Medtronic, RTX, and Teradyne and has recommended the following options: long January 2026 $75 calls on Medtronic, short January 2026 $85 calls on Medtronic, and short June 2024 $65 puts on Charles Schwab. The Motley Fool Australia has recommended Adobe, Alphabet, and VanEck Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

There are many cheap stocks available for the Foolish investor who is willing to look. Take telecommunications giant Telstra Group Ltd (ASX: TLS), for example. Its shares have taken a hit in 2024 and now trade at $3.55 per share, down from a 52-week high of $4.42 on 21 June 2023.

This decline could present a potential buying opportunity for savvy investors looking for a cheap stock with strong fundamentals. Let’s dig into why Telstra might be a bargain worth considering.

Why is Telstra’s stock cheap now?

Over the past year, Telstra shares have fallen around 18%, underperforming the S&P/ASX 200 Index (ASX: XJO) by 28%. This isn’t what makes it a cheap stock, though.

The slump has pushed Telstra’s price-to-earnings (P/E) ratio down to 19.7 at the time of publication. Notably, the stock hasn’t traded at this valuation since 2017, when it ended the year on a P/E of 13.4.

For context, the current multiple implies that investors are paying $19.70 for every $1 of the company’s earnings.

This is also a significant drop from its peak P/E of 27 in 2022 and a 16% discount from the three-year average multiple of 23.5 times. This is calculated as the average of the P/E multiples recorded at year-end.

This suggests that the current P/E ratio is on the lower end of its three-year range, making it potentially cheap.

Year	P/E multiple (year-end)
2020	21.5
2021	23.1
2022	25.75
Average Current	23.5 19.7

Allan Gray’s investment chief, Simon Mawhinney, echoes this sentiment. Allan Gray first bought Telstra shares in the first quarter of this year, The Australian Financial Review reports.

Mawhinney believes this is one of the rare occasions in the past decade when Telstra is available at a “not unreasonable price”, thanks to its recent decline.

Do analysts think Telstra is a cheap stock?

Goldman Sachs analysts see substantial income potential in Telstra shares, even amid recent disappointments in its trading updates.

The broker has projected fully franked dividends of 18 cents per share for FY 2024 and 18.5 cents per share for FY 2025, according to my colleague James. At the current share price of $3.55, these projections translate to forward dividend yields of approximately 51% and 5.2% for FY 2024 and FY 2025, respectively.

Goldman Sachs maintains a buy rating on the company with a price target of $4.25 per share.

Auburn Capital also rates the telco giant a buy amid the continued downtrend in its share price. According to my Foolish colleague Tristan, the broker values Telstra even higher at $4.50 per share.

On a trailing earnings per share (EPS) of 17.6 cents per share, this valuation implies a P/E of 25.5 times ($4.50 / 0.176 = 25.5) – equal to a 30% value gap at the time of writing. In my opinion, that makes Telstra a cheap stock today.

Can Telstra trade higher?

The market’s reaction to the news Telstra will cut up to 2.800 jobs in April fanned the flames that were already charring the telco’s share price.

Representing almost 10% of the company’s staff headcount, the job cuts are part of a wider strategic review at the company.

In April, Telstra announced a review of its health division, not ruling out a potential sale of the unit. Before that, in 2021, the firm had revealed plans to cut $500 million in costs by 2025.

Known as its “T25 cost reduction ambition”, the blueprints include a planned $200–$250 million in annual restructuring costs over the next two years.

The job cuts and other strategic moves would reduce costs by $350 million in the coming two years, the company recently said.

It noted:

In addition to starting the reset of Telstra Enterprise, Telstra will reshape some of its internal operations by moving its Global Business Services function into other parts of the business.

This will help simplify processes and empower leaders closest to customers to make more decisions.

Telstra’s efforts in cleaning up the business can’t be ignored, in my view and could be grounds for a change in P/E multiple.

Foolish takeaway

Despite a challenging year, I think Telstra’s current valuation and projected dividend yield could present a compelling case.

Trading at a trailing P/E of 19.7, Telstra’s valuation is compressed compared to its historical averages. It is a cheap stock compared to years past.

Just remember, investing comes with risk. Always conduct your due diligence and consider your own personal financial circumstances.

The post Time to pounce? 1 phenomenal ASX stock that hasn’t been this cheap in a while appeared first on The Motley Fool Australia.

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• Are Telstra shares now a brilliant bargain?
• ‘Undervalued’: 3 ASX 300 shares to buy following significant share price falls
• Buy Rio Tinto and these ASX dividend stocks for 5%+ yields

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

Life360 Inc (ASX: 360) shares have returned from their trading halt on Friday and are dropping into the red.

At the time of writing, the location technology company’s shares are down 3.5% to $14.16.

Why were Life360 shares in a trading halt?

The high-flying ASX tech stock was placed into a trading halt yesterday as it finalised its Nasdaq IPO.

This is now complete with Life360 shares trading on Wall Street overnight under the (NASDAQ: LIF) ticker.

And the good news for shareholders is that the company’s shares didn’t have a terrible start to life on the Nasdaq boards. More on that soon.

Nasdaq IPO

After the market close on Thursday, Life360 revealed that it had finalised the pricing of its initial public offering in the United States.

It was offering a total of 5,750,000 shares of its common stock at an initial public offering price of US$27.00 per new share.

Life360 advised that it intends to use the net proceeds it receives from the offering to increase its capitalisation and financial flexibility, to create a public market for its common stock in the United States, and for general corporate purposes, including working capital, operating expenses and capital expenditures.

Management also stated that it “views the Offering and increased exposure to U.S. investors as a natural next-step in its growth.”

What is Life360?

In case you’re not familiar with the company. Life360 is a family connection and safety company aiming to keep people close to the ones they love.

Its category-leading mobile app and Tile tracking devices allow members to stay connected to the people, pets, and things they care about most. This is through a range of services, including location sharing, safe driver reports, and crash detection with emergency dispatch.

At the last count, Life360 was serving approximately 66 million monthly active users (MAU) across more than 150 countries.

Wall Street debut

As I mentioned at the top, Life360 shares were offered at US$27.00 per new share to investors in the United States.

During a relatively subdued session on Wall Street, they traded as low as $26.00 and as high as $27.26.

And at the end of Thursday’s night session they closed at $27.00, which is exactly where they started it.

But with the Nasdaq index falling 0.1%, this can be described as a reasonably positive debut for the tech stock. But perhaps not the explosive start that many investors were hoping for.

The post Life360 shares tumbles after Wall Street debut appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Life 360 shares halted ahead of Nasdaq IPO
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• Why Clarity Pharmaceuticals, Life360, Ramsay Health Care, and Spartan Resources shares are rising today

Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. 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 Australian share market is a great place to generate a passive income.

But which ASX stocks would be good options for income investors right now?

Let’s take a look at three ASX income stocks that analysts have recently named as buys:

Inghams Group Ltd (ASX: ING)

The team at Morgans thinks that income investors should be looking at Australia’s leading poultry producer, Inghams.

Its analysts believe the company’s shares are being undervalued by the market. Particularly given its leadership position and attractive dividend yield. Morgans also highlights that the company is “leveraged to poultry – the affordable, healthy, sustainable and growth protein.” This bodes well for the future.

As for those attractive dividend yields, Morgans is expecting fully franked dividends of 22 cents per share in FY 2024 and then 23 cents per share in FY 2025. Based on the current Inghams share price of $3.67, this equates to dividend yields of 6% and 6.25%, respectively.

Morgans has an add rating and $4.40 price target on its shares.

Orora Ltd (ASX: ORA)

Over at Goldman Sachs, its analysts think that Orora could be an ASX income stock to buy. It is one of the world’s largest packaging companies. It manufactures packaging products such as glass bottles, beverage cans, and corrugated boxes.

Goldman appears to believe a selloff this year has created a buying opportunity for patient investors. Especially given its cheap valuation and above-average dividend yields.

In respect to the latter, the broker is forecasting dividends per share of 12 cents in FY 2024 and 13 cents in FY 2025. Based on the current Orora share price of $2.19, this will mean yields of 5.5% and 5.9%, respectively.

Goldman has a buy rating and $3.00 price target on its shares.

Super Retail Group Ltd (ASX: SUL)

A third ASX income stock to buy could be Super Retail. It is the owner of popular retail brands BCF, Macpac, Rebel, and Super Cheap Auto.

Goldman Sachs is also a fan of Super Retail and thinks it would be a great option for income investors. Especially given its loyalty program. Its analysts continue to “believe that SUL is building a competitive advantage through 11.1mn members and 76% sales to members, which will help drive sales in a more complex operating environment.”

Goldman believes this positions the company to pay fully franked dividends per share of 67 cents in FY 2024 and then 73 cents in FY 2025. Based on the latest Super Retail share price of $13.23, this will mean yields of 5% and 5.5%, respectively.

Goldman has a buy rating and $17.80 price target on its shares.

The post Analysts name 3 ASX income stocks to buy now appeared first on The Motley Fool Australia.

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

The Australian share market is home to a large number of listed companies.

However, only a small portion of these can be classed as truly high quality companies.

Examples of this include ASX 100 stocks such as biotech giant CSL Ltd (ASX: CSL) and industrial property company Goodman Group Ltd (ASX: GMG).

But Bell Potter thinks that we should be adding a new ASX 100 stock to the list. That is enterprise technology company TechnologyOne Ltd (ASX: TNE).

What is the broker saying about this ASX 100 stock?

According to a note this morning, the broker believes that TechnologyOne’s quality makes it deserving of a re-rate to higher multiples. It commented:

Technology One has had very consistent and an increasing rate of PBT [profit before tax] growth the last four years: 13% in FY20, 14% in FY21, 15% and FY22 and 16% in FY23. This trend looks set to continue for the short to medium term with VA consensus forecast growth of 16%, 18% and 18% in FY24, FY25 and FY26 which is slightly below our forecasts of 17%, 19% and 19%. In our view this consistent and increasing growth has been a key driver of the PE re-rating in the stock over the last few years from around 30x to now around 40x. If the trend of consistent and increasing growth continues – as both consensus and we expect – then we believe this PE re-rating can continue up to a forward PE of around 50x.

Commenting on its comparison to other quality companies that have re-rated, the broker adds:

What’s interesting, however, is that while all these stocks have had re-ratings largely on the back of strong earnings growth over multiple years, the growth has not been consistent and in some cases has even been quite volatile. We believe, therefore, this is a key differentiator for Technology One in its favour and the comfort the market has in knowing the growth is going be consistent and not spike in one year or sink the next only supports in our view a continued re-rating in the multiple.

Double-digit returns

In light of the above, the broker has reaffirmed its buy rating and lifted its price target on the ASX 100 stock to $20.25.

Based on its current share price of $18.14, this implies potential upside of 11.6% for investors over the next 12 months.

The broker also expects a 1.2% dividend yield, lifting the total potential return to almost 13%.

The post Buy this quality ASX 100 stock that deserves a re-rating like CSL and Goodman appeared first on The Motley Fool Australia.

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• Here’s how the ASX 200 market sectors stacked up last week

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

The Australian share market traditionally trades with an average dividend yield of 4%.

While this is a great yield and comparable to what you might find with savings accounts, you don’t have to settle for that.

Not when there are some ASX dividend stocks out there offering significantly larger yields.

In addition, one of these stocks has been tipped to grow its dividend in the coming years, meaning bigger and bigger yields could be coming.

So much so, the ASX dividend stock in this article is forecast by one leading broker to provide a yield as large as 8% in 2026.

The stock in question is Accent Group Ltd (ASX: AX1).

What is Accent?

In case you’re not familiar with Accent Group, let’s take a little look at what it does.

Accent is a footwear retailer and wholesaler which owns and operates a number of footwear businesses in the performance, comfort, and active lifestyle sectors.

This includes many store brands that readers will be familiar with such as The Athlete’s Foot, Platypus, HypeDC, and Stylerunner. In addition, it has the local rights to global brands such as Skechers, Vans, Timberland, Reebok, and Hoka.

Accent also has an emerging presence in youth apparel following the acquisition of Glue Store in 2021.

Big yields expected from this ASX dividend stock

Thanks to the strength of these brands and favourable consumer trends, Bell Potter believes that Accent is well-positioned to reward shareholders with some very attractive dividends in the coming years.

For example, in FY 2024, the broker is forecasting the company to pay a fully franked 13 cents per share dividend. Based on its current share price of $1.98, this will mean a 6.6% dividend yield for investors.

Looking ahead, Bell Potter believes the ASX stock will increase its dividend to 14.6 cents per share in FY 2025. This equates to a fully franked 7.4% dividend yield for anyone buying its shares at current levels.

This trend is expected to continue in FY 2026, with Bell Potter forecasting an increase to 16.4 cents per share. This will mean a very large 8.3% dividend yield for income investors to look forward to receiving that year.

But wait, there’s more! Bell Potter isn’t just expecting outsized dividend yields. It also expects Accent shares to deliver big capital gains over the next 12 months.

The broker has a buy rating and $2.50 price target on them. This implies potential upside of 26% for investors from current levels.

The post This ASX dividend stock is predicted to pay an 8% yield in 2026! appeared first on The Motley Fool Australia.

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

A couple of ASX 200 shares have released updates this week to very different receptions.

One impressed the market and saw its shares launch higher, the other disappointed investors and led to its shares sinking deep into the red.

Goldman Sachs has been running the rule over the updates and while not overly impressed with one of them, still believes both ASX 200 shares are in the buy zone right now.

Let’s take a look at what the broker is saying about them:

IDP Education Ltd (ASX: IEL)

This language testing and student placement company is the one that disappointed the market. The ASX 200 share sank 7.5% after warning about recent changes to regulatory settings.

It advised that a more restrictive policy environment in its key destination countries is reducing the size of the international student market. This has negatively impacted testing and student placement volumes during the second half. As a result, IDP Education is guiding to flat earnings in FY 2024.

Commenting on the update, Goldman said:

IEL’s trading update was soft, but should help investors better frame the earnings base for FY25 as the impacts of regulatory tightening measures become clearer.

The broker has now reduced its earnings forecasts for the coming years and expects its earnings to bottom in FY 2025. After which, Goldman believes its growth will resume.

Despite this weak near term outlook, the broker feels that its shares are undervalued. It said:

Overall we now expect FY25 EBIT of A$222mn, -4% vs FY24E, and cut FY24/25/26E EBIT -9%/-17%/-17% with IEL trading on 23x FY26E P/E, even assuming a modest FY26E recovery, though we acknowledge uncertainty remains on the CY25 CA cap and AU university placement caps.

Goldman now has a buy rating and $21.75 price target on its shares. This implies potential upside of approximately 50% for investors.

Treasury Wine Estates Ltd (ASX: TWE)

This wine giant’s shares charged higher this week after it reaffirmed its guidance for FY 2024 and spoke positively about its opportunity in North America.

In respect to the former, management continues to expect mid-high single digit EBITS growth for the year. It also advised that work to assess the future operating model for the company’s global portfolio of Premium brands is continuing with an update expected in August.

Goldman was impressed with this update and believes its growth is about to accelerate. It said:

In FY22-24e, we expect the company to deliver sales/EBITS/EPS CAGR of 4.0%/12.0%/8.7%, while from FY24-26e, we expect this to accelerate to ~7%/13%/12% respectively. All of this is against a moderately declining growth environment in US/China wine.

In light of the above, the broker has reiterated its buy rating on the ASX 200 share with an improved price target of $13.40. This suggests a potential return of 11% before dividends and almost 15% including them. Goldman concludes:

Our valuation multiple and methodology are unchanged. Our 12m TP of A$13.40/sh (from A$13.00/sh) implies 15% TSR and we reiterate Buy given positive delivery of the strategy reset as well as attractive double-digit EPS growth at an attractive valuation. The stock is trading at 1yr fwd P/E of 20x. The key catalyst for the stock will now be its June 20 Business Update focused on China.

The post Goldman Sachs names 2 ASX 200 shares to buy now appeared first on The Motley Fool Australia.

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

Choosing the right ASX stock or stocks to buy for an investment portfolio is a tricky process. With so many options on the Australian stock market to choose from, many new investors can get overwhelmed and pick the wrong shares to start with. Or even worse, they may decide the whole investing thing isn’t for them after all, and keep their cash in the bank. But if I had $1,000 to put into a new ASX stock today, there’s only one I would choose. It would be the Vanguard Australian Shares Index ETF (ASX: VAS).

The Vanguard Australian Shares ETF is the largest index fund on the ASX. it offers investors a simple deal: invest in this exchange-traded fund (ETF) and immediately gain access to a portfolio of ASX shares that almost perfectly reflect the largest 300 stocks on the ASX, weighted by market capitalisation.

Those 300 shares include everything from Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and Woolworths Group Ltd (ASX: WOW) to Telstra Group Ltd (ASX: TLS), AGL Energy Ltd (ASX: AGL) and Harvey Norman Holdings Limited (ASX: HVN).

You are effectively getting everything the Australian share market has to offer, the whole shebang. Miners, banks, energy stocks, consumer discretionary shares, real estate investment trusts (REITs), consumer staples companies, healthcare businesses… everything.

Why I would recommend the VAS ETF to any ASX investor today

This, in my view, makes VAS a great investment for almost anyone. Whether you’re an investing veteran or share market novice, this ASX stock can be a great addition to any portfolio.

For one, you are getting an investment that has historically given back a decent return over many decades. As of 30 April, VAS has averaged an ASX return of 8.97% per annum since its market inception in 2009. That includes both capital growth and dividends.

Speaking of dividends, VAS is an ASX investment that also has significant dividend income potential. Since this index fund holds the 300 largest shares on the ASX within its portfolio, it receives any dividends that these companies pay out. VAS passes these on to its ASX investors in the form of quarterly dividend distributions.

At recent pricing, the Vanguard Australian Shares ETF is trading on a trailing dividend distribution yield of 3.84%. This comes partially franked too, seeing as most of the dividends coming out of the ASX 300 come with at least some franking credits attached.

So with this VAS ETF, ASX investors can get instant diversification, a decent history of capital growth, and solid dividend income prospects all in one investment. For these reasons, I think VAS is a perfect place for any ASX investor to put $1,000 in spare cash today.

The post The ultimate ASX stock to buy with $1,000 right now appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has positions in Telstra Group and Vanguard Australian Shares Index ETF. 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 Harvey Norman and Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.