Category: Stock Market

The Wesfarmers Ltd (ASX: WES) share price looks like an appealing long-term buy in my opinion.

Why does the long-term part matter? I think all investing should be done with the long-term in mind, even if the investment gains play out sooner than expected.

I think good investing takes patience. Holding shares for a long time gives us a better chance for a good business to deliver good returns. It gives the business more time to deliver profit compound growth, which may help push the share price higher.

Plus, long-term investing means that investors can receive more dividends, which can be re-invested into more shares.

With the Wesfarmers share price down 25% from August 2021, I think it’s a good time to invest for a few different reasons.

Attractive financials

With the company now priced at a materially lower level, we’re getting the same business for a much better price.

Let’s look at what the current price/earnings (P/E) ratio is. Commsec estimates currently suggest that Wesfarmers could generate $2.16 of earnings per share (EPS) in FY23. This puts the Wesfarmers share price at 23 times FY23’s estimated earnings.

I think that’s a very reasonable valuation considering the high-quality nature of the business.

The company achieved an overall return on equity (ROE) of 32.8% in the first half of FY23. That shows how much profit Wesfarmers generated from the shareholder money that is retained within the business.

Bunnings, the key profit generator of the business, saw a return on capital (ROC) of 70.7%.

These are the types of numbers that I’d want to see from my businesses. It also suggests that Wesfarmers can earn great returns on profit it re-invests within the business.

Growth platforms

I like that Wesfarmers is putting money into areas where it has a large growth opportunity with a long-term growth runway.

The hardware segment is huge, so Bunnings has plenty of growth avenues with commercial customers, tools and other areas. For example, it’s expanding Tool Kit Depot into the east coast of Australia.

Wesfarmers’ expansion into health and beauty with the acquisition of Priceline and Clear Skincare Clinics could turn into a very long-term play. The ASX share has identified spending trends and ageing demographics as two helpful tailwinds.

I think the Wesfarmers chemicals, energy and fertiliser (WesCEF) business is a very compelling segment. In the FY23 first half, WesCEF’s earnings before tax (EBT) increased by 48.6% to $324 million. There is plenty of further growth potential here as it works on getting the Mt Holland lithium mine operational.

Having multiple growth avenues gives the business more compound growth potential, in my opinion.

Commitment to shareholder returns

Wesfarmers says that a key objective is to “provide a satisfactory return to shareholders”.

I like this because I think it guides management’s capital allocations, ensures they don’t take any major risks with the business and look to provide growing cash returns in the form of dividends.

In FY23, Commsec numbers suggest that Wesfarmers is going to pay an annual dividend per share of $1.87. This could translate into a grossed-up dividend yield of 5.4%.

Over the past five years, the Wesfarmers share price has risen by 64%. Past performance is not a reliable indicator of future performance. But, I think it shows that the business is making steady long-term progress, and the market is recognising that.

The post Why I think Wesfarmers shares are a top buy right now appeared first on The Motley Fool Australia.

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More reading

• 2 of the best defensive and safe ASX 200 shares to buy now: broker
• These ASX lithium shares are a buy despite explosive supply forecast: UBS
• Invested $5,000 in Wesfarmers shares 5 years ago? Here’s how much passive income you’ve earned
• Here’s how much I’d need to invest in Wesfarmers shares to generate a $150 monthly income
• Morgans names the best ASX dividend shares to buy now

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended 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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ASX index funds are without question the most popular exchange-traded funds (ETFs) on the ASX. As it currently stands, the Vanguard Australian Shares Index ETF (ASX: VAS) is Australian investors’ first choice when it comes to ETFs. And by a country mile too.

There’s a lot to like about ASX index funds like Vanguard’s. Investors get broad diversification, and exposure to some of the country’s best companies, and ASX index ETFs tend to be generous when it comes to dividend distributions too.

But speaking of dividends, the ASX is also home to several ETFs that purely focus on maximising dividend income for their investors.

These ETFs might not be as popular as index funds like the Vanguard Australian Shares ETF. But they still command a significant chunk of the market.

The ASX’s dividend ETFs in focus

For example, the Vanguard Australian Shares High Yield ETF (ASX: VHY) has more than $4 billion in assets under management. Rather than investing in 200 or 300 shares like an index fund would, this ETF holds a far more concentrated portfolio of 73 shares (at its latest count).

It does this to focus on investing only in shares that pay out higher and more sustainable dividends compared to the broader market.

It’s not the only ASX ETF that is built this way either. The ASX also houses the iShares S&P/ASX Dividend Opportunities ETF (ASX: IHD) and the SPDR MSCI Australia Select High Dividend Yield Fund (ASX: SYI), among a few others.

But are these ETFs really a better deal for those investors seeking dividend income? Well, that’s what we’ll be looking at today.

Well, let’s start with the basics. So as of 28 February, the Vanguard Australian Shares ETF has returned 6.47% over the past 12 months, and an average of 8% per annum over the past three years. Over the past five, it has averaged 7.86% per annum.

This ETF has paid out four dividend distributions over the past 12 months, which come to an annual total of $6.36 per unit. That gives the Vanguard Australian Shares ETF a trailing yield of 7.25% on current pricing. This fund charges a management fee of 0.1% per annum.

Let’s compare that to Vanguard’s dividend-focused ETF.

Income or returns?

So Vanguard’s High Yield ETF has returned 11.11% over the 12 months to 28 February. Over the past three years, it has averaged 11.53% per annum, and 8.55% per annum over the past five. This ETF pays out quarterly dividend distributions too.

On current prices, the past 12 months’ total of $4.15 in distributions per unit gives this ETF a trailing yield of 6.26%. This fund charges a management fee of 0.25% per annum.

So, somewhat ironically, we can conclude that the Vanguard Australian Shares ETF offers a higher trailing yield right now than the Vanguard High Yield ETF. However, the High Yield ETF’s overall performance (which assumes reinvested dividends) over one, three, and five years has been superior.

This doesn’t carry over to some of the other dividend-focused ETFs on the ASX though. For example, the iShares Dividend Opportunities ETF has averaged 6.15% per annum over the past three years, and 4.6% per annum over the past five. It charges 0.23% per annum.

In the SPDR High Dividend Yield Fund’s case, the story is different again. This ETF has given its investors a return of 8.08% over the 12 months to 28 February. Over three years, it has averaged 8.7% per annum, and 7.65% over five.

So when it comes to overall performance, Vanguard’s High Yield ETF seems to take the crown over most other ASX income-focused ETFs. That includes Vanguard’s own ASX 300 index fund.

Thus, we can conclude that investors would have been better off investing in this High Yield ETF over any period in recent history. But when it comes to raw dividend payments, Vanguard’s Australian Shares ETF comes out on top. Go figure.

The post Is a dividend ETF really better than an ASX index fund for income? appeared first on The Motley Fool Australia.

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More reading

• Want high income right now? These are the ASX dividend shares I would buy
• I bought these two ASX shares last week, here’s why
• How to generate $300 of monthly income from the Vanguard Australian Shares Index ETF
• These ETFs could be top options for buy and hold investors
• Income investors could get very big dividends from these ASX ETFs

Motley Fool contributor Sebastian Bowen has positions in the 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 recommended Vanguard Australian Shares High Yield ETF. 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 banking sector has been under the pump recently amid concerns over a global banking crisis.

This has seen ASX 200 bank shares such as Commonwealth Bank of Australia (ASX: CBA) pullback meaningfully from recent highs.

Is it time to panic?

The team at Goldman Sachs has been looking at ASX 200 bank shares and remains confident that they are in good health.

The broker highlights that the big four banks have liquidity coverage ratios (LCR) well ahead of requirements and strong capital positions. It commented:

Post Silicon Valley Bank being taken into receivership by the FDIC, we have received an increasing number of queries regarding the resilience of the Australian Banks. We remain confident in the health of the banking sector in Australia given: i) a single, national regulator, with most of the Australian listed banks subject to the Liquidity Coverage Ratio (LCR), ii) balance sheet mix, which sees only a relatively small part of their balance sheets in a marked-to-market environment, iii) Australian bank regulatory capital positions are MTM for the impact of rate rises, and iv) strong capital positions, with fully-loaded CET1 ratios at close to 18%.

One risk to consider

There is one risk that the broker sees for the banks. Though, not one that could send them into receivership.

That risk is increasing competition for deposits. Goldman explained:

For some time we have been highlighting that funding costs remained the key risk to the banks in 2023; a risk that has been further catalysed by the dislocation in global funding markets over the past fortnight. We estimate the Australian banks’ term wholesale funding requirements over the next three years will be one-third higher than the average issuance over the last six years.

To the extent that we expect this to drive greater levels of deposit competition, we note that our weekly product pricing database suggests that term deposit betas have averaged c. 0.75 this cycle, versus the 1.0 we have seen in previous rate cycles, with deposit betas having been as high as 1.2. Our forecasts already assume term deposit betas revert to 1.0 over this cycle, which represents an 11bp headwind to bank NIMs. To the extent this increased to 1.2, it would be an 8bp incremental hit to our NIM forecasts.

Which ASX 200 bank share should you buy?

In light of the above, the broker continues to believe that Westpac Banking Corp (ASX: WBC) is the best ASX 200 bank share to buy right now.

So much so, it has reiterated its conviction buy rating with a $27.74 price target. Goldman concludes:

We reiterate our Buy (on CL) recommendation on WBC given: i) while NIM pressures are accelerating across the sector, WBC’s shorter-duration replicating portfolio, and current balance sheet performance, should see its NIM outperform peers, ii) despite WBC recently revising its FY24E cost target to A$8.6 bn (from A$8.0 bn), the bank’s performance on cost management remains strong in this inflationary environment with a 9% step down in underlying costs expected over the next two years, iii) the stock is trading at a 25% 12-month forward PER discount to peers (historically a 3% discount), and iv) our TP of A$27.74 offers 36% TSR.

The post Goldman ‘remains confident in the health’ of ASX 200 bank shares and names it top pick appeared first on The Motley Fool Australia.

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More reading

• Online trading in these ASX 200 bank stocks is surging. Here’s why
• Buy these ASX 200 dividend shares for income: Goldman Sachs
• 5 things to watch on the ASX 200 on Wednesday
• Which ASX 200 big four bank share could be the safest to hold?
• Want high income right now? These are the ASX dividend shares I would buy

Motley Fool contributor James Mickleboro has positions in Westpac Banking. 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 Westpac Banking. 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 S&P/ASX 200 Index (ASX: XJO) is now barely in the green for 2023, erasing what had been a sensational start to the year for ASX shares.

Accelerated by a barrage of concerning events within the banking industry in recent weeks, many investors are now on their toes. The collapse of Silicon Valley Bank and a takeover of Credit Suisse has called into question whether rapid rate rises are ‘breaking’ the system. More important is whether the fallout can be contained by the intervention of central banks around the world.

All the fear, uncertainty, and doubt are taking their toll on markets. There is a chance fear becomes the prevailing emotion if circumstances worsen, which could prompt some panic selling.

While temporarily painful, such periods of indiscriminate selling can be opportunistic for long-term shareholders.

If opportunity knocks

Two fine ASX financial shares

It appears people are shooting first and asking questions later in the financial sector, with all big four banks in the red over the past month.

If the economic situation were to deteriorate, my guess is a few ASX financial shares could be at risk of irrational selling. However, one company that I’d happily scoop up in a depressed market is Macquarie Group Ltd (ASX: MQG).

The investment bank is diversified across retail banking, asset management, commodity markets, and capital advisory. In my opinion, this makes Macquarie a much more attractive holding than the big four, as its segments smooth out the cyclicality of each individual unit.

Another ASX share I’d jump at amid any panic selling is Netwealth Group Ltd (ASX: NWL). The current valuation is hardly ‘cheap’, though that’s my only real qualm with the company.

Considering it is taking the wealth management platform market by storm, Netwealth is an investment I would comfortably make in a falling market if the fundamentals remain unchanged.

Two quality names in health

The healthcare sector is one I particularly like due to its often defensive nature. Products and services in this industry tend to lean more toward ‘needs’ than ‘wants’ — proving resilient through all parts of the economic cycle.

Two ASX shares I’m eager to buy at lower prices are Pro Medicus Limited (ASX: PME) and Nib Holdings Limited (ASX: NHF). Both companies are intertwined with healthcare in different ways — Pro Medicus from a software angle and Nib Holdings as an insurer.

Additionally, these two businesses have a history of generating solid free cash flows. Hence, I would sleep like a baby holding these companies, even through a tumultuous period of time.

An adventurous ASX retail share

Last but not least is a retailer with an iconic and growing brand — KMD Brands Ltd (ASX: KMD).

If you’re not familiar with KMD Brands, here’s the long and the short of it. The company comprises outdoor clothing brand Kathmandu, surfing and sportswear retailer Rip Curl, and hiking boots brand Oboz.

Although the outdoor clothing market is highly competitive with the likes of Patagonia and The North Face, Kathmandu goes toe-to-toe with these giants locally. As demonstrated by the search volume for jackets locally, Kathmandu is a strong contender.

The ASX retail share is now expanding to Canada and Europe, presenting an opportunity for further growth over the coming years.

Today, KMD Brands revealed it has swung back into profitability in its FY23 first-half results. An increase of 8% in sales across the United States for its Rip Curl brand is evidence of execution.

The post 5 ASX shares I’d buy if there is panic selling appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Forget term deposits and buy these ASX 200 dividend shares: analysts
• Why I’d be happy to invest in these ASX 200 bank shares today
• Turbulence insurance: Fund names 2 ASX 200 shares for long-term riches
• Buy Macquarie and this high yield ASX dividend share: brokers

Motley Fool contributor Mitchell Lawler has positions in Kmd Brands, Macquarie Group, and Pro Medicus. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Netwealth Group and Pro Medicus. The Motley Fool Australia has positions in and has recommended Macquarie Group, Netwealth Group, and Pro Medicus. The Motley Fool Australia has recommended NIB Holdings. 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 Pilbara Minerals Ltd (ASX: PLS) share price is storming ahead today.

Pilbara shares are rising nearly 3.27% to $3.635. However, in earlier trade, Pilbara shares were up 5%. For perspective, the S&P/ASX 200 Index (ASX: XJO) is lifting 0.92% today.

Let’s take a look at why Pilbara Minerals shares are on the rise today.

What’s going on?

Pilbara is not the only ASX lithium share in the green today. Mineral Resources Ltd (ASX: MIN) shares are up 3.27%, while Allkem Ltd (ASX: AKE) shares are rising 2.82%.

ASX lithium shares including Pilbara appear to be following in the footsteps of multiple US lithium shares overnight.

Lithium giant Sociedad Quimica y Minera de Chile (NYSE: SQM) rose 5.7% on the New York Stock Exchange overnight, Albemarle Corporation (NYSE: ALB) shares jumped 4.5% and Livent Corp (NYSE: LTHM) lifted 2.25%.

This followed a visit from high-profile California Governor Gavin Newsom touting lithium as “white gold”. He said in quotes cited by CNBC:

The entire industry has moved in this space. We want to dominate. We see this as the greatest economic opportunity, and we want to dominate in this space, and we’re doing that

Meanwhile, data from Asian Metal, cited by Bloomberg overnight, shows the lithium price surged by more than 1,300% in two years.

On the flip side, the data also showed the lithium price in China has halved in four months.

Higher global supply of lithium and China’s EV sector moderating could be reasons for this fall, the publication noted.

Morgans has recently recommended investors buy the Pilbara Minerals share price and placed a $4.70 price target on its shares. As my Foolish colleague James reported, Morgans believes demand from China could lift from March.

However, as my Foolish colleague Sebastian reported yesterday, UBS has recently placed a neutral rating on Pilbara Minerals shares. UBS believes new lithium supply could double between 2022 and 2025, potentially weighing on the lithium price.

Pilbara Minerals share price snapshot

The Pilbara Minerals share price has risen 21% in the last year.

Pilbara has a market capitalisation of about $10.9 billion based on the current share price

The post Why is the Pilbara Minerals share price having such a top run today? appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• These ASX lithium shares are a buy despite explosive supply forecast: UBS
• Buy Pilbara Minerals and this high yield ASX dividend share: analysts
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Buy these ASX growth shares this week: experts

Motley Fool contributor Monica O’Shea 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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The top end of town might not be where most market watchers turn to hunt down whopping returns, but some brokers appears hopeful the share price of $139 billion giant CSL Limited (ASX: CSL) could break the mould.

Indeed, they’ve tipped the S&P/ASX 200 Index (ASX: XJO) healthcare icon to soar as much as 22% from its current levels. That’s on top of the 8.5% gain it’s posted over the last 12 months.

Right now, the CSL share price is trading at $286.40. That’s 0.49% higher than its previous close.

For comparison, the ASX 200 has lifted 0.88% today and dropped 4% since this time last year.

So, what might the future hold for the CSL share price? Let’s take a look at what these bullish brokers are forecasting.

Is the CSL share price a buy right now?

There’s a lot to like about CSL shares, according to these experts.

The biotech icon impressed with the release of its first-half earnings last month. It posted a 19% jump in revenue, a 10% improvement in post-tax profit prior to amortisation on a constant currency basis, and lifted its dividend to US$1.07 per share.

It also revealed record plasma collections – a factor that could boost its revenue further in the future, Citi noted.

The broker retained its buy rating and forecast the stock to gain a notable 22% to $350 on the back of its results, my Fool colleague James reported.

Meanwhile, Morgans tips the company’s earnings to continue growing in the coming years as its interest expenses fall and sales at its Behring and Vifor businesses rise.

The broker has a $337.92 price target – a potential 18% gain – and an add rating on CSL shares.

Though, not all are convinced the ASX 200 healthcare monolith represents a good buy right now.

Goldman Sachs has a neutral rating and a $314 price target on the share. Though, that still represents a 9% upside.

The post Does the CSL share price really offer 22% upside right now? appeared first on The Motley Fool Australia.

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More reading

• How I’d aim to retire rich enough to live on passive income from my ASX dividend shares
• Analysts say these ultra high quality blue chip ASX 200 shares are buys
• Why is the CSL share price smashing the ASX 200 on Thursday?
• Here’s how much I’d need to invest in CSL shares to generate a $300 monthly income
• 5 ASX 200 shares that inflation can’t touch: expert

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper 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 CSL and Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Endeavour Group Ltd (ASX: EDV) share price is rising with the market on Wednesday.

In morning trade, the drinks company’s shares are up over 1% to $6.67.

Where next for the Endeavour share price?

It could be onwards and upwards from here according to a couple of leading brokers.

Goldman Sachs, for example, is bullish on the company and has recently put a buy rating and $7.80 price target on its shares.

Based on the current Endeavour share price, this implies potential upside of 17% for investors from current levels. In addition, Goldman expects dividend yields of approximately 3.3% in FY 2023 and 3.6% in FY 2024.

The broker is positive largely due to Endeavour’s leadership position in a defensive category. It commented:

We remain positive on EDV given its clear leadership in a resilient category with proven strong sales execution and high consumer loyalty. We believe that the company’s investments in digitalization enabling targeted pricing and promotions as well as increasing automation of cost items will provide the operational agility required in a fast changing consumer environment. Additionally, our sensitivity analysis suggests that the risk of NSW gaming regulatory risk is largely factored in and hence more clarity around execution could provide upside catalysts.

Who else is bullish?

Another broker that is bullish is Morgans. In fact, its analysts named the company on the broker’s best ideas list again this month with an add rating and $7.80 price target.

Morgans believes recent weakness in the Endeavour share price has created a buying opportunity for investors. It commented:

We believe the share price weakness over the past six months on the back of an uncertain regulatory environment (eg, potential introduction of cashless gaming cards in NSW) has shifted the balance of risks to the upside with EDV’s underlying business remaining strong. The company possesses a broad network of retail liquor stores/hotel venues, well-known brands (eg, Dan Murphy’s and BWS) and dominant market positions.

The post Why brokers tip double-digit gains from the Endeavour share price appeared first on The Motley Fool Australia.

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More reading

• 2 of the best defensive and safe ASX 200 shares to buy now: broker
• Morgans names 3 of the best ASX shares to buy in March

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

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If you’re looking to cash in on the New Hope Corporation Limited (ASX: NHC) dividend, read on.

The S&P/ASX 200 Index (ASX: XJO) coal stock reported its half-year results yesterday.

And the board declared both a fully franked ordinary interim dividend as well as a special cash dividend, also fully franked at 30%.

Here’s the skinny.

What’s happening with the New Hope dividend?

On the back of surging coal prices, the miner reported some eye-popping results for the six months ending 31 January, enabling a generous dividend payout.

Highlights of those results included net profit after tax (NPAT) of $669 million. That was up a stellar 103% from the prior corresponding half-year period.

Net cash from operating activities surged even more, up 117% year on year to $984 million.

The very strong half-year enabled the New Hope board to declare a 30 cents per share ordinary dividend and a 10 cents per share special dividend.

At the current New Hope share price of $5.40, that works out to a forward yield (as this has yet to be paid) of 7.4%.

The coal miner also paid a final, fully franked dividend of 56 cents per share on 20 December.

Taken together with the 40 cents per share total interim dividend and that works out to 96 cents per share. Meaning New Hope shares offer a fully franked yield (partly trailing, partly forward) of 17.8%.

If you’d like to receive the 40 cents per share interim payout, be aware that New Hope trades ex-dividend on 17 April.

Eligible investors should receive that payout on 3 May.

New Hope share price snapshot

As you can see in the chart below, the New Hope share price, up 2% in morning trade today, has gained 71% over the past 12 months.

And remember, that’s just the share value appreciation. It doesn’t include the 96 cents of New Hope dividend payouts. Add that in (even without the franking tax benefits) and the ASX 200 coal miner’s full-year shareholder returns top 100%.

The post Want to land the outsized New Hope dividend? Here’s what you need to know appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today
• Why Domino’s, Incitec Pivot, Mincor, and New Hope shares are racing higher
• New Hope share price rockets 6% as half-year profits double
• Guess which ASX 200 coal share just posted a 100% profit jump

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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The Allkem Ltd (ASX: AKE) share price is having a strong session.

In morning trade, the lithium miner’s shares are up over 3% to $10.62.

However, despite this, the Allkem share price remains down materially from its record high of $16.75.

Can the Allkem share price keep rising?

The good news is that despite being bearish on lithium prices and forecasting them to pullback significantly next year, Goldman Sachs is very bullish on Allkem’s shares.

This is due to its belief that the company’s production growth and downstream optionality will keep its earnings strong and offset the pressure caused by lower lithium prices.

According to a note from Monday, its analysts have retained their buy rating and $15.40 price target on its shares. This implies potential upside of 45% for investors from current levels over the next 12 months.

Commenting on its production growth, the broker said:

Allkem has one of the best production outlooks in our lithium coverage, with broad-based growth optionality, second only to Mineral Resources on an LCE basis when including downstream hydroxide production on an equity basis. This drives our forecast for the company’s equity LCE production growth of >4x by FY27E, supporting earnings rebounding to near current record levels despite the declining lithium price environment.

In addition, the broker highlights that the market is undervaluing its assets. This is despite its competitive brine cost curve position. It adds:

Allkem has the largest lithium metal contained resource base amongst our coverage when factoring in South American brine assets and second largest reserve (excluding Olaroz due to ongoing reserve re-modelling). However, AKE’s aggregate resource is trading at a significant discount to peers, despite a competitive brine cost curve position.

All in all, Goldman appears to see recent weakness in the Allkem share price as a great buying opportunity for investors.

The post Allkem share price can jump 45% even if lithium prices fall: Goldman Sachs appeared first on The Motley Fool Australia.

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More reading

• These ASX lithium shares are a buy despite explosive supply forecast: UBS
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• Why are ASX 200 lithium shares falling so hard today?
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• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has positions in Allkem. 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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The current ANZ Group Holdings Ltd (ASX: ANZ) share price is low enough that it could offer an exceptionally high dividend yield.

The ASX dividend share has seen a 12% fall since 9 February 2023.

When a share price falls 10%, it boosts the dividend yield by 10%. For example, if the dividend yield used to be 9%, and the share price falls 10%, then the dividend yield becomes 9.9%.

First, let’s look at how much passive income ANZ shares are expected to pay out in FY23.

Dividend projection

The dividend forecast on Commsec suggests that ANZ shares could pay an annual dividend per share of $1.60 in the 2023 financial year.

At the current ANZ share price, this projected dividend could equate to a grossed-up dividend yield of 10% in FY23.

In fact, Commsec numbers are suggesting that the dividend could increase further in FY24 to $1.64 per share and rise again in FY25 to $1.65 per share.

Those predictions mean that the ANZ grossed-up dividend yield could be 10.3% in FY24 and 10.4% in FY25.

So, a double-digit yield is projected for this financial year and the following two financial years.

Is this a good time to buy ANZ shares?

For investors that want to buy ANZ shares, then this is one of the better times of the last 52 weeks to consider buying shares. It has been a lot higher than today over the last year.

There is a lot of volatility going on in the global share market, particularly with banks.

I’m not an expert on the banking problems in the northern hemisphere, but I think the recent examples of Silicon Valley Bank and Credit Suisse have shown how quickly things can go wrong.

I don’t believe ANZ, or any of the S&P/ASX 200 Index (ASX: XJO) bank shares, are as vulnerable because Australian banks are well-capitalised. They were strong during the COVID-19 period and that seems to be continuing.

The ASX bank share revealed that at 31 December 2022, its common equity tier 1 (CET1) ratio was 12.2%.

It also revealed that its credit quality was good. Looking at the loans that were at least 90 days past due, as a percentage of the overall portfolio, it “continued to reduce” – there was a drop in arrears of the Australian housing portfolio, down 3 basis points to 55 basis points in the first quarter of FY23.

ANZ also reported a $7 billion increase in Australian net loans and advances over the three months to 31 December 2022. It also saw that all divisions experienced an increase in customer deposits, including increased flows into term deposits.

The ASX bank share is also benefiting from higher interest rates because its boosting ANZ’s lending margins.

However, this may be the best it gets in terms of operating conditions. I think arrears are going to increase as a result of the much higher interest rates. There may also be the potential for lending competition to lower the sector’s lending margins again.

My conclusion on the ANZ share price

I don’t think it’s going to get much better for ANZ’s earnings from here. I’m not sure there’s going to be much benefit from the Suncorp Group Ltd (ASX: SUN) banking acquisition in per-share terms. I think it could be a distraction for management.

ANZ shares could offer very large dividend income because it’s only valued at 9 times FY23’s estimated earnings, according to Commsecs. But, I wouldn’t expect much profit growth in FY24 or FY25 compared to FY23. It looks cheap, and it may benefit from a valuation boost from this low level. But I think there are other ASX dividend shares that could achieve stronger long-term growth.

The post ANZ shares could offer a dividend yield of 10% in FY23, is it a buy? appeared first on The Motley Fool Australia.

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More reading

• Which ASX 200 big four bank share could be the safest to hold?
• ASX 200 bank shares shrug off global banking turmoil to leap higher
• Forget term deposits and buy these ASX 200 dividend shares: analysts
• Where I would go hunting for defensive ASX 200 shares with upside
• 2 ASX 200 bank shares to buy after the selloff: experts

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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