Category: Stock Market

I love finding Australian value stocks that the market is undervaluing. I’m going to write about three ideas I think the market is ignoring.

In my mind, a value stock is a business that has a relatively low price/earnings (P/E) ratio which could easily be trading on a higher valuation. I like businesses that pay dividends because a low valuation usually means a higher dividend yield – we can get a good return that way.

KMD Brands Ltd (ASX: KMD)

KMD is a business that operates three brands – Kathmandu, Rip Curl and Oboz, which are essentially retailers that are focused on outdoor clothing and footwear, for cold and hot weather. I’ll point out that this business is a New Zealand business, but it’s listed on the ASX and makes a lot of its sales in Australia, so I’m going to call it a New Zealand (and Australian) value stock.

As you might expect, sales have weakened amid the current inflationary environment and higher interest rates.

The KMD Brands share price has fallen 60% from November 2021, so it’s much better value now. I don’t think retail conditions are going to be weak forever, though it could take a year or more until households are able/willing to start spending more again.

But, I think KMD Brands is priced at a very cheap level for that possible rebound. According to the projections on Commsec, it’s valued at 7 times FY26’s estimated earnings and it could pay a possible dividend yield of almost 10% that year.

Lindsay Australia Ltd (ASX: LAU)

This business is a sizeable and growing player in the transport and logistics space. It claims to be a leading national service provider to the agriculture, horticulture and food-related industries. It can assist farmers grow, package, transport and distribute their produce throughout Australia and globally.

Despite steadily growing revenue over the past five years, and focusing on more growth for the long-term, the Australian value stock is priced at a cheap level in my opinion.

According to Commsec, it’s priced at 7.2 times FY25’s estimated earnings and 6.6x FY26’s estimated earnings. It’s priced so cheaply that the fairly low projected dividend payout ratio could lead to a grossed-up dividend yield of 8.5% in FY25 and 8.9% in FY26.

The business is priced cheaply, it’s indirectly benefiting from the growing population and it offers a large dividend yield. There’s also a possibility it could grow via acquisitions, which would boost scale.

Metcash Ltd (ASX: MTS)

Metcash supplies IGA supermarkets around Australia, as well as a large number of independent liquor retailers like Cellarbrations, The Bottle-O, IGA Liquor, and Porters Liquor.

The business has a very promising hardware division which includes Mitre 10, Home Timber & Hardware and Total Tools.

I believe population growth is a useful tailwind for all three of the Australian value stock’s main segments, with potential interest rate cuts being a possible booster for hardware earnings.

While it’s not as strong as Coles Group Ltd (ASX: COL) or Wesfarmers Ltd‘s (ASX: WES) Bunnings, I think it’s comparable, but trades on a much cheaper P/E ratio.

According to Commsec, the Metcash share price is valued at just 12 times FY25’s estimated earnings with a possible grossed-up dividend yield of 8.3% for that year.

It is valued at 11.8 times FY26’s estimated earnings with a possible grossed-up dividend yield of 8.6%. Those numbers are attractive to me, which is partly why I recently invested.

The post 3 Australian value stocks to buy right now appeared first on The Motley Fool Australia.

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More reading

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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 Lindsay Australia and Wesfarmers. The Motley Fool Australia has positions in and has recommended Coles Group and Wesfarmers. The Motley Fool Australia has recommended Lindsay Australia and Metcash. 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 Cochlear Limited (ASX: COH) share price is falling this Monday morning, despite the company releasing its latest earnings covering the six months to 31 December before market open.

Cochlear shares closed at $334.54 last week. But the ASX 200 healthcare stock opened at $331.14 this morning before dropping down to $327.76 at the time of writing, a fall worth 2.03%.

What did the company report?

Here’s what Cochlear reported for the first half of the 2024 financial year this morning:

• Revenues of $1,113 million, up 20% in constant currency terms over the first half of FY2023
• Underlying net profit of $192 million, up 21% year on year in constant currency terms
• Statutory net profit of $191 million, also up 21% year on year
• Underlying net profit margin of 17%
• Interim dividend of $2 per share, partially franked at 70%, declared, a 29% increase over 2023
• Share buyback program paused

Although Cochlear announced a big rise in its interim dividend, the company has also suspended its share buyback program “given the current high interest rate environment”.

What else happened in 1H24?

Cochlear’s 20% rise in revenues was assisted by a 14% increase in Cochlear implant units shipped over the period, along with a 35% rise in services revenue. The latter was thanks in part to “strong upgrade demand for the recently released Cochlear Nucleus 8 Sound Processor”.

Cochlear first flagged the success of the Nucleus 8 back in October last year during the company’s annual general meeting. At the time, Cochlear’s management also guided investors to expect a rise of between 16% and 23% in underlying net profits for the 2024 financial year.

At the time, this didn’t have much of a positive impact on the Cochlear share price. But back on 8 February, Cochlear told shareholders that they can now expect an increase of between 26% and 31% in underlying net profits over FY2024.

That announcement saw a 4.4% rise in the value of Cochlear shares.

What did Cochlear management say?

Here’s some of what Cochlear’s management had to say about the numbers the company has revealed today:

Cochlear implant trading conditions continue to be strong across most markets, with an improving trend in adult referral rates in many developed countries. We have maintained the market share gains made in FY23, with strong market growth across the first half.

The key change to our expectations is that we now expect to achieve 10-15% growth in our cochlear implant units for FY24 compared to the high single-digit growth expected in August.

Cochlear 2024 half-year results

What’s next for Cochlear?

Looking forward, Cochlear has told investors that “we expect the positive momentum of the first half to continue into the second half”. The company reaffirmed its guidance earlier this month of a 21-34% rise in underlying net profits for the full 2024 financial year.

That’s partly thanks to ongoing favourable implant trading conditions, which reportedly “continue to be strong across most markets, with an improving trend in adult referral rates in many developed countries”.

As such, Cochlear now expects to achieve “10-15% growth in our cochlear implant units for FY24 compared to the high single-digit growth expected in August”.

Cochlear share price snapshot

The Cochlear share price has performed exceptionally well in recent months. The company is up 8.76% in 2024 to date at current pricing, as well as up 23.11% over the past six months. Over the past year, investors have enjoyed a share price gain of just over 46.7%.

At the current Cochlear share price, this ASX 200 healthcare stock has a market capitalisation of $19.96 billion, a price-to-earnings (P/E) ratio of 71.85 and a trailing dividend yield of 1.01%.

The post Cochlear share price falls despite 29% dividend boost appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen 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 Cochlear. The Motley Fool Australia has recommended Cochlear. 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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APM Human Services International Ltd (ASX: APM) shares are rocketing on Monday.

At one stage today, the human services provider’s shares were up as much as 73% to $1.44.

They have since pulled back a touch but remain up 53% to $1.27 at the time of writing.

Why are APM shares rocketing?

Investors have been scrambling to buy the company’s shares this morning after it confirmed that it has received a takeover approach.

According to the release, the company has been in discussions with CVC Asia Pacific and received a conditional and non-binding indicative proposal on Friday.

CVC has offered to acquire APM by way of a scheme of arrangement for $1.60 per share. This represents a 93% premium to its last close price and values the company at approximately $1.5 billion.

The release notes that the proposal was received following a period of engagement between APM and CVC, including the provision of information and due diligence under the terms of a non-disclosure agreement.

Thanks but no thanks

Despite the significant premium on offer with this proposal, the APM board has unanimously decided to reject it.

They believe the proposal does not sufficiently reflect the fundamental value of APM and the potential of its market leading platform globally.

The board also highlights that although APM is currently operating in a challenging environment at a historic low point of the unemployment cycle, they are confident in the company’s outlook.

APM’s executive chair, Ms Megan Wynne, said:

APM remains focused on supporting our people, continuing to deliver the highest-quality services globally for our clients and stakeholders, and executing on our strategy. The Board and I have full confidence in APM’s management team to deliver long-term value to our shareholders. I am confident in the outlook for APM.

The post APM shares rocket 73% after rejecting $1.5b takeover appeared first on The Motley Fool Australia.

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More reading

• Cochlear share price falls despite 29% dividend boost
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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 APM Human Services International. 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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S&P/ASX 200 Index (ASX: XJO) energy stock Ampol Ltd (ASX: ALD) is charging higher today.

Shares in the petroleum refiner and fuel distributor closed Friday trading for $37.59. In morning trade on Monday, shares are swapping hands for $38.03 apiece, up 1.17%.

For some context, the ASX 200 is up 0.2% at this same time.

This outperformance comes following the release of Ampol’s full-year 2023 results.

Here’s what Ampol reported.

ASX 200 energy stock gains amid earnings boost

• Earnings before interest and tax (EBIT) – excluding significant items – came in at $1.30 billion, up 2% on 2022
• Statutory net profit after tax (NPAT) of $549 million, down 25% year on year
• Net borrowings as at 31 December of $2.20 billion, down from $2.46 billion a year earlier, with leverage at 1.6 times and committed facilities of $5.0 billion
• Final fully franked dividend of $1.20 per share plus special dividend of 60 cents per share for a record final payout of $1.80 per share, up 16% from 2022

What else happened with Ampol during the year?

The growth in 2023 earnings that looks to be helping the ASX 200 energy stock outperform today was spurred by earnings growth in Ampol’s non-refining divisions, along with a full 12 months’ contribution from Z Energy.

Ampol acquired Z Energy in mid-2022, and the company reported it has so far delivered on the expected acquisition benefits and synergies. In 2023, Z Energy contributed EBIT of $264 million to group earnings.

2023 saw Ampol achieve record total sales volumes of 28.4 billion litres, up 17% year on year.

And passive income investors will be pleased with the all-time high, fully franked final dividend payout of $1.80 per share.

That takes the dividend payments for 2023 to $2.75 per share for a total payout of $655 million. This comes in at 89% of NPAT, at the top of Ampol’s payout range for the full year.

What did management say?

Commenting on the results that are seeing the ASX 200 energy stock outperform today, CEO Matt Halliday said:

The result reinforces the adaptability and resilience of Ampol’s integrated supply chain in what was another year where energy markets moved rapidly in response to geopolitical events. We continued to grow our Petrol and Convenience earnings, delivering another strong performance in Convenience Retail…

The balance sheet is strong, providing Ampol with the flexibility to invest in our core fuels and convenience businesses, and to prudently invest in the energy transition while delivering our highest ever dividends to shareholders.

What’s next for Ampol?

Looking to what could impact the ASX 200 energy stock in the months ahead, Ampol plans to upgrade its Lytton refinery to produce gasoline compliant with the government’s new fuel specifications for both regular and premium gasoline grades.

Ampol is also continuing to extend its charging network for EVs. The company expects this to extend to 300 charging bays in Australia and 150 charging bays in New Zealand by the end of 2024.

How has this ASX 200 energy stock been tracking?

The Ampol share price is up 18% in 12 months. And that’s not including the $2.75 a share in dividends the ASX 200 energy stock delivered over the year.

The post ASX 200 energy stock Ampol charging higher on record 2023 sales appeared first on The Motley Fool Australia.

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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.

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I’ve utilised the ability of my superannuation fund which allows me to invest in S&P/ASX 300 Index (ASX: XKO) shares. One ASX share has more than doubled in value, and it has been my best performer in the relatively short period of time that I’ve been stock-picking in my superannuation fund.

I’m not suggesting that anyone should invest like that with their own fund – my focus here is to show that investing in particular businesses can work out well if we invest at the right time, no matter what the ownership structure is.

Temple & Webster Group Ltd (ASX: TPW)

My investment return currently shows a gain of over 110% since the investment in late October 2023.

When I think about Temple & Webster’s future, I think it has a compelling future. It can benefit from Aussies adopting online shopping. That has been a tailwind for a long time already for the company, but as the younger (digital-savvy) Aussies enter their bigger-spending years, it bodes well for the ASX share, in my opinion.

Shopping for homewares and furniture is seen as a discretionary category, meaning a downturn could be bad news for the company. I understand why the market was pessimistic about the high-growth business amid inflation and higher interest rates.

Why I decided to invest

I love looking at cyclical ASX shares when they’re at a weak point of a cycle. Share prices usually don’t fall for no reason, something has to worry investors. But, I think this is when we can see the best valuations to invest at.

Temple & Webster has continued to grow during this period, gaining market share. In the FY24 first-half result, it saw revenue growth of 23% thanks to growth of both repeat and first-time customers. It reached 1 million active customers for the first time in February 2024. Amazingly, in the period 1 January 2024 to 11 February 2024, revenue was up 35% year over year.

An e-commerce business has a number of advantages compared to bricks and mortar retailers. Once the digital infrastructure has been built it can materially benefit from increased scale, profit margins can increase thanks to a number of factors, the fixed costs can become a smaller percentage of revenue, it can get better terms with suppliers, and it can invest more in areas such as marketing.

I’m excited by what the business can become in five years, particularly if it reaches its goal of $1 billion in annual sales sooner rather than later.

Great businesses sometimes see volatility and go through heavy declines. I view those times as a chance to buy a compelling business at a much cheaper price.

I wouldn’t despair if the Temple & Webster share price went through more pain because I’d view that as another chance to buy it at a great price.

I’m not looking to sell the ASX share in my superannuation fund, I think it can become much bigger in the long-term. But, I’d be happy to wait for some more volatility before buying for my portfolio seeing as it’s already the largest position in the stock-picking part of my fund.

The post This is the best ASX share buy I’ve made in my superannuation fund appeared first on The Motley Fool Australia.

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More reading

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Motley Fool contributor Tristan Harrison has positions in Temple & Webster Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Temple & Webster Group. The Motley Fool Australia has recommended Temple & Webster Group. 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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Fortescue Ltd (ASX: FMG) stock has achieved sizeable gains in the past few months. Could the ASX mining share be bigger than the Commonwealth Bank of Australia (ASX: CBA) by 2026?

How big is Fortescue now?

Fortescue’s market capitalisation is now higher than Wesfarmers Ltd (ASX: WES), Macquarie Group Ltd (ASX: MQG), ANZ Group Holdings Ltd (ASX: ANZ) and Westpac Banking Corp (ASX: WBC).

ANZ currently has a market cap of around $85 billion, Westpac sits at $86 billion, and Fortescue has a market cap of $89 billion.

In the last six months, the Fortescue share price has lifted by 39%.

How big is CBA? It has a market capitalisation of $195 billion at the time of writing.

So, Fortescue would have to more than double in size to reach the level that Australia’s biggest bank is currently at. It seems unlikely that Fortescue can rise that much in a relatively short time, and that doesn’t even account for the possibility of CBA shares rising – though they could fall.

But, if Fortescue stock were to reach the market cap heights of CBA, there could be three things that power it there, in my opinion.

Stronger iron ore price

I think the biggest reason for Fortescue’s recent rally is the strength of the iron ore price.

Six months ago, it was close to US$100 per tonne, and now it’s up to US$130 per tonne. Iron ore costs roughly the same each month to mine, so any extra revenue for that production largely translates into extra net profit (aside from paying more to the government).

The current iron ore price has been achieved at a time when the Chinese property sector is reportedly weak. If the Chinese economy and the property sector can rebound, that could push the iron ore price higher, leading to stronger profitability for Fortescue.

It’s impossible to know what the iron ore price is going to do. Forecasting it to go materially higher from here may be too optimistic.

More production

Another way to increase revenue would be to produce more iron ore. I’m not sure Fortescue can produce much more at its current projects that are already at full production.

But it’s certainly possible that the high-grade Iron Bridge project could produce more as it ramps up.

Fortescue also has the high-grade Belinga iron ore project in Africa, which it believes “will one day be among the largest iron ore mines in the world”. While it may take longer than 2026 to reach full production, the market may price in some of the potential improvements that Fortescue could experience.

Fortescue noted that the Belinga project opened “growth opportunities for Fortescue throughout Africa”.

More production, combined with a good iron ore price, enables the miner to make good profits. I think it’s vital the iron ore price stay high if Fortescue is to have any chance of overtaking CBA in the next few years. It obviously can’t control what’s happening with the iron ore price.

Green energy

One of the most exciting elements of Fortescue stock is the company’s growth plans in green hydrogen, green ammonia and high-performance batteries.

It has a long-term goal of producing millions of tonnes of green hydrogen annually, which could unlock a large new earnings stream for the business.

In the long term, I think the energy division (and Fortescue Capital) could be what gets Fortescue shares the closest to CBA.

But it’s also the riskiest – is Fortescue putting its money to good use? Will there be enough demand for this green energy? Will customers want to pay the amount that Fortescue needs to make a good profit on the money it has invested?

I wouldn’t bet on Fortescue being a bigger business than CBA by the end of 2026, but investor excitement about Fortescue’s energy division could help a lot as the main production gets closer.

The post Will Fortescue stock be worth more than CBA by 2026? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Fortescue. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group and Wesfarmers. The Motley Fool Australia has positions in and has recommended Macquarie Group and Wesfarmers. 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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Imdex Ltd (ASX: IMD) shares are having a day to remember on Monday.

In morning trade, the ASX All Ords share is up 20% to $1.93.

This follows the release of the mining technology company’s half-year results.

ASX All Ords share jumps on results

• Revenue up 18.4% to $235.3 million (16% in constant currency)
• Normalised EBITDA up 13% to $71 million (14% in constant currency)
• Net profit after tax down 26% to $16.8 million
• Normalised net profit after tax up 7.5% to $32.8 million
• Fully franked interim dividend flat at 1.5 cents per share

What happened during the half?

For the six months ended 31 December, Imdex reported an 18.4% increase in revenue to $253.3 million. This was driven almost entirely from the acquisition of Devico, which contributed revenue of $36.1 million. The core Imdex business reported a modest 0.2% lift in revenue to $199.2 million.

Also growing was the company’s normalised EBITDA, which rose 13% to a record of $71 million. This excludes Devico integration costs and the non-cash impairment of Maghammer.

It was these one-offs that meant that its net profit after tax was down 26% to $16.8 million on a reported basis but up 7.5% on a normalised basis.

And judging by the ASX All Ords share’s performance today, it seems the market is more focused on the normalised result than the reported result.

Management commentary

Imdex CEO, Paul House, was pleased with the half. He said:

We are very pleased that this half has demonstrated the resilience of the IMDEX business model and our strategy to put together end-to-end solutions that deliver value to customers and gain market share in what has been a contracting market.

We generated record revenues, record EBITDA and margin improvement. We concurrently completed the Devico operational integration, thereby unlocking further revenue and cost synergies in the longer-term. This is a wonderful acknowledgement of the hard work by our teams around the world.

Outlook

Management remains optimistic on the company’s prospects in 2024 despite the potential for lower mining exploration spending. It said:

S&P Market Intelligence has reported exploration spend for CY24 is likely to be in line with or marginally down (<5%) on CY23. The high-cost operating environment presents opportunities for IMDEX’s innovative end-to-end solutions, integrated product offering, orebody knowledge and directional drilling to improve drilling productivity.

Customer activity globally is anticipated to remain steady during 2H24. The Company’s mid to major customers are well funded and are expected to maintain, and in some regions expand drilling programs.

As of 15 February, the ASX All Ords share revealed that the number of sensors on hire were up approximately 5% on the prior corresponding period. This reflects the addition of some of the Devico sensors as Imdex progresses the systems integration globally.

The post Why this ASX All Ords share leaping 20% despite a big dent in profits 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 Imdex. The Motley Fool Australia has positions in and has recommended Imdex. 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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I love the idea of investing in ASX shares that can provide a mixture of capital growth and passive income. If you’re looking for two stocks that cost under $50 per share, I’ve got two I’d love to share with you.

Profit-making companies are attractive because they can pay out some profit as a dividend and re-invest the rest for more growth.

Here’s why I really like — and own — the two ASX shares below.

Metcash Ltd (ASX: MTS)

Metcash currently has a share price of $3.56. It supplies IGA supermarkets around Australia, as well as the liquor businesses Cellarbrations, The Bottle-O, IGA Liquor, Porters Liquor, Thirsty Camel, Big Bargain Bottleshop and Duncans.

It recently announced that it’s buying Superior Food, a leading Australian food service distribution business. Metcash said food service (which supplies businesses) was a “large and growing market”.

For me, what’s most exciting is the company’s hardware division which includes Mitre 10, Home Timber & Hardware, Total Tools and more. It’s buying Bianco Construction Supplies, a construction and industries supplies business servicing the South Australia and Northern Territory. It’s also buying Alpine Truss, one of the largest frame and truss operators in Australia.

When we put these divisions together, I think Metcash has solid earnings, which are leveraged to population growth.

I believe that an eventual rebound of construction and renovation activity will provide a helpful backdrop for Metcash’s hardware earnings to grow materially.

In my opinion, the ASX share has a low price/earnings (P/E) ratio for the quality of the business. According to the projections on Commsec, the Metcash share price is valued at 12.5x FY24’s estimated earnings with a possible grossed-up dividend yield of 8.1%.

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

Soul Pattinson currently has a share price of $34.21. Since the start of 2020, it has risen by more than 50%, though past performance is not a guarantee of future returns.

It owns a diversified portfolio of different assets, including ASX shares, unlisted businesses, credit/bonds, property and so on.

I like the diversification that this company offers, and it regularly adds to its portfolio. This ensures a portfolio focus on sectors with long-term return potential for shareholders.

Soul Pattinson has been a listed business since 1903, which shows it has excellent longevity. The ASX share has paid a dividend every year since 2000, and it has grown its annual dividend per share each year since 2000.

I think it’s one of the most likely Australian businesses to be around in 20 years because of that diversification element. While I wouldn’t call it cheap, I think it’s an excellent long-term ASX share to buy.

The post 2 ASX shares under $50 new investors can buy confidently appeared first on The Motley Fool Australia.

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More reading

• Here’s why I can’t wait for Soul Patts’ shares to report next month
• Are Metcash shares worth buying for that fat 6% dividend yield?
• 3 ASX shares that could soar thanks to the RBA
• ASX dividend shares: What’s better, growth or consistency?
• Soul Patts shares: Here’s how some investors are getting a 22% yield

Motley Fool contributor Tristan Harrison has positions in Metcash and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. 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.

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According to some accounts, after a successful battle, the victorious Roman general would be paraded through the streets of the city.

And, behind him, a slave would repeat the phrase ‘Memento mori‘.

Translated, it means: ‘You are mortal’; a reminder to the general not to let success go to his head.

It’s good advice.

Humility is something to be cultivated in all walks of life, I reckon.

(And when you’ve done that, you can be proud of yourself. Which… means you’re back to square one!)

But seriously, humility is a very, very handy trait, particularly for investors.

We all know the stock market is volatile. Certainly the last few years have been a case in point.

Starting in February 2020, we had the fastest bear market in history, followed by the fastest recovery.

In 2022, the technology sector lost around one-third of its value. Then in 2023, it gained about 30%.

And those examples are nothing compared to the rises and falls of some individual companies’ shares, often in much shorter timeframes.

Now, no-one needs to be reminded of their mortality when shares fall. That one’s easy, unfortunately.

But it’s when they rise that we need to remain sober in our assessments.

It’s also really hard.

We want to believe that rising share prices are justified: because we like getting richer.

And we like the feeling of having our judgement validated. “See, I was right!” is a powerful emotion.

But, dear reader, memento mori.

The problem is that our instinct is to take the gains for granted, but that same instinct causes us to suffer the losses greatly.

Again, it’s only natural.

They’re just not very helpful instincts.

They blind us to the fact that sometimes our gains are pure luck. A fluke.

That sometimes the investment case is justified, but the gains get out of all proportion.

A great example of that last instance is Microsoft, currently the world’s second-largest listed company (by market capitalisation).

In early 2000, before the tech crash, Microsoft’s shares sold for almost US$52 per share.

Then, dot com became dot bomb.

Microsoft shares wouldn’t reach those heights again for more than 15 years, not crossing the US$52 mark until October 2015!

Imagine how good you felt, in 2000: the shares had tripled in less than three years.

Imagine how tough the next 15 years were.

And since 2015? The shares are up almost 8-fold in price, to US$404 as of this writing.

What’s next for Microsoft? I don’t know.

Maybe the shares go straight to $1,000.

Maybe they fall to $200.

No, I don’t want to rob you of the joy (relief?) of rising share prices.

Because, here’s the thing: if you can be equanimous when shares rise, you’ll also be more philosophical when they fall.

But, if you let your emotions get the better of you in the good times… they’ll probably get the better of you during the unavoidable falls, too.

Yes, those of us who have been battered over the past few years can be excused for wanting to enjoy it when shares rise.

Yes, I’m being a killjoy. Sort of.

But I’m doing it because I want you to be prepared for both the ups and the downs.

I want you to be prepared – financially, mentally and emotionally – so you can see this investing thing through to the end.

If you’re still nursing some losses, remember that a diversified portfolio of well-chosen shares is very, very likely to go up, over time.

And if you’re ahead? Memento mori.

Fool on!

The post Invest like a Roman general appeared first on The Motley Fool Australia.

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Motley Fool contributor Scott Phillips has positions in Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. 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.

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ASX dividend shares that offer a high dividend yield can be really attractive for investors wanting passive income. We know that interest rates on savings accounts and term deposits fluctuate and may not always offer as much return.

Now could be the right time to look at ASX shares beaten down because of the current economic backdrop.

Real estate investment trusts (REITs) face a difficult situation in periods of higher interest rates as they put pressure on building valuations and also mean higher interest costs, hurting net rental profit.

Growthpoint Properties Australia Ltd (ASX: GOZ) has a portfolio of “high-quality” industrial and office properties across Australia. The company says it invests in existing properties to ensure they meet tenants’ needs now and into the future. Let’s take a closer look.

Large dividend yield expected

As of November 2023, Growthpoint had an occupancy rate of 94% and a weighted average lease expiry (WALE) of 5.8 years — “underpinning income to security holders”.

The Commsec forecast suggests it could pay a distribution per security of 20.5 cents in FY26. This would be a distribution yield of close to 9%.

I’ll also mention that the forecast for FY24 is 19.3 cents per security, a distribution yield of 8.2%.

How much are Growthpoint shares actually worth? It’s hard to truly value a property until it goes through a sale process.

The ASX dividend share advised in December 2023 that external valuations had been conducted for around 62% of the group’s portfolio. They indicated a decrease of approximately $137.8 million, or 4.7%, on a like-for-like basis compared to 30 June 2023’s book values.  

The specific decrease in external valuations of these properties is expected to reduce the net tangible assets (NTA) by 19 cents. But there are other factors that could impact the final NTA. They include internal valuations for the other properties, the value of derivatives, other Growthpoint investments and changes to net debt at the balance date.

At June 2023, the business had an NTA of $4, down 12.3% compared to June 2022.

With the Growthpoint share price at $2.35, it appears to be trading at a large discount.

What’s the outlook for these property sectors?

I don’t have a crystal ball, nor does management. However, the ASX dividend share does have a high occupancy rate and a compelling WALE.

Growthpoint managing director Timothy Collyer explains:

The group’s movement in preliminary draft external valuations reflects the increased cost of capital and higher return expectations from investors. In the industrial market, supply constraints continue to drive strong rental growth, which has largely offset yield expansion.

Office markets are experiencing higher-than-average vacancies, although physical occupancy continues to increase across all markets and is anticipated to improve in 2024 as more businesses implement return-to-office policies.

Despite the lower preliminary draft external valuation of the group’s properties, Growthpoint’s high-quality portfolio with secure tenants on long leases continues to perform well in terms of occupancy (94%) and WALE (5.8 years).

While the NTA may have more to fall, the Growthpoint share price could be undervalued, making the dividend yield too compelling to miss.

The post This ASX dividend share is forecast to pay a 9% yield in 2026 appeared first on The Motley Fool Australia.

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More reading

• $20,000 in savings? Here’s how I’d try to turn that into $1,463 a month of passive income
• How investing $100 per week can create $1,500 in annual ASX dividend income
• $10,000 in savings? Here’s how I’d try to turn that into $500 a month of passive income

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

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