Category: Stock Market

The CSL Limited (ASX: CSL) share price is holding above the $300 mark today, up 0.77% to $301.33 at lunchtime. Meantime the S&P/ASX 200 Index (ASX: XJO) is also in the green by 0.19%.

It’s been an exciting couple of days for the ASX healthcare share. CSL’s unique haemophilia B treatment, called Hemgenix, has just received approval from the United States Food and Drug Administration.

CSL CEO Paul Perreault describes the decision as a “historic approval”. This is because Hemgenix is the first and only one-time gene therapy to become available for adults with haemophilia B.

A commercial launch is expected in FY24.

What does this mean for the CSL share price?

According to The Australian, Wilsons analyst Shane Storey says Hemgenix is a “powerful driver of sector dominance” for CSL.

Storey said:

Hemgenix will open up the haemophilia B market to a younger cohort of patients that exhibit suboptimal adherence to prophylactic therapy due to the onerous nature of delivery.

The potential to replace ≥10 years of regular prophylactic management for these patients with a single shot of Hemgenix is a powerful driver of sector dominance, which brings with it margin expansion and sales leverage opportunities within the CSL Behring recombinant haemophilia (rHaem) portfolio.

CSL is already a market leader in haemophilia treatments. It has a drug called Idelvion, which extends the half-life of factor IX infusions, meaning patients need less frequent treatment (every 14 days).

Wilsons is tipping a 12-month share price target of $327 for CSL shares and has an overweight rating.

As my colleague James reported today, Citi has reaffirmed its buy rating and share price target of $340.

Macquarie is retaining its outperform rating but has lifted its price target by 4.1% to $343.

How does Hemgenix work?

Haemophilia is a blood disorder caused by a genetic defect that stops the body from creating its own coagulating factors.

Haemophilia A means low factor VIII and haemophilia B means low factor IX.

The factors are proteins that help the blood coagulate. Without them, the blood gets too thin and this can lead to bleeding.

One of the most common treatments to date is regular factor infusions. Even then, patients can still experience spontaneous bleeds, leading to problems like joint damage and strong pain.

Hemgenix can stop spontaneous bleeds in haemophilia B patients by prompting the body to produce its own factor IX.

The Australian quotes Kim Phelan, chief operating officer of The Coalition for Haemophilia B, who said gene therapy offered “the possibility of freedom from the need for regular, ongoing infusions”.

The European Medicines Agency is also reviewing Hemgenix for approval.

CSL shares snapshot

CSL shares crossed the $300 mark this week for only the third time in 2022.

Prior to COVID-19, the CSL share price was trading up around $340 before the market crash.

Since then, it has risen above $300 several times but hasn’t been able to stay there.

The post Why this could be a ‘powerful driver of sector dominance’ for CSL shares: Wilsons appeared first on The Motley Fool Australia.

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More reading

• Here’s what Citi is saying about the CSL share price
• Why did the CSL share price just crack $300 for only the third time in 2022?
• 3 dividend-paying ASX growth shares I would buy to retire rich
• 4 ASX 200 shares to buy in an unmissable sector: expert
• Will ASX 200 shares bottom before the year is out? Here’s Macquarie’s ‘best guess’

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen has positions in CSL Ltd. and Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. The Motley Fool Australia has recommended Macquarie Group Limited. 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 Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has probably been a source of disappointment for ASX bank share investors this year. To be fair, 2022 hasn’t been a great year for most ASX shares. The S&P/ASX 200 Index (ASX: XJO) remains down by around 4.3% year to date.

But ANZ shares have shone out as a particularly poor performer. This ASX 200 bank has lost more than 10.5% of its value over 2022 thus far.

Adding salt to the wound, ANZ is also the only member of the big four to lose to the ASX 200 over the year so far. In fact, National Australia Bank Ltd (ASX: NAB), Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) shares are all in the green for the year. Westpac is actually up more than 10%.

So ANZ shares have really let the ASX bank team down.

But what about over the past 12 months? How much would a $10,000 investment in ANZ shares a year ago be worth today? Let’s find out.

What would a $10,000 buy of ANZ shares last year be worth today?

Well, 12 months ago, on 25 November 2021, ANZ shares closed up at a share price of $27.05 – a good 9% or so from where the bank is trading at today.

If an investor bought $10,000 worth of ANZ shares at that price, they would end up with 369 shares, with a little change left over.

Today, those 369 ANZ shares would be worth a total of $9,158.58, down almost $900.

Now, ANZ has paid out two dividends over the past 12 months, so we can’t discount those. These two dividends add up to a total of $1.46 per share for the year. So we can add $538.74 in dividend income for our 369 shares.

But even adding that to the capital our investor would have today, we come up with a total of $9,697.32. So still underwater.

Thus, we can conclude that ANZ shares have been a fairly poor investment to have held over the past 12 months. Especially so considering the fate of the other three ASX 200 major bank shares.

The post If I’d invested $10,000 in ANZ shares a year ago, here’s how much I’d have now appeared first on The Motley Fool Australia.

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More reading

• Use the ASX 200 market correction to retire early. Here’s how
• 5 ASX 200 shares Macquarie just recommended its clients buy
• Macquarie is cooling off on its outlook for BHP shares. Should you?
• Looking to buy ANZ shares? Here’s why the ASX 200 bank is hitting headlines
• Will ASX 200 shares bottom before the year is out? Here’s Macquarie’s ‘best guess’

Motley Fool contributor Sebastian Bowen has positions in National Australia Bank Limited. 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 Corporation. 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 EML Payments Ltd (ASX: EML) share price is ending the week on a high after the company outlined “a new chapter” at today’s annual general meeting (AGM).   

It comes after an 18-month period of upset brought about by regulatory issues, misaligned organisational structure, and a competitive environment.

Right now, the EML share price is up 12.26%, trading at 59.5 cents. That’s more than 80% lower than it was 18 months ago.

For comparison, the All Ordinaries Index (ASX: XAO) is up 0.22% at the time of writing.

Let’s take a closer look at the news driving the EML Payments share price today.

What’s boosting the EML share price today?

The EML share price is roaring upward today as the company’s leaders address recent challenges. Speaking at its AGM, chair Peter Martin said:

As far as EML is concerned it’s been one of the toughest periods in our history.

It is clear that uncertainty about EML’s future prospects has led to a loss of confidence and contributed to the fall in market value. I’m referring to the continuing regulatory issues in our Irish subsidiary, PFS Card Services, and our UK subsidiary, Prepaid Financial Services, and the related costs.

Despite our genuine efforts, there’s been a lack of clarity about what this means to EML and how we are going about fixing the problems.

How indeed? Well, that was also outlined today. EML has undergone a strategic review, with CEO and managing director Emma Shand commenting:

The review identified numerous shortcomings which the company will address as a priority in a bid to reshape it a competitive valuable proposition for stakeholders.

“It won’t happen overnight, but we can do it,” Shand said, continuing:

Of EML’s seven acquisitions between FY15 and FY21, six were prepaid card businesses. However … the acquired businesses have largely been left to operate in silos, missing an opportunity to integrate, extract synergies, and align culturally.

Finally, while EML’s point solutions are well appreciated by our loyal client base, these highly bespoke point solutions, across 10+ industry sectors, are not easily scaled.

What’s next?

On the back of the findings, EML will begin a transformation. It will focus on its European and UK remediation efforts, streamlining its customer and operational effectiveness, and repositioning the business for growth. Speaking on the latter, Shand said:

There is a significant and exciting opportunity to evolve our business over time; from being largely in prepaid cards, to an embedded finance leader within the next five years.

The company will focus its efforts on embedded payments solutions, human capital management, retail, and government. It says these four pillars represent 70% of global total addressable payments revenue.

It expects to have a controllable cost out of the business of between 10% and 15% by FY24, with full impact in FY25.

Trading update

EML also provided a trading update this morning.

Its revenue fell 5% over the first quarter on that of the prior comparable period (pcp), coming in at $49 million. Its gross profit also slumped 4% to $32.5 million after cycling $5.3 million of one-off revenues in the pcp.

The company’s overheads lifted 29% on those of the pcp but fell quarter-on-quarter. Its gifting segment has started off the holiday period strongly.

It also saw $2.5 million of net interest income last quarter, compared to $1.4 million over the whole of FY22.

Finally, it recognised $14 million of casts relating to regulatory matters, one-off restructuring, executive retentions, and European fraud costs.

Is new FY23 guidance also lifting the EML share price?

The company’s new guidance may be another driver lifting the EML share price today.

It expects its net interest margin to increase to between $17 million and $21 million this fiscal year. Rising interest rates are also expected to add $16 million to $20 million to its full-year earnings before interest, tax, depreciation, and amortisation (EBITDA).

EML’s revenue is tipped to come in at between $240 million and $260 million. Meanwhile, its gross profit margin is expected to be around 67%.

The company’s overheads guidance is between $135 million and $145 million. Finally, its underlying EBITDA is expected to come in at $26 million to $34 million.

The post EML share price jumps 12% in ‘new chapter’ after troubled past appeared first on The Motley Fool Australia.

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• 5 big ASX announcements making news this week
• Leading fund manager names the 3 ASX stocks that drove its returns higher in October
• Why has the EML share price rebounded 30% in 2 days?
• Here are 3 ASX All Ords shares that are off to the races today
• Why Brainchip, Bubs, EML, and Fortescue shares are falling today

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 EML Payments. The Motley Fool Australia has positions in and has recommended EML Payments. 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) lithium shares were all in the green following the first three trading days of the week.

As at Wednesday’s closing bell, here’s how the big lithium stocks had fared for the week:

• Core Lithium Ltd (ASX: CXO) shares were up 0.7%
• Allkem Ltd (ASX: AKE) shares were up 1.5%
• Pilbara Minerals Ltd (ASX: PLS) shares were up 1.4%
• IGO Ltd (ASX: IGO) shares were up 1.5%

Then Thursday rolled in. And those gains evaporated.

Why have ASX 200 lithium shares been falling for two days?

All of the big lithium stocks closed in the red yesterday.

And today those losses are mounting.

Here’s how ASX 200 lithium shares are currently tracking since the opening bell on Monday:

• Core Lithium Ltd (ASX: CXO) shares are down 5.8%
• Allkem Ltd (ASX: AKE) shares have lost 6.7%
• Pilbara Minerals Ltd (ASX: PLS) shares are down 8.0%
• IGO Ltd (ASX: IGO) shares have lost 4.7%

The retrace looks to be linked to a massive spike in COVID infections in China, with infections in the world’s most populous nation reaching all-time highs.

China, also the world’s number two economy is a global leader in EV production. Hence the nation has a voracious appetite for lithium, a critical element in most EV and grid storage batteries.

While Chinese authorities have yet to issue new sweeping lockdown orders, increasing restrictions this week are dampening hopes that China’s economy will come roaring back anytime soon.

That, in turn, looks to be working into investor expectations of near-term lithium demand, and throwing up headwinds for ASX 200 lithium shares.

But don’t feel too bad for shareholders just yet.

How have the big lithium stocks performed over the year?

Over the past 12 months, all ASX 200 lithium shares have smashed the benchmark returns.

Since this time last year, the ASX 200 is down 2%.

Over that same time, Allkem shares are up 38%; IGO shares have gained 44%; Pilbara shares are up 73%; and the Core Lithium share price has surged 143%.

The post Here’s why ASX 200 lithium shares are ending the week with a fizzle appeared first on The Motley Fool Australia.

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• If I’d bought $5,000 of Core Lithium shares at the start of this financial year, guess how much I’d have now?
• 3 ASX 200 shares analysts are tipping for stellar growth
• Three comforting lessons for investors whose portfolio has been smashed versus the surprisingly good return of the ASX 200
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• What $10,000 in ASX lithium shares a year ago would be worth today

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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It’s turning out to be a pretty top week for the S&P/ASX 200 Index (ASX: XJO) and ASX shares. So far this Friday, the ASX 200 has gained another 0.1%, putting the index at around 7,250 points. That’s at a six-month high. The ASX 200 has added value every day this week, bar Monday, and is up 1.3% since last Friday. But let’s talk about the Qantas Airways Limited (ASX: QAN) share price.

Although the ASX 200 is having a pleasing week, the Qantas share price is flying far higher. Qantas shares ended last week at $5.88. But yesterday, the airline hit a new 52-week high of $6.36 a share.

That was also a new post-COVID high for the airline, which, until this month, hadn’t seen a share price with a ‘6’ in front of it since early 2020.

Although Qantas shares have fallen today, down 0.73% so far at $6.14, the airline is still up a healthy 4.4% over just this week.

So why has the Qantas share price been having such a pleasant week?

Well, it probably has quite a lot to do with the update Qantas gave to investors on Wednesday. This update saw Qantas raise its guidance forecast for the first half of FY2023.

It was only last month that Qantas declared that it expects to make an underlying profit before tax of between $1.2 billion and $1.3 billion for the half.

But on Wednesday, just a month later, Qantas told investors that they can add another $150 million to those figures, with the new guidance range set for $1.35-$1.45 billion. This comes off the back of the insatiable demand for travel.

Qantas also declared that it expects net debt to fall to between $2.3 billion and $2.5 billion by the end of December. That represents an improvement of $900 million.

So understandably, investors were very impressed with this update. Qantas shares rose 6% on the day it was released, and remain elevated for the week, despite today’s mild falls.

The post Why is the Qantas share price having such a top run this week? appeared first on The Motley Fool Australia.

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More reading

• ASX 200 company banned from selling its products. Here’s why
• 5 of the craziest things making news on the ASX this week
• The share market is full of stupidity: here’s how you take advantage
• 5 things to watch on the ASX 200 on Friday
• Why has the Lake Resources share price tumbled 11% in 10 days?

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 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 Objective Corporation Limited (ASX: OCL) share price is ending the week in a disappointing fashion.

At the time of writing, the technology solutions company’s shares are down 15% to $12.74.

This means the Objective Corp share price is trading within sight of its 52-week low of $12.50.

Why is the Objective Corp share price being sold off?

Investors have been selling down the Objective Corp share price today in response to the release of a disappointing trading update after the market close on Thursday.

As management previously advised, Objective Corp has followed the lead of TechnologyOne Ltd (ASX: TNE) and switched its focus to a software-as-a-service (SaaS) model. This has seen the company stop offering purchase perpetual right to use (PRTU) licensing options to new customers.

Management expects this to boost its annual recurring revenue (ARR) in the coming years. However, this has had a negative impact on its sales revenue in FY 2023 and management is now guiding to softer than normal revenue growth.

In addition, the company notes that salary growth in the technology industry has been “very robust” over the past 18 months and it has spent heavily on travel costs to re-engage with customers.

In light of the above, FY 2023 revenue growth is going to be “single-digit rather than the double-digit figures that shareholders have come to expect” and its operating margin will decrease.

While this is disappointing, management remains very positive and highlights its very strong balance sheet (cash of $60 million and no debt), its highly cash generative business, and positive long term outlook. In respect to the latter, the company concluded:

The customer demand and fundamentals of our business remain strong. This will put us in a strong position to deliver outstanding headline numbers again from FY 2024.

The post Why is this ASX All Ords tech share crashing 15%? appeared first on The Motley Fool Australia.

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• 3 ASX tech shares that risk going up in flames, and 1 sturdy stock I’d buy instead
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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 Objective Corporation Limited. The Motley Fool Australia has recommended TechnologyOne Limited. 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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Retail investors have been prohibited from putting money into two funds that deal in ASX shares.

Corporate watchdog Australian Securities Investments Commission announced Friday that it has issued interim orders to stop Perpetual Limited (ASX: PPT) from offering or distributing two funds:

• Perpetual Pure Microcap Fund
• Perpetual Geared Australian Share Fund

The order prohibits the S&P/ASX 200 Index (ASX: XJO) company from issuing interest in the funds, providing product disclosure statements or recommending retail investors invest in those products.

So why did ASIC take such action?

Risks of funds could be inappropriate

ASIC stated it was compelled to act to “protect retail investors from potentially investing in funds that may not be suitable for their financial objectives, situation or needs”.

Perpetual has been accused of not sufficiently considering whether the risks and features of those funds are appropriate for the target markets.

The Perpetual Pure Microcap Fund exclusively invests in microcap ASX shares, which can be more volatile than larger cap stocks.

“Microcap equities carry a significant level of risk due to high price volatility, shallower market depth (with few traders and turnover in share transactions) and the limited operational history of microcap companies,” stated ASIC.

In contrast, the watchdog was worried about how the Perpetual Geared Australian Share Fund can borrow up to 60% of the fund’s total assets as leverage for ASX shares.

“The fund’s investment strategy comes with elevated risks, including the potential for a high level of price volatility and the use of leverage, which increases the chances of investors incurring large losses.”

Perpetual co-operating with ASIC

Perpetual confirmed to The Motley Fool that the company is “engaging with ASIC to respond to the interim stop order”.

“Perpetual takes its regulatory obligations seriously and has taken immediate steps to comply with this interim stop order,” a Perpetual spokesperson said.

“Perpetual has ceased the sale and distribution of these products effective 24 November 2022 until further notice.”

The order itself initially lasts 21 days, although this is subject to change.

The Perpetual share price was up 0.63% at the time of writing. The stock has lost 30.8% year to date, and currently pays out an 8.15% dividend yield.

The ASX 200 business has a market capitalisation of $1.47 billion.

The post ASX 200 company banned from selling its products. Here’s why appeared first on The Motley Fool Australia.

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• The share market is full of stupidity: here’s how you take advantage
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• Why has the Lake Resources share price tumbled 11% in 10 days?
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• Here are the 3 most heavily traded ASX 200 shares on Thursday

Motley Fool contributor Tony Yoo 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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S&P/ASX 200 Index (ASX: XJO) coal shares are ending a strong week with a strong performance on Friday.

In early trade the Whitehaven Coal Ltd (ASX: WHC) share price is up 0.8%; New Hope Corp Limited (ASX: NHC) shares are up 3%; and the Yancoal Australia Ltd (ASX: YAL) share price is up 1.4%.

The ASX 200 is in the green as well, up a slender 0.1%.

With today’s intraday gains factored in, investors who bought shares in any of the big coal stocks on Monday morning will be sitting on some outsized gains for the week.

Since the opening bell on Monday, New Hope shares have gained 6.1% while both Yancoal and Whitehaven shares are up 7.9%.

So, what’s been happening with the ASX 200 coal shares this week?

What’s been drawing investor interest this week?

Prices for thermal coal (primarily used to generate electricity) gained over the week, up roughly 4% from last week.

The coal price continued to trade near historic highs, at just under US$350 per tonne. That’s more than double the price that same tonne was fetching 12 months ago. And that’s continuing to see the ASX 200 coal shares rake in the cash.

New Hope’s strong performance over the week came despite the miner closing 8.8% lower yesterday. That followed on the company’s release of its quarterly update.

New Hope reported a 167% increase in underlying earnings before interest, taxes, depreciation and amortisation (EBITDA). That’s the raking in the cash part.

However, investors appear to have sold off the stock after the miner reported production slipped slightly as it struggles with wet weather and industry-wide labour shortages.

ASX 200 investor interest in the big coal shares also likely remains strong in light of their smashing trailing dividend yields.

At current share prices, New Hope trades at an 8.9%, fully franked yield; Whitehaven at a yield of 5.7%, fully franked; and Yancoal at a whopping trailing yield of 21.1%, unfranked.

How have the ASX 200 coal shares performed in 2022?

We know investors in ASX 200 coal shares this week were holding some outperforming stocks.

As for the calendar year, you’re unlikely to hear any complaints.

Since the opening bell on 4 January, the New Hope share price is up 138%; Yancoal shares have gained 88%; and the Whitehaven share price has soared 227%.

The post What’s happening with ASX 200 coal shares this week? appeared first on The Motley Fool Australia.

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More reading

• 5 of the craziest things making news on the ASX this week
• 8%+ dividend yields! 3 ASX 200 shares I’d snap up to beat inflation
• Three comforting lessons for investors whose portfolio has been smashed versus the surprisingly good return of the ASX 200
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Why is the New Hope share price tumbling 8% on Thursday?

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 A2 Milk Company Ltd (ASX: A2M) share price is having another positive day.

In morning trade, the infant formula company’s shares are up almost 2% to $6.20.

This latest gain means the A2 Milk share price is now up 40% over the last six months.

Can the A2 Milk share price keep rising?

While there is unlikely to be another 40% gain over the next six months, one leading broker sees scope for the A2 Milk share price to continue its ascent.

According to a recent note out of Bell Potter, its analysts have retained their buy rating with a $6.80 price target.

This implies potential upside of approximately 10% for investors from current levels.

Why is the broker bullish?

Bell Potter is positive on the company due to its strategy that aims to delivers sales of NZ$2 billion and EBITDA margins in the teens by FY 2026.

It highlights that this would implies very strong earnings per share growth over the coming years, which would more than justify the current multiples its shares trade on.

The broker also sees a major opportunity in the United States for its infant formula following the recent receipt of FDA approval. It explained:

A2M has stated that through its manufacturing partner, SM1, it has access to ~9m tins of IMF capacity. However, A2M’s initial expectations are for the supply of up to ~1m tins in 2H23e. This does not appear an egregious forecast, given we estimate BUB sold ~0.45m tins into the US over 4Q22-1Q23 with 6,500 distribution points and A2M has 27,400 existing distribution points for its fresh portfolio.

Our Buy rating is unchanged. If A2M can execute on its strategy to achieve ~NZ$2Bn in FY26e revenues and EBITDA margins in the teens, then it would imply compound double digit EPS growth through to FY26e. We view the initial entry into the US IMF category as incrementally positive, though note the scale of A2M’s existing US fresh distribution footprint implies this could be a more meaningful contributor should sales velocities approach levels seen in other markets.

The post Up 40% in six months, can the A2 Milk share price keep rising? 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 A2 Milk. 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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As an ASX big four bank, Commonwealth Bank of Australia (ASX: CBA) shares have always been a prominent choice for ASX dividend income investors.

CBA shares have paid out hefty dividends for decades. But does that mean it is a good choice for income investors today?

Well, let’s start with the dividends CBA is currently paying out. So Commonwealth Bank shares have doled out two dividends this year, as is the norm.

The first was the March interim dividend of $1.75 per share, fully franked.

The second was the final dividend from September, which was worth $2.10 per share, also fully franked.

That’s a total of $3.85 in dividend income per share for 2022. On today’s CBA share price of $108.10 (at the time of writing), this gives CBA shares a trailing dividend yield of 3.56%.

Are CBA shares a buy for dividend income?

But let’s talk about what might happen going forward from here. After all, knowing what kind of income CBA has paid out only goes so far in terms of what is useful for an investor today.

So, like many ASX dividend shares, CBA has a dividend policy. This tells investors that each year, CBA will strive to “target a full-year payout ratio of 70% – 80%” of its earnings to fund its dividends.

Over FY2022, CBA made $5.57 in earnings per share (EPS), up 14% from the $4.88 it made in FY2021. Of that $5.57 in EPS, the bank paid out $3.85 of those earnings per share as dividends. That’s a payout ratio of 69.12%, so just below CBA’s ratio target.

Both of these metrics bode well for future dividend income. If CBA can manage to grow its EPS again in FY2023, and keep its payout ratio steady, then shareholders will enjoy a dividend increase. If the bank grows its EPS and ups its payout ratio, then investors will enjoy an even larger dividend rise.

Perhaps this is why brokers at Macquarie have recently decided to swap out Australian and New Zealand Banking Group Ltd (ASX: ANZ) shares for CBA shares in a recent model portfolio reshuffling.

So on the numbers, it looks as though CBA’s current dividends are on a sure footing and could increase further. But we shall have to wait and see if CBA can keep up its earnings growth going forward. That’s the real key to a rising dividend.

The post Could now be the time for income investors to buy CBA shares? appeared first on The Motley Fool Australia.

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More reading

• 5 ASX 200 shares Macquarie just recommended its clients buy
• Sell the big four banks and buy this ASX lithium share: broker
• How I’d aim for $1,000 in monthly income by buying ASX 200 dividend shares
• Are CBA shares flying too close to the sun?
• Markets are nervous. Why waiting to buy these ASX 200 shares could prove expensive

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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. 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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