Category: Stock Market

ASX dividend shares are in the spotlight in today’s ultra-low interest rate environment.

On Tuesday, the Reserve Bank of Australia (RBA) stuck to its guns, keeping the official cash rate at a historic, rock bottom 0.10%. That means we’re unlikely to see higher returns from any cash held in savings deposits for some time yet.

Last I checked, even term deposits weren’t paying much over 1%. Meaning once you factor in inflation, your $100 in the bank will actually buy you less next year than it will today.

It also means investors seeking regular income – and willing to take more risk with their money than sticking it in a bank – increasingly look to ASX dividend shares. They hope that these will not only return inflation-beating yields but will deliver some capital gains as well.

A few words of caution for yield investors

Before moving on to the 10 top-yielding ASX dividend shares, a few words of caution.

Not all high-yielding shares are created equal.

Sometimes a share will have a high trailing dividend yield because its share price has fallen dramatically. If that’s the case you’d be wise to investigate why its shares have been falling and what the consensus outlook is moving forward.

Remember, there’s no guarantee a company will continue its current dividend payout ratio. Especially if its share price has been under pressure. Best to focus on expected future yield than past yields.

Also, any money that ASX dividend shares return to shareholders is money the companies won’t be able to reinvest into their business.

With that said, let’s move on to…

The 10 top-yielding ASX dividend shares

Taking out the number 1 position (data from Iress as reported by The Australian) among the 50 largest ASX companies is Fortescue Metals Group Limited (ASX: FMG). Fortescue pays a 10.8% dividend yield, 100% franked. The mining giant has a market cap of $72.2 billion. The Fortescue share price is up 57% over the past 12 months.

Coming in at number 2 is AGL Energy Limited (ASX: AGL). AGL pays a 10.2% dividend yield, unfranked. The energy provider has a market cap of $5.4 billion. The AGL share price is down 50% over the past 12 months.

The third best yielding company making the list is Aurizon Holdings Ltd (ASX: AZJ).  Aurizon pays a dividend yield of 7.8%, 70% franked. The rail freight operator has a market cap of $6.8 billion. The Aurizon share price is down 24% over the past 12 months.

Number 4 is Origin Energy Ltd (ASX: ORG). Origin pays a dividend yield of 5.6%, unfranked. The energy provider has a market cap of $7.9 billion. The Origin share price is down 25% over the past 12 months.

The fifth best yielding company in the top 50 ASX shares is APA Group (ASX: APA). APA Group pays a 5.5% dividend yield, unfranked. The energy infrastructure company has a market cap of $11 billion. The APA Group share price is down 20% over the past 12 months.

Top-yielding ASX dividend share number 6 is DEXUS Property Group (ASX: DXS). Dexus pays a dividend yield of 5%, unfranked. The commercial property owner and manager has a market cap of $11.2 billion. The Dexus share price is up 10% over the past 12 months.

At number 7 we have Rio Tinto Limited (ASX: RIO). Rio pays a dividend yield of 4.9%, fully franked. The iron ore miner has a market cap of $47.2 billion. Over the past 12 months, the Rio Tinto share price is up 25%.

Number 8 is GPT Group (ASX: GPT). GPT pays a dividend yield of 4.9%, unfranked. The diversified property group has a market cap of $9.1 billion. The GPT Group share price has gained 12% over the past 12 months.

Stockland Corporation Ltd (ASX: SGP) takes the number 9 position. Stockland pays a 4.7% dividend yield, unfranked. The property owner and manager has a market cap of $11.5 billion. Stockland’s share price is up 23% over the past 12 months.

Rounding out the list of the 10 top-yielding ASX dividend shares is Australia and New Zealand Banking GrpLtd (ASX: ANZ). ANZ pays a dividend yield of 4.6%, fully franked. The big 4 bank has a market cap of $81.9 billion. Over the past 12 months, the ANZ share price has gained 51%.

There you have it.

10 high yielding ASX dividend shares amongst the biggest 50 companies on the ASX. Six have seen their share price rise over the past full year while four have suffered share price falls.

Why the Motley Fool’s Scott Phillips leans towards APA Group

Earlier today I reached out to Scott Phillips, the Motley Fool’s CIO, to get his take on the list of top 10 ASX dividend shares.

He told me he’d steer clear of the retail energy shares. He also wouldn’t buy Rio or Fortescue at their current prices.

As for the commercial property shares listed above, Scott said:

I’m keeping a watching brief on commercial property. With a lot changing in the world of retail, and many people now working from home, I’m not sure it’s possible to have a good handle on future occupancy rates. If I was looking at REITs, even though I don’t expect them to be market-beating, I’d go for bulky goods retail and/or warehousing.

Scott believes that Aurizon looks fascinating, saying the share “looks cheap, and its yield looks good”. What investors need to be aware of, he added, is the question of “how long it can keep its coal cars full, and scale benefits flowing”. At the moment he prefers to wait on the sidelines with this share.

Out of our top 10 list above, Scott picked APA Group as “a good option for a diversified income portfolio”.

He said:

APA has a quality business of near-monopoly gas pipelines, and I think the demand is likely to be robust in the medium-long term.

I don’t expect it to be market-beating from a total return perspective. But I think it’s a useful part of a diversified income portfolio, especially as many income seekers are overweight banks and REITs.

Happy ASX dividend share investing!

The post The 10 ASX dividend shares delivering the highest yields appeared first on The Motley Fool Australia.

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The Fatfish Group Ltd (ASX: FFG) share price won’t be going anywhere on Friday afternoon after the company requested a trading halt.

Why Fatfish shares paused trading today

The Fatfish share price jumped 4% this morning before entering into a trading halt just prior to lunchtime. This request was made on the basis of an upcoming buy now, pay later (BNPL) acquisition announcement.

Shares in the technology venture building company will remain halted until either Tuesday 8 June or when the relevant announcement is released to the market.

Fatfish ramps up Southeast Asian BNPL exposure

In recent months, Fatfish has been ramping up its strategic investments in the BNPL space with a focus on the Southeast Asian market.

On 18 February, the company’s subsidiary Smartfunding successfully launched its corporate BNPL service in Southeast Asia. Fatfish has been progressively increasing its stake in Smartfunding and currently holds a 78.7% stake in the company.

On 26 February, Fatfish entered into a strategic partnership with KryptoPOS to rollout its BNPL services throughout Asia. The company believes that this partnership also has the potential to boost the market reach of its Smartfunding BNPL services.

With Smartfunding’s focus on a corporate BNPL product, Fatfish acquired a strategic 85% stake in Forever Pay, which is a licensed corporate entity with a money lending license from the Malaysian government. Fatfish intends to develop and launch a retail BNPL product and leverage any potential synergies with Smartfunding.

The Fatfish share price in 2021

The Fatfish share price was a beneficiary of the BNPL hype in February, when the company’s shares went gangbusters from 3.5 cents to as high as 43 cents.

In response to an ASX price and volume query, the company said that “some ASX listed companies in the BNPL space have experienced recent strong demand and increases in prices, especially company(s) involved in the Asian geographical market.”

As the hype began to cool down for BNPL shares, the Fatfish share price has slowly drifted lower, first consolidating around the 10 cent level around March before sliding lower to the 7 cent level in May. As of today’s pause in trade, Fatfish shares are sitting at 7.6 cents.

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The Australian Bureau of Statistics (ABS) has released its official retail trade figures for April, highlighting a 1.1% increase compared to March, on a seasonally adjusted basis.

The results were unchanged from its preliminary retail trade data released on 21 April. Included in the official release were the industries driving the uptick in retail turnover.

Broadly speaking, ASX retail shares managed to rally strongly throughout March and April, in many cases hitting record all-time highs. However, by mid-April and May, many were struggling to hold onto gains and edged lower.

Here’s a snapshot of which industries and subgroups lifted retail trade in April, and how some of the ASX retail shares are faring.

Latest retail trade results

Food retailing

Food retailing increased 1.4% in seasonally adjusted terms. By industry subgroup, supermarket and grocery stores, liquor retailing and other specialised food retailing rose a 1.2%, 3.0% and 1.1% respectively.

Things were going well for the Woolworths Group Ltd (ASX: WOW) share price until its third-quarter update on 29 April. Its shares tanked more than 5% between 29 April and 3 May from $41 to $39. The Woolworths share price has since made a bullish recovery and, at $43.33 today, is within cooee of its February record all-time highs of $43.85.

The third-quarter update highlighted a 0.7% fall in Australian Food sales against the prior corresponding period. However, the company registered a strong performance across its Big W, Endeavour Drinks and Hotel businesses.

Household goods retailing

Household goods increased 1.5% in seasonally adjusted terms. Key subgroup drivers include a 3.0% increase in electronic goods and 1.7% increase in furniture, floor coverings, houseware and textile goods retailing.

Despite the improvement in household goods, some previous high-fliers in this group — including JB Hi-Fi Ltd (ASX: JBH), Kogan.com Ltd (ASX: KGN) and Harvey Norman Holdings Ltd (ASX: HVN) — experienced sharp selloffs in April. This is possibly driven by a period of tough comparables against supercharged COVID-19 driven earnings in FY20.

This was especially the case for Kogan, where its shares have tanked almost 50% year-to-date. The company’s disappointing trading update in May flagged inventory challenges, likely driven by the anticipation that heightened sales would continue.

Cafes, restaurants and takeaway food services

Cafes, restaurants and takeaway food services improved 2.3% in April, driven by a 4.4% lift in takeaway food services, while cafe, restaurants and catering services edged 0.6% higher.

According to ABS data, turnover for cafe, restaurants and takeaway food services has toppled pre-COVID highs of about A$3,935 million in February 2020, after the latest figures came in a A$4,125 million.

This aligns with the recent bullish share price action of Dominos Pizza Enterprises Ltd (ASX: DMP). Its shares are up 20% since April and set a new all-time record high on Thursday of $117.96.

The post Which ASX retail shares are the latest trade winners? appeared first on The Motley Fool Australia.

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The ARB Corporation Limited (ASX: ARB) share price has been a very strong performer on Friday.

In fact, in afternoon trade the 4×4 parts company’s shares are the best performers on the S&P/ASX 200 Index (ASX: XJO) with a 7% gain to $45.23.

Why is the ARB share price charging higher?

Investors have been bidding the ARB share price higher today following the release of a couple of positive broker notes out of Ord Minnett and Wilsons.

In respect to the former, Ord Minnett believes that ARB is well-placed to benefit from growth in new vehicle sales. Particularly given strong demand for four-wheel drive and SUV vehicles. This should be supported by new store openings.

The broker commented: “Supportive factors such as the extension of the instant asset write-off scheme, continued demand for vehicles driven by domestic tourism and increased road use by households should continue to drive solid demand for new vehicles.”

Elsewhere, this morning analysts at Wilsons retained their buy rating and lifted their price target by almost 20% to $47.80.

Even after today’s gain, this price target implies potential upside of almost 6% over the next 12 months.

Why is Wilsons bullish?

Wilsons is positive on the company for the same reasons. It believes recent vehicle sales data and current trading conditions are supportive of the company’s growth.

Its analysts commented: “We remain attracted to ARB and its prospects for sustained sales growth through a continued shift to SUVs, significant investment in R&D, and penetration of export markets.”

Another positive that the broker highlighted was ARB’s recent agreement with Ford. That agreement will see ARB branded off-road accessories for Ranger and Everest vehicles sold as Ford licensed accessories through participating Ford dealers in Australia.

The products are due to go on sale with Ford in Australia in the second half of the year. After which, other selected Ford markets are expected to follow.

Wilsons suspects that this could lead to greater brand recognition in the lucrative USA market in the future.

Today’s gain means the ARB share price is now up a sizeable 46% since the start of the year.

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The Straker Translations Ltd (ASX: STG) share price is in the red today after the company released an update on its capital raising efforts.

At the time of writing, Straker shares are down 5.58% to $2.20.

What’s driving the Straker share price lower?

A possible catalyst for the decline is an impending share dilution for all existing shareholders.

According to this morning’s release, the translation specialist has completed a share placement and an upsized institutional entitlement offer. Both equity-raising efforts saw strong demand from existing shareholders and new investors.

As a result, the company increased the offer size of the placement by $5 million to $15 million. Together with the institutional entitlement offer of $5 million, this brings the total equity raised to $20 million.

Approximately 10.5 million new ordinary shares will be issued at a price of $1.90 apiece to each participating investor. This represents a discount of around 13.5% to today’s Straker share price.

Straker will use its existing placement capacity to create the new shares. Under listing rule 7.1, this allows up to 15% of its total shares to be issued without shareholder approval. The company will use an extension to the listing rule (7.1A) to issue the remaining shares with the additional 10% capacity.

The proceeds of the placement and institutional entitlement offer will see Straker improve balance sheet liquidity to execute its growth strategies. Funds will be allocated once the company pays down existing debt and covers the cost of the equity raise.

It is expected the placement and institutional entitlement offer shares will be allotted on 15 June 2021.

In addition, Straker will launch a $5 million retail entitlement offer on 9 June 2021. Eligible investors will be able to top up their holding with 1 share for every 10.32 Straker shares held.

Management commentary

Straker CEO Grant Straker said:

Having delivered strong growth since our IPO this was our first post-IPO equity raise and our stronger balance sheet will enable us to drive towards our aspirational goal of getting to $100m in revenue.

We have multiple growth opportunities in front of us, and we feel now is the time to invest in organic and inorganic growth strategies. It is very pleasing to see strong support for the equity raise and to have a world-class range of new and existing institutional shareholders on the register, a great reflection on all the hard work the Straker team has done over the past few years.

The Straker share price has almost doubled in value in the past 12 months, surging by more than 96%.

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The Westpac Banking Corp (ASX: WBC) share price has been a positive performer on Friday.

In afternoon trade, the banking giant’s shares are up 1% to a 52-week high of $26.80.

This means the Westpac share price is now up an impressive 36% since the start of the year.

Why is the Westpac share price pushing higher today?

The catalyst for the rise in the Westpac share price today appears to have been a bullish broker note out of Morgan Stanley.

According to the note, the broker has retained its overweight rating and $29.20 price target on the bank’s shares.

Based on the latest Westpac share price, this implies potential upside of 9% over the next 12 months excluding dividends.

And with Morgan Stanley forecasting dividends of $1.18 per share in FY 2021 and $1.25 per share in FY 2022, the potential total return stretches to approximately 13.5%.

What did Morgan Stanley say?

The note reveals that Morgan Stanley is expecting the big four banks to return significant capital to shareholders via off-market buybacks. It sees this as a way to distribute extra franking credits.

And while it suspects that the banks will remain conservative in the near term until all ongoing pandemic risks are accounted for, once the crisis passes it believes Westpac has the strongest case for a buyback.

It is expecting a $3.5 billion buyback to be announced with Westpac’s half year results in FY 2022.

Is anyone else bullish on Westpac?

Morgan Stanley isn’t the only broker that sees value in the Westpac share price.

A note out of Citi at the start of the week reveals that its analysts have a buy rating and $29.50 price target on its shares. It sees opportunities for return on equity improvements via its cost reduction plans.

Citi’s price target and its dividend forecasts imply a total potential return of ~14.5% over the next 12 months.

The post Why the Westpac (ASX:WBC) share price just hit a 52-week high appeared first on The Motley Fool Australia.

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Westpac Banking Corp (ASX: WBC) is said to be pressing ahead with determining whether to demerge its $10.3 billion New Zealand-based banking business.

According to reporting by today’s The Australian, the Westpac board will hear advice from Macquarie Capital on whether the bank should keep a hold of its New Zealand unit later this month.

Westpac first announced it was considering demerging its New Zealand business on 24 March this year. On the day of that announcement, the Westpac share price slumped by nearly 1%. But today, investors appear unfazed by the news the banking giant is further considering the spin-off, sending the company’s shares higher.

Currently, Westpac shares are swapping hands for $26.75 – 0.94% higher than yesterday’s closing price.

Let’s take a closer look at the potential demerger.

Westpac New Zealand demerger still on the table

According to The Australian, Westpac will decide whether to put the spin-off of its New Zealand business to shareholders within the coming months.

Westpac’s talks of demerging its New Zealand business began earlier this year when the Reserve Bank of New Zealand (RBNZ) put pressure on the bank’s Kiwi segment.

In March, the RBNZ found Westpac had potentially committed 2 breaches. The first was a breach of the RBNZ’s liquidity policy. The RBNZ’s liquidity policy dictates how much cash a bank should be able to access at short notice. The second breach was Westpac New Zealand’s potential non-compliance through the central bank’s liquidity thematic review – an ongoing review of the RBNZ’s liquidity policy.

As a result of the potential breaches, the RBNZ instructed Westpac New Zealand to undertake independent reports into both its risk governance and liquidity risk management.

Additionally, the RBNZ told Westpac its New Zealand business segment must hold more liquid assets until the RBNZ determines the remediation work to have been effective.

The same day the RBNZ issued its directions, Westpac announced it was considering if demerging its New Zealand business would be in its shareholders’ best interests.

Westpac’s New Zealand business brings in around 15% of the bank’s cash flow. It’s operated in the country for more than 160 years.

According to The Australian, Macquarie Capital is analysing the consequences and potential valuation of the proposed demerger.

The demerger will require shareholder approval to proceed.

The potential demerger of its New Zealand business isn’t the only shakeup Westpac has seen lately.

Earlier this year, the bank stated it was simplifying its business by combining its consumer and business divisions. Westpac’s consumer and business divisions became its new consumer & business banking division in late March.

Westpac share price snapshot

Despite numerous challenges reported by Westpac this year, the bank’s share price is performing well on the ASX.

Currently, the Westpac share price is around 38% higher than it was at the start of 2021. It’s also gained 47% since this time last year.

The bank has a price-to-earnings (P/E) ratio of around 21.4 and a market capitalisation of approximately $978 billion. It has 3.6 billion shares outstanding.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is pushing ever so slightly higher. At the time of writing, the benchmark index is up 0.1% to 7,265.7 points.

Four ASX shares that have climbed more than most today are listed below. Here’s why they are charging higher:

ARB Corporation Limited (ASX: ARB)

The ARB share price is up 5.5% to $44.64. Investors have been buying the 4×4 parts company’s shares following the release of a bullish broker note out of Ord Minnett. According to the note, the broker believes that ARB will benefit from growth in new vehicle sales. In addition, it expects new store openings and demand for SUVs to be supportive of its growth.

Humm Group Ltd (ASX: HUM)

The Humm share price has risen 5% to $1.08. The catalyst for this appears to have been a broker note out of UBS this morning. Its analysts have retained their buy rating and $1.60 price target on the company’s shares. This follows the announcement of the release of its new buy now pay later product, TAPP.

Incitec Pivot Ltd (ASX: IPL)

The Incitec Pivot share price is up 2% to $2.39. This appears to have been driven by a broker note out of Macquarie this morning. The broker highlights that fertiliser prices remain positive and in some cases are strengthening. The broker has retained its outperform rating and $2.93 price target on its shares.

Pro Medicus Limited (ASX: PME)

The Pro Medicus share price is up 2.5% to $48.79. In response to the announcement of a collaboration with healthcare giant Mayo Clinic, Goldman Sachs retained its buy rating and $53.80 price target on the company’s shares. “We believe the strategy of partnering with the leading academics helps to maximise the value and competitive advantage of PME’s technology proposition,” the broker commented.

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The CVC Limited (ASX: CVC) share price is down today. At the time of writing, shares in the investment company are trading for $1.95 – down 2.01%. By comparison, the S&P/ASX All Ordinaries Index (ASX: XAO) is 0.19% higher.

The company comes into focus after issuing a profit guidance and several business updates.

Let’s take a closer look at today’s announcement.

CVC share price edges lower

In a statement to the ASX, CVC Limited gave the following updates.

Profit guidance

CVC is forecasting a net profit after tax of $21–$23 million for the year ended 30 June 2021. In the prior corresponding period, the company made a $2.1 million loss. CVC stated that the forecasted profit includes a “significant proportion of unrealised gains, approximately 50%, arising from the revaluation of long-term investments held by CVC.”

In its half-year report, the company posted a net profit after tax of $15.7 million. Today’s announcement would mean profits for the second half of the financial year are down by approximately 50%.

Business updates

In today’s statement, CVC also highlighted its portfolio investment “is now significantly more weighted to property focused investments.”

It provided a number of property-related updates, including:

• A property in East Bentleigh, Victoria, which CVC has a 50% stake in, has been rezoned from industrial use to mixed residential, retail, and commercial use. The property has now been revalued upwards to $67.3 million – adding $13 million in pre-tax profit for FY21.
• A property in Donnybrook, Victoria, which CVC has a 49% interest in, is on the brink of being approved. Formal approval is now with the state minister for planning, and the area is expected to be rezoned.
• A property in Liverpool, NSW, which CVC owns a 66% stake in, has had planning approval from Liverpool City Council and is now in the hands of the NSW Department of Planning.
• A Bunnings Warehouse has been approved for development at a 60% owned property of CVCs in Caboolture, Queensland. Construction of shopping centre at the site should commence within FY22.

CVC share price snapshot

Over the past 12 months, the CVC share price has increased 39.3%. The company was hit hard by the COVID market sell-off of March 2020, losing 53.9% of its value in the space of two and a half months.

Its recovery since then has been steady but it has still not reached its pre-pandemic levels.

CVC has a market capitalisation of $228 million.

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The DroneShield Ltd (ASX: DRO) share price is taking off today after the company announced it has received a new $3.8 million defence contract.

In morning trade, DroneShield shares rocketed 12.12% higher to 18.5 cents apiece before partially retreating. At the time of writing, the company’s shares are swapping hands for 17.25 cents each, up by 4.55% for the day so far.

New defence contract

Investors are buying up DroneShield shares after the company updated the market with a positive release.

According to the statement, DroneShield has received a 2-year defence contract with a Five Eyes country. The term ‘Five Eyes’ relates to a signals alliance between the United States, Canada, Australia, the United Kingdom, and New Zealand.

The deal, valued at about $3.8 million, represents ongoing commitments from government agencies, which have sought DroneShield products in the past.

DroneShield said the agreement contains the usual customary clauses of a research and development contract. It is expected around $2 million of the contract’s value will be collected during the June and September 2021 quarters.

DroneShield CEO Oleg Vornik said, “This contract is testament to the world-leading capabilities of the DroneShield team”.

What does DroneShield do?

DroneShield specialises in drone security technology. The company designs and develops detection systems that use specialised technology to protect people, organisations and critical infrastructure from drone incursions.

Specifically, its multi-layered products are centred around detection and disruption from unmanned aerial systems.

DroneShield share price summary

Over the past 12 months, DroneShield shares have been recovering from the fallout of COVID-19. After hitting a 52-week low of 10 cents in July last year, the company’s share price has lifted by around 70%. However, DroneShield shares are still some way off their 52-week high of 25 cents achieved in September.

DroneShield has a market capitalisation of around $69 million. The company holds more than 389 million shares on its registry.

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