Category: Stock Market

Top brokers name 3 ASX shares to buy next week
Last week saw a number of broker notes hitting the wires once again. Three buy ratings that investors might want to be aware of are summarised below.

Here’s why brokers think investors ought to buy them next week:

Core Lithium Ltd (ASX: CXO)

According to a note out of Macquarie, its analysts have retained their outperform rating and $1.70 price target on this lithium miner’s shares. Macquarie notes that Core Lithium has just completed a $100 million institutional placement and the maiden sale of its spodumene direct shipping ore through a digital exchange platform. In respect to the latter, the broker was impressed with the strong price Core received. As for the former, it believes Core Lithium is now well-placed to accelerate its growth. The Core Lithium share price was trading notably lower than this price target at $1.15 at the end of the week.

Life360 Inc (ASX: 360)

A note out of Goldman Sachs reveals that its analysts have initiated coverage on this location technology company’s shares with a buy rating and $7.50 price target. Goldman sees a big growth runway ahead for Life360 thanks to its estimated US$12 billion global total addressable market. In addition, its analysts believe that Life360 is reaching a volume and pricing inflection point, with potential structural profitability tailwinds not far away. The Life360 share price was fetching $5.20 at Friday’s close.

PolyNovo Ltd (ASX: PNV)

Another note out of Macquarie reveals that its analysts have retained their outperform rating and $1.90 price target on this medical device company’s shares. Macquarie was impressed with PolyNovo’s first quarter sales update and highlights its record performance during September. It appears confident this strong form can continue, particularly given the recent FDA approval of its new MTX product. Macquarie expects this to bolster its offering and diversify its sales. The PolyNovo share price ended the week at $1.75.

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Motley Fool contributor James Mickleboro has positions in Life360, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360, Inc. and POLYNOVO FPO. 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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9 October 2022
Has the Betashares Nasdaq 100 ETF been a good buy so far in FY23?
The Betashares Nasdaq 100 ETF (ASX: NDQ) is one of the most popular exchange-traded funds (ETFs) on the ASX, with $2.45 billion of investor money. But, has it performed well in this financial year?

Firstly, let me tell you what the ETF is about. It tracks the 100 largest non-financial companies on the NASDAQ.

The returns generated by an ETF are dictated by the returns of the underlying businesses (or assets) it’s invested in.

For ETFs that are invested in companies in different countries that are priced in different currencies, changes in the exchange rate can impact short-term returns as well. I’ll give a good example of that in a moment.

Betashares Nasdaq 100 ETF performance

In the three months to September 2022, the ETF saw its price decline by 0.15%. That compares to the S&P/ASX 200 Index (ASX: XJO), which declined by 1.4%.

For an Aussie investor, that’s an outperformance of 1.25%.

However, I think it’s worth pointing out that the actual Nasdaq-100 Index (INDEXNASDAQ: NDX) fell by 4.6% in US dollar terms. This means that for Aussie investors in the ETF, the decline of the Australian dollar against the US dollar helped offset the decline in value of the US shares, in Australian dollar terms.

There has been a lot of volatility for the biggest names on the NASDAQ as inflation and higher interest rates bite into the valuation of those largely tech and tech-related companies.

Apple, Microsoft, Alphabet, Amazon.com, Tesla, Meta Platforms and Nvidia are the biggest names in the portfolio and they have all seen big swings in their share prices in recent months.

What’s happening in October?

September was the end of the first quarter of the Australian 2023 financial year.

But we’re already a week into October.

Since the end of September, the Betashares Nasdaq 100 ETF has risen by 3.8% and the ASX 200 has gone up 4.7%. To provide the full picture, in US dollar terms, the Nasdaq-100 Index has risen 4.7% as well.

Why do interest rates matter so much?

Interest rates impact all sorts of things, such as mortgage rates, the cost of business debt and so on. But, it also hurts asset valuations. Legendary investor Warren Buffett once said this about interest rates:

The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature… its intrinsic valuation is 100% sensitive to interest rates.

The post Has the Betashares Nasdaq 100 ETF been a good buy so far in FY23? appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, BETANASDAQ ETF UNITS, Meta Platforms, Inc., Microsoft, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Meta Platforms, Inc., and Nvidia. 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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9 October 2022
2 very exciting ASX growth shares experts rate as buys
If you have room for some new additions next week, then it could be worth considering the two ASX growth shares listed below.

Here’s what you need to know about these buy-rated shares:

Lovisa Holdings Limited (ASX: LOV)

The first ASX growth share that experts are tipping as a buy is Lovisa.

It is a fast-fashion jewellery retailer with a growing network of stores across the world. But Lovisa’s highly experienced management team isn’t resting on its laurels, it sees a material expansion opportunity ahead.

It is for this reason that Morgans is very bullish on the company. Following its strong FY 2022 result, it commented:

What was even more remarkable than the result itself was the phenomenal scale of LOV’s ambition. In its own words, LOV is ‘building a global brand’, which will involve the development of a global presence that we believe will far out scale the 651 stores in the portfolio today.

The momentum of growth is expected to increase in FY23 and the addition of further new markets, perhaps including Italy and Mexico, appears more than likely. In our opinion, it won’t stop there. Expansion in Hong Kong seems to us to be a precursor to a move into mainland China in due course. And if LOV can prove itself in Italy, the European fashion capital, why not Japan, its counterpart in Asia, further down the track?

Morgans currently has an add rating and $24.00 price target on its shares.

Megaport Ltd (ASX: MP1)

Another ASX growth share that experts rate as a buy is leading global elastic interconnection services provider, Megaport.

Megaport’s increasingly popular service provides users with an easy way to create and manage network connections. Through the Megaport network, businesses can then deploy private point-to-point connectivity between any of the locations on Megaport’s global network infrastructure.

And with the structural shift to the cloud continuing, the team at Goldman Sachs believes the company is well-placed to benefit from increasing demand and higher spending on enterprise networking. It recently commented:

MP1 is benefiting from its first-mover advantage, and two structural tailwinds that accelerated through covid-19, including: (1) The adoption of public cloud & multi-cloud usage; and (2) The growth in Networking as a Service (NaaS). The opportunity for further growth is immense (GSe A$129bn p.a. spent on fixed enterprise networking across MP1 geographies).

Goldman Sachs has a buy rating and $10.30 price target on its shares.

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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 MEGAPORT FPO. The Motley Fool Australia has recommended Lovisa Holdings Ltd and MEGAPORT FPO. 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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9 October 2022
4 investment truths that have been shattered in 2022
Like any area of life, in investment there are basically accepted rules or truths that have stood the test of time.

But the chaos of 2022 has some people rethinking whether those axioms should now be challenged.

One such expert is Fidelity International investment director Tom Stevenson.

“Expressions like ‘time in the market not timing the market’ become investment adages because their truth endures through the ups and downs of the cycle,” he said in the UK’s The Telegraph.

“But sometimes, as [former UK prime minister] Jim Callaghan noted about politics in the 1970s, there is a sea change about which we can do nothing, and which is only really clear in hindsight.”

One such example is back in 1956, when decades-long wisdom was that bonds were a superior investment to stocks.

According to Stevenson, that year Imperial Tobacco pension fund manager George Ross Goobey dared to make the outrageous claim that shares made better inflation– and risk-adjusted returns than bonds.

“He was right and the rest is market history.”

Stevenson is startled to find himself thinking 2022 could be another year in which conventional investment wisdom could be shattered.

“Looking for the equivalent sacred cows today, I was unsettled to discover just how many things I could list about investing that I used to believe unreservedly and about which I’m now not quite so sure.”

In 2022, bonds have performed as poorly as shares

The first axiom in doubt is that dividing your investments between shares and bonds would minimise volatility, thus “helping you sleep better at night”.

“This year has been a shocking reminder that in certain circumstances (think high inflation and central banks prepared to risk recession to get it under control), both bonds and shares can perform extremely badly at the same time.”

According to Stevenson, all of 2022 has severely tested the previously “reassuring” notion that when one of the two assets falls, the other rises.

“Risk-averse investors who have sought the shelter of a traditional balanced fund are quite reasonably asking their advisers what has just hit them.”

In 2022, gold prices have not risen

The second idea that could now be consigned to the trash can is gold is a hedge against inflation.

“This illusion gained traction in the 1970s when the precious metal performed well alongside sharply rising prices,” said Stevenson.

“But there is more correlation than causality at work here.”

The actual truth, according to Stevenson, is that gold outperforms when inflation is greater than interest rates and bond yields.

“Then, the metal is forgiven its most glaring disadvantage — the fact that it does not pay an income.”

Negative inflation-adjusted returns from gold and cash are associated with times of rampant inflation — but not always.

“Today’s rapid swing from negative to positive real yields and the associated underperformance of gold this year make the point.”

In 2022, growth shares have lost the battle

For more than a dozen years, high growth — and especially technology — shares had zoomed upwards. Many investors and experts attributed this to a structural change in attitudes, priorities and valuation methodologies.

But the crash this year has quelled the revolution.

“Investors are once again looking for the bird in the hand that less exciting but steady cash generators and dividend payers can offer,” said Stevenson.

“Twenty years ago, we were reminded by the dot-com crash that shares on low multiples of earnings or assets, or which paid a high and sustainable income, were worth more than the market often acknowledges. I suspect we are relearning that today.”

In 2022, China showed it’s not the US

For many decades, investors saw the liberalisation of the Chinese economy with great enthusiasm.

The prevailing wisdom was that China would emulate the US’ rise to eventually become the world’s largest economy.

But 2022 has cast much doubt on whether the journey will be so straightforward, according to Stevenson.

“Beijing’s recent prioritisation of ‘common prosperity’ over economic growth confirms that China has long since given up slavishly following the western development model.”

Only a decade ago, the unstoppable rise of the middle class in China and their insatiable appetite for household goods, recreational needs and financial services looked like “a one-way bet for investors”.

“A property bubble, regulatory squeeze and zero-COVID policy later, things look harder to navigate.”

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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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9 October 2022
Here are 2 ASX dividend shares that experts say are buys right now
If you’re looking to boost your income portfolio next week, then you may want to look at the shares listed below.

Here’s why these ASX dividend shares have been tipped as buys by experts:

Dexus Industria REIT (ASX: DXI)

The first ASX dividend share for income investors to consider is Dexus Industria. It owns, manages, and develops high-quality industrial warehouses and business parks, and is invested in the operations of Jandakot Airport industrial precinct.

Management notes that its portfolio is well positioned towards the industrial and logistics sectors. Pleasingly, this is a good thing. It highlights that tenant demand remains strong across the industrial market, supported by Australian retail online penetration increasing.

Morgans is a fan of the company. Its analysts currently have an add rating and $3.28 price target on the company’s shares.

They are also forecasting attractive dividends per share of 17.3 cents in FY 2023 and 16.1 cents in FY 2024. Based on the current Dexus Industria share price of $2.56, this will mean yields of 6.75% and 6.3%, respectively.

Whitehaven Coal Ltd (ASX: WHC)

Another ASX dividend share that is highly rated is coal miner Whitehaven Coal.

With coal prices forecast to remain strong for some time to come, the miner has been tipped to deliver bumper profits and free cash flow in the coming years.

One of those expecting this to be the case is Macquarie. It is bullish on Whitehaven Coal due to sky high coal prices and currently has an outperform rating and $12.00 price target on its shares.

The broker is also expecting these high prices to underpin big dividends. It is forecasting fully franked dividends of $1.07 per share in FY 2023 and $1.25 per share in FY 2024. Based on the current Whitehaven Coal share price of $10.96, this implies potential yields of 9.8% and 11.4%, respectively.

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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 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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9 October 2022
Why analysts say these excellent ASX growth shares are buys
If you’re searching for growth shares to buy, then two ASX shares listed below could be worth considering.

Both have been named as buys by analysts and tipped to have material upside potential. Here’s what they are saying about them:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The first ASX growth share that has been named as a buy is Domino’s.

It is one of the largest pizza chain operators in the world with a significant presence in the ANZ, European, and Asian regions.

And while the company is have a difficult time at present, analysts at Morgans believe investors should stick with the company. Particularly given its very positive long term outlook. It commented:

DMP is the largest Domino’s franchisee outside the US and one of the largest quick-service restaurant companies in the world. It is an affordable option that has performed well historically even in times of inflation or slower economic growth. The engine of DMP’s growth is its ability to roll out new stores all over the world. […] Over the next ten years, DMP expects to grow organically to 7,250 stores in the 13 countries in which it currently operates. This means DMP expects to more than double in size again by 2033, not including any future acquisitions.

Morgans has an add rating and $90.00 price target on Domino’s shares.

Xero Limited (ASX: XRO)

Another ASX growth that could be in the buy zone is Xero. It is a cloud-based accounting platform provider to small and medium sized businesses globally.

Xero has been on form again this year despite the tough economic environment. For example, in FY 2022 the company reported a 29% increase in revenue to NZ$1.1 billion and a 28% jump in annualised monthly recurring revenue (AMRR) to NZ$1.2 billion. This was underpinned by a 19% increase in total subscribers to 3.3 million thanks to growth in all markets.

Despite this, the Xero share price has been sold off along with the rest of the tech sector. Goldman Sachs sees this as a buying opportunity for investors. Earlier this year it said:

Following the recent underperformance (absolute/relative), we see an attractive entry point into what is a compelling global growth story and our preferred large cap technology name in ANZ.

Since then its shares have fallen even further, which is likely to have left Goldman’s analysts licking their lips. Particularly given their believe that the company is “well-placed to navigate this uncertainty given the stickiness & importance of its software.”

The broker has a buy rating and $111.00 price target on Xero’s shares.

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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 Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended Dominos Pizza Enterprises 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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8 October 2022
Could oversold ASX growth shares now be a buying opportunity for value investors?
Value investing is where people buy good quality companies whose share prices have fallen below the intrinsic value of the businesses.

As per our Foolish guide to value investing:

Investors who use the value investing strategy hope that a company’s share price will rise as more people come to appreciate the true intrinsic value of the company’s fundamental business.

In the year to date, ASX growth shares have been smashed as inflation and interest rates rise.

Growth shares are typically young companies with debt. They’re usually highly leveraged because they’re growing, so they’ve needed to borrow. Some aren’t even profitable yet — but as the share market trades on future performance — their share prices have risen, hence the reference to ‘growth shares’.

Which ASX growth shares are looking good value?

Value investors love buying the dip and using dollar-cost averaging to build their long-term holdings. And you could say we’ve seen a dip in share values this year, right?

The S&P/ASX 200 Index (ASX: XJO) is down 11% and the S&P/ASX All Ordinaries Index is down 12% in the year to date.

Much worse, the S&P/ASX All Technology Index (ASX: XTX) is down 33%. (Australian tech stocks are typically considered growth shares.)

Two experts reckon many high-quality ASX growth shares have been oversold and are now attractive buying opportunities.

The qualifier there is high quality.

As GMO’s head of focused equity, Tom Hancock, points out: ” … growing quality companies … have an extra layer of protection in rising rate environments because they are less reliant on capital markets.”

Hancock writes on Livewire: ” … this year has presented an opportunity for value investors to take a fresh look at growth companies, especially quality growth companies.”

In another Livewire article, Tim Richardson of Pengana International Equities Limited says there has been “an indiscriminate sell-off in growth companies”, and high-quality stocks have been caught up in it.

Richardson writes:

The indiscriminate sell-off in growth companies this year has extended beyond those with little or no cash flow and dubious business models.

Quality growth stocks across the board have underperformed value stocks, leaving some great companies priced at more attractive valuation levels. This implies higher potential returns over the medium-to-long term.

Richardson points out that many high-quality growth shares are exposed to new, long-term trends caused by COVID-19. He says:

Working from home is here to stay. This brings growth opportunities for a wide range of disruptive businesses as people continue to work and shop at home, whilst consuming media, entertainment and dinner ‘from the couch’.

The decarbonisation of the global economy is now irrevocably underway, accelerated by the US Inflation Reduction Act.

Decarbonisation benefits companies in a range of sectors (e.g. electric vehicles, green project finance and renewable energy technology) that enjoy low sensitivity to the business cycle.

While neither Richardson nor Hancock reveal any specific growth stocks they like, my Foolish colleague Kate identifies several companies benefitting from these trends in her article, What is a growth stock and how to choose one.

Companies leveraged to the work-from-home trend include cybersecurity companies Tesserent Ltd (ASX: TNT) and Prophecy International Holdings Limited (ASX: PRO), workflow platform provider Whispir Ltd (ASX: WSP), and CV Check Ltd (ASX: CV1), which helps companies bring employees on board.

Kate also writes that decarbonisation is benefitting companies in the hydrogen sector, such as Pure Hydrogen Corporation CDI (ASX: PH2).

Hancock said he and his team have been buying quality ASX growth shares this year.

Hancock says:

This year’s gyrations in growth stocks have created an interesting opportunity for our Quality Strategy in which we have been able to acquire shares in high-quality growth companies at prices that have seemed to us to overplay the role of rates in determining investment results.

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Motley Fool contributor Bronwyn Allen 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 Whispir Ltd. The Motley Fool Australia has recommended CV Check Ltd and Whispir Ltd. 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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8 October 2022
3 high quality ETFs for ASX investors to buy next week
If you’re looking for an easy way to invest your hard-earned money, then exchange traded funds (ETFs) could be the answer.

But which ETFs should you look at?

Listed below are three high quality ETFs that could be worth considering. Here’s what you need to know about them:

BetaShares Global Cybersecurity ETF (ASX: HACK)

The first ETF that could be a buy is the BetaShares Global Cybersecurity ETF. This fund provides investors with the opportunity to invest in the cybersecurity sector. This means you’ll be buying companies such as Accenture, Cisco, Cloudflare, Crowdstrike, and Palo Alto. Due to the growing threat of cyberattacks globally and the damage that these attacks can do (just ask Optus!), these companies look well-placed to benefit from increasing demand for cybersecurity services.

BetaShares NASDAQ 100 ETF (ASX: NDQ)

Another ETF for investors to look at buying is the BetaShares NASDAQ 100 ETF. This ETF allows investors to buy many of the highest quality companies in the world in one fell swoop. That’s because the BetaShares NASDAQ 100 ETF is home to the 100 largest non-financial shares on the famous NASDAQ exchange. Among the companies you’ll be investing in are Alphabet, Amazon, Apple, Meta, Microsoft, Netflix, and Tesla. And with the index down materially this year, now could be an opportune time to make a long term investment.

iShares Global Consumer Staples ETF (ASX: IXI)

A final ETF for investors to buy next week is the iShares Global Consumer Staples ETF. This ETF gives investors access to many of the world’s largest global consumer staples companies. Given that these companies manufacture and sell products that are always in demand with consumers, they could be good option in the current uncertain economic environment. Among the fund’s holdings are the likes of Coca-Cola, Nestle, PepsiCo, Procter & Gamble, Unilever, and Walmart.

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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 BETA CYBER ETF UNITS and BETANASDAQ ETF UNITS. The Motley Fool Australia has positions in and has recommended BETA CYBER ETF UNITS, BETANASDAQ ETF UNITS, and iShares Global Consumer Staples 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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8 October 2022
Were ASX 200 bank shares a safe place to park cash in Q1?
The first quarter of FY23 was a green period for ASX 200 bank shares overall.

They may have had a terrible month in September, but for the three months of Q1 FY23 they all trended up (or remained steady in the case of Commonwealth Bank of Australia (ASX: CBA)).

The Westpac Banking Corp (ASX: WBC) share price rose by 6.3% over the three months to 30 September.

National Australia Bank Ltd (ASX: NAB) shares went up 4.7%. The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price went up 4.4%. CBA went nowhere — 0% movement by the end of the period.

By comparison, the S&P/ASX 200 Index (ASX: XJO) lost 1% over the period.

Does this mean ASX 200 bank shares are safe?

The word ‘safe’ is very subjective in share market investing. However, if you asked most Australians to name a few safe and reliable blue-chip shares, odds are they’ll mention at least one of the big four banks.

ASX 200 bank shares have a reputation for being long-established and profitable companies. They are generally considered to be great ASX dividend shares and many retiree investors will attest to that.

So, relatively speaking, one might consider them safe stocks.

As has been said by many commentators before, the big four Aussie banks are likely “too big to fail”.

ASX bank dividends are coming up

If you define safety as regular and reliable dividends, well, that’s what the ASX 200 bank shares are known for. So, if you parked your money in banks in Q1, you can look forward to some dividend income soon.

Three banks will announce dividends soon — ANZ on 27 October, Westpac on 7 November, and NAB on 9 November.

As we’ve previously reported, Citi expects the final NAB dividend to be 77 cents. This follows an interim dividend of 73 cents. All up, $1.50 per share for the full FY22. Based on today’s NAB share price of $30.14, this equates to a fully franked annual dividend yield of 7.1%.

Citi tips ANZ to declare a 72-cent final dividend, bringing the full dividend for FY22 to $1.44 per share. Based on the current ANZ share price of $24.29, this will mean a fully franked 8.5% annual dividend yield.

Goldman is forecasting a 62-cent final dividend from Westpac, bringing its full-year FY22 dividend to $1.23. Based on the current Westpac share price of $21.88, this will mean a fully franked yield of 8%.

What do the experts think of ASX 200 bank shares?

As reported on Livewire, Morgans, Jarden, and JP Morgan all rate NAB as their preferred banking stock.

Goldman Sachs analysts Andrew Lyons and John Li say Westpac is their pick for four main reasons.

Firstly, the company’s performance is strongly leveraged to rising interest rates. They also note superior cost management, continuing business investment, and “supportive share price valuations”.

Brad Potter, head of Australian equities at Tyndall Asset Management, expects the banks’ net interest margins (NIMs) to “continue to increase strongly over the next six to 12 months”, which will lead to “decent earnings growth”.

The wholesale Tyndall Australian share fund holds all four ASX 200 bank shares. It’s overweight in Westpac and ANZ shares and underweight in CBA shares.

Potter says: “CBA arguably deserves to trade at a premium to the other three banks, but the premium it’s trading on is astronomical.”

What will happen to ASX 200 bank shares in a recession?

There’s been lots of speculation about a potential recession in Australia or the United States soon.

Potter says:

In a recession, I don’t think the banks will be impacted particularly badly, particularly given their
very strong balance sheets, capital liquidity and provisioning levels.

But from a sentiment perspective, banks get sold off during a recession. And that’s why,
despite the fact we’ll get decent earnings growth coming through in the next six to 12 months,
their share prices are probably not reacting very well.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen has positions in Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, and Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs and JPMorgan Chase. 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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8 October 2022
How big will the Woodside dividend be in 2023?
Last week was a good one for Woodside Energy Group Ltd (ASX: WDS) shareholders, with the market giving them a couple of gifts.

The first was a stronf rise in the Woodside share price after oil prices climbed again in response to news that OPEC will cut production by 2 million barrels per day in November.

Woodside dividend

Another gift that shareholders received was the energy giant’s latest interim dividend.

In August, when Woodside released its half year results, the company reported a massive 414% increase in underlying net profit after tax to US$1,819 million. This was driven by higher realised prices and the addition of the BHP Group Ltd (ASX: BHP) petroleum assets.

In addition, the company generated US$2,568 million of free cash flow during the half, which allowed the Woodside board to declare a fully franked interim dividend of 109 US cents per share or 160 Australian cents per share.

This represented 80% of underlying net profit plus 80% of the merger completion payment adjusted for working capital, which was the equivalent to returning approximately 81% of free cash flow.

Are there more big paydays to come?

According to a recent note out of Citi, its analysts are expecting more of the same in the second half and in FY 2023.

In respect to the former, the broker has pencilled in a fully franked full year dividend of 325 Australian cents per share. This suggests a final dividend in the region of 165 Australian cents per share for the second half, which alone represents a very generous 4.7% yield.

What about in 2023?

Looking even further ahead, Citi is forecasting more big dividends in FY 2023 for Woodside shareholders.

It is expecting the energy company to pay a 360 Australian cents per share fully franked dividend. This will mean a massive 10.3% dividend yield based on the latest Woodside share price.

Citi also sees modest upside for its shares at present. It currently has a buy rating and $36.50 price target on them.

The post How big will the Woodside dividend be in 2023? 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 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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8 October 2022