Category: Stock Market

The NIB Holdings Limited (ASX: NHF) share price pushing higher on Monday morning.

Following the release of its half year results, the private health insurer’s shares have risen 2.5% to $5.52.

How did NIB perform in the first half?

For the six months ended 31 December, NIB reported a 1.1% decline in revenue to $1.3 billion.

And although the company reported a 0.9% increase in claims expense to $1 billion, a 14.1% reduction in operating expenses to $172.1 million offset this and underpinned profit growth.

NIB delivered a 4.4% lift in underlying operating profit to $86.9 million and a 15.9% jump in net profit after tax to $66.2 million

Despite its profit growth, the NIB board declared a flat fully franked interim dividend of 10 cents per share.

What were the drivers of NIB’s growth?

NIB’s Managing Director and CEO, Mark Fitzgibbon, revealed that the company added 16,000 Australian Residents Health Insurance (ARHI) members during the period. This was an increase of 2.7% and underpinned a 2.2% increase in premium income. Premium income growth would have been 4.2% if it hadn’t postponed its 2020 annual premium increase by six months.

Mr Fitzgibbon also revealed that ~52% of its policy sales were to members under the age of 40, with more than 45% of its sales to people that are new to private health insurance.

Positively, NIB’s membership growth in its core ARHI business is believed to be ahead of the industry growth rate. In addition,  the company experienced an improvement in member retention, which helped support it profit growth.

However, the Chief Executive did warn that its above target profit margin needed to be treated with some caution.

He commented: “ARHI profitability has been slightly distorted by COVID-19 and consequential delays in treatment and claims which is still playing out. We’ve modelled that impact as best we can and continue to make allowance for a claims catch-up in our financial accounts.”

“Yet it’s an inexact science and while ever the pandemic persists, underlying claims costs trends will continue to have some noise, as we’ve seen with events such as the Victorian lockdowns. I also suspect there may be for many, a natural aversion to going to hospital and other forms of treatment involving close contact as a result of COVID-19,” he added.

Outlook

No guidance has been given for the full year due to COVID-19 uncertainties.

However, it does expect strong sales and improved retention to continue throughout FY 2021. Though, as mentioned above, the company is expecting claims to grow as members catch up on postponed treatments.

Looking further ahead, the company is aiming to sell critical illness health insurance in China from FY 2022. It was also be focusing on building the capabilities of its Honeysuckle Health joint venture.

Finally, NIB has become the latest company to announce plans to become carbon neutral. It intends to achieve this by the end of FY 2022.

Mr Fitzgibbon said: “Although our carbon footprint is low, we see no less a responsibility in tackling global warming especially with its well established risks to population health and safety.”

More reading

• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended NIB Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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February reporting season has so far been largely positive as ASX 200 shares bounce back from COVID-19 related challenges.

Higher commodity prices have helped miners deliver record-breaking profits at the larger end of town, as bad debt and impairment expenses have retreated to help banks deliver upbeat earnings and higher dividend payments.

Despite improved business conditions, these 2 ASX 200 shares have failed to impress brokers and been slapped with a sell rating. 

Goodman Group (ASX: GMG)

The Goodman share price was arguably one of the best performing REITs in 2020, thanks to its focus on high-quality properties and essential infrastructure. However, its shares have struggled to make headway in the new year, falling by more than 10%. 

Goodman’s results on Friday was a testament to its high-quality portfolio, with first-half FY 21 results and full-year guidance ahead of Goldman Sachs consensus.

The company delivered an operating profit of A$614.9 million, well ahead of Goldman’s forecasted $565.7 million. However, the result came in below the broker’s estimate at the property investment line, and the property management contribution was well below its forecast, despite higher average funds under management balance.

Goldman maintained a sell rating with a 12-month price target of $12.24 or a downside of 30% after digesting the results. 

Cochlear Limited (ASX: COH) 

Cochlear’s half-year report for FY21 on Friday was very much about a recovery in operations following significant COVID related disruptions to its cochlear implants (CI) business. The company’s revenues were ahead of Goldman expectations, with a respective 14% and 1% decline in CI units in Q1 and Q2, compared to the -12% and -32% consensus. The upbeat performance saw the Cochlear share price surge by more than 8% on Friday, marking it as the best performing ASX 200 share on the day. 

The company cited improving momentum across the second half, however, still very mixed by regional performance. Clinics in the United States, Japan and Korea were operating near pre-COVID capacity for most of the period, whilst Western Europe delivered a small decline, and emerging markets were still down some 30%. 

Cochlear went ahead to provide investors with FY21 earnings guidance, targeting earnings of $225 million to $245 million, representing growth of 46-59%. Goldman noted that the FY21 guidance implies a 6-10% 2-year compound annual growth rate (CAGR) from FY19, suggesting the recovery will likely still take longer than for many other stocks in the sector. 

The broker also flagged that momentum slowed across several countries from November, and Cochlear saw slower trading again in January and February due to recent surgery slowdowns. However, the deployment of vaccines and an expected recovery in surgical volumes should see volumes improve again. 

Despite the recovery taking place, Goldman still sees a greater risk of indefinite delay/volume loss than for most others in the sector. The broker remains sell-rated on Cochlear with a 12-month target price of $165, representing a 20% downside to today’s prices. 

More reading

• ASX 200 sinks 1.3%, Cochlear soars, TWE sours
• ASX 200 down 0.6%: Cochlear jumps, Goodman upgrades guidance
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• Cochlear (ASX:COH) share price in focus after delivering a solid half year result

Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It’s no secret that alternative energy sources are gaining interest. Arguably, many ASX investors are becoming more forward-looking with their investments, rather than making decisions based on lagging indicators. Examples of this include the electrification revolution and the growing interest in renewables technology.

Most recently, it appears ASX hydrogen shares have caught the eye of public markets. 

The market is constantly at work, attempting to uncover the next innovation that will address existing problems. As a former engineer myself, I believe this very ‘first principles’ approach towards investing has worth. Financials are always important, but in my opinion, a business should (first and foremost) add value by solving a problem.

On that note, hot on the tail of the lithium trend, hydrogen energy is another potential innovation in the renewable energy space being closely watched by investors. 

Hydrogen gaining its share of investments

As reported by the ABC, there have been a number of driving forces shining the spotlight on hydrogen in recent months. US President, Joe Biden’s plans for a carbon-free power supply by 2035, and $2 trillion in accelerated investments towards sustainable infrastructure, certainly give alternatives a boost.

More locally, Andrew Forest, best known for his role as chair of Fortescue Metals Group Limited (ASX: FMG), has announced his plans to invest billions into green hydrogen to expand his own energy business.

The beauty of hydrogen is, if it’s generated through electrolysis (a process of separating water molecules into hydrogen and oxygen using electricity), with the electricity sourced from renewable sources, the process is completely emission-free.

So let’s take a look at four ASX companies with exposure to hydrogen. 

Hydrogen shares on the ASX

Hazer Group Ltd (ASX: HZR)

Hazer is a Perth-based company that is in the process of commercialising a more efficient process for producing hydrogen. This unique process utilises iron ore as the catalyst for converting natural gas and methane into hydrogen and graphite. Given Hazer is commercialising its own production process, this company is somewhat of a pure-play hydrogen share.

Last month, Hazer reported its second-quarter performance, in which it reiterated the company’s focus remains on its commercial development project (CDP). Hazer aims to successfully complete this project in order to demonstrate the potential of its ‘Hazer Process’.

The Hazer share price has performed exceptionally well over the last year. Shareholders have been rewarded with a price appreciation of 168% over the period. At the time of writing, Hazer shares are trading at $1.345, with a market capitalisation of around $176 million.

Santos Ltd (ASX: STO)

Taking it to the large-cap space, Santos is also dabbling in hydrogen’s potential. Santos is Australia’s second-largest independent oil and gas producer. Only last week, Santos reported record annual production, with 89 million barrels of oil equivalent – 18% higher than the prior year. Yet, it appears Santos isn’t putting all of its eggs in one basket.

In July of last year, the oil giant commenced a concept study into the potential for hydrogen for the Cooper Basin. Santos Managing Director and CEO Kevin Gallagher stated that natural gas can be decarbonised at its source to make ‘zero-emissions’ or ‘blue’ hydrogen. The carbon dioxide produced would then be captured and stored in the reservoirs from which the gas came.

Hydrogen is also mentioned extensively in Santos’ latest Climate Change Report. It appears the company is still investigating the potential economics of it all. Santos is also working towards a net-zero emissions goal by 2040, which hydrogen could potentially help contribute to.

The Santos share price has struggled over the last 12 months, as demand for oil slumped during lockdowns. At the time of writing, Santos shares are down 11.5% from this time last year, underperforming the S&P/ASX200 Index (ASX: XJO), down 5%.

Province Resources Ltd (ASX: PRL)

Province Resources is a small mining company with a number of gold, sand, copper, and other mineral projects. However, it also operates a green hydrogen project named the HyEnergy Project.

The HyEnergy project was recently acquired through the company’s acquisition of Ozexco. Located in the Gascoyne region of Western Australia, HyEnergy is projected to generate 1 gigawatt (1,000 megawatts) of renewable energy to generate approximately 60,000 tonnes of green hydrogen. The proximity to ports also opens up the potential for exporting to international markets.

The Province Resources share price was plodding along, not doing too much for most of the year until recently. Following the announcement of the company’s acquisition, Province Resources shares skyrocketed from 2.6 cents to 14.5 cents. Since then, the Province Resources share price has fallen back to the current level of 8.5 cents at the time of writing, up 750% in 12 months.

Fortescue Metals Group Limited (ASX: FMG)

Fortescue Metals Group is well known for its iron ore operations in Australia. However, chair Andrew Forrest, and CEO Elizabeth Gaines plan on achieving net-zero emissions for the company by 2040.

To curve Fortescue’s emissions, the decarbonisation pathway is paved by hydrogen and battery electric solutions. In this way, Fortescue won’t necessarily be exporting hydrogen, but the company certainly plans to benefit from its application. 

The motivator for Fortescue is the potential to manufacture Australia’s own locally sourced “green steel”. Currently, Australia benefits from the exportation of our resources, such as iron ore. But if Fortescue can implement its green manufacturing plan through the use of hydrogen, we might be able to produce steel locally. This potential ‘vertical integration’ proposition would undoubtedly represent sweet whispers in the ears of investors.

The Fortescue share price has been boosted by strong iron ore prices over the past year, delivering 123% gains for shareholders. 

More reading

• ASX 200 Weekly Wrap: ASX lower despite bumper dividends
• 5 things to watch on the ASX 200 on Monday
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• Will Fortescue (ASX:FMG) shares really pay an 18% dividend yield in FY21?
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Mitchell Lawler 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 Bruce Jackson.

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Macquarie Group Ltd (ASX: MQG) share price has started the week strongly and is pushing higher on Monday.

At the time of writing, the investment bank’s shares are up 4% to $148.39.

Why is the Macquarie share price charging higher?

Investors have been buying Macquarie shares after it upgraded its full year guidance less than two weeks after issuing it.

At its operational briefing on 9 February, management advised that it expects its profit result in FY 2021 to be down slightly year on year. Positively, today, the company revealed that it now expects to achieve profit growth for the full year.

What did Macquarie announce?

According to the release, for the 12 months ending 31 March, Macquarie expects its profits to increase ~5% to ~10% on FY 2020’s results.

Management advised that extreme winter weather conditions in North America have significantly increased short-term client demand for its capabilities in maintaining critical physical supply across the commodity complex and particularly in relation to gas and power.

It explained that Macquarie’s Commodities and Global Markets (CGM) business physically ships gas on the majority of major pipelines across the United States and over time has built capacity to support clients by delivering power and physical commodities to help them meet the unexpected needs of their customers.

However, as before, its short-term outlook is subject to a range of uncertainties. This includes the duration and severity of the COVID-19 pandemic, the uncertain speed of the global economic recovery, and global levels of government support for economies.

Its result will also be subject to the completion of period-end reviews. These include asset impairment and expected credit loss allowances. Though, judging by the Macquarie share price performance, investors don’t appear concerned by these uncertainties.

Macquarie advised that it continues to maintain a cautious stance, with a conservative approach to capital, funding and liquidity. It believes this positions it well to respond to the current environment.

Where next for the Macquarie share price?

Positively, the Macquarie share price has been tipped to go even higher from here by one leading broker.

Earlier this month Morgan Stanley put an overweight rating and $160.00 price target on its shares. Though, this price target could soon change to reflect today’s positive update. 

More reading

• ASX 200 Weekly Wrap: ASX lower despite bumper dividends
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• Telstra (ASX:TLS) share price rises as brokers pass judgement on its profit result
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Audinate Group Ltd (ASX: AD8) share price is pushing higher in early trade.

At the time of writing, the media networking solutions provider’s shares are up almost 1% to $8.33.

Why is the Audinate share price pushing higher?

The catalyst for the rise in the Audinate share price this morning has been the release of its half year results. Those results revealed that the company has seen its revenue levels return to pre-COVID levels.

According to the release, Audinate reported revenue of US$11.1 million. This was flat on the prior corresponding (and COVID-free) period and up 19.5% on the second half of FY 2020.

Management advised that this was driven by a 48% increase in Software revenue. It notes that the company experienced significant growth in royalties, which was supported by growth in retail software sales and Dante Domain Manager sales.

The company’s Chips, cards & modules revenue benefitted from strong growth in Dante AVIO adaptors and good growth in Broadway and Ultimo chips. This partially offset a material decline in Brooklyn revenue. Management advised that its Brooklyn product is often sold into mixing consoles and is consequently most impacted by the decline in live sound and live events due to COVID-19.

Another positive was that Audinate’s gross margin remained steady at 77% despite a material shift toward software revenue. This led to gross profit of US$8.6 million, which was up slightly over the prior corresponding period from US$8.5 million.

However, due to currency headwinds, the company’s earnings before interest, tax, depreciation and amortisation (EBITDA) softened slightly to A$1.8 million. And while the company received A$0.8 million in JobKeeper payments, this was excluded from its EBITDA result.

And on the bottom line, Audinate reported a net loss after tax of A$1.2 million. This compares to a A$0.3 million profit in the same period last year.

Finally, the company recorded an operating cashflow of A$3.2 million, up from A$2.9 million a year earlier. This was primarily a result of cash from the aforementioned COVID related grants.

This left Audinate with cash (including term deposits) of A$66.3 million at the end of the period.

Management commentary

Audinate’s CEO and Co-Founder, Aidan Williams, was very pleased with the company’s performance during a difficult period.

He said: “We were very pleased with the FY21 first half revenue result and the overall financial performance of the business. It is encouraging to see business confidence returning to the AV industry, reflected in good demand for Dante products heading into the second half.”

Dante-enabled products continue to increase in numbers

The company notes that number of Dante enabled products manufactured by Audinate’s Original Equipment Manufacturer (OEM) customers is a key measure of its technology proliferation. It is also traditionally a leading indicator of future revenue growth.

Positively, at the end of the period there were 3,008 Dante-enabled products on the market, up 27% year on year. This is materially more than its nearest competitor.

In addition, the number of OEM customers with Dante-enabled products also grew 23% to 360 over the same period.

Outlook

Management advised that it is seeing confidence return amongst OEMs, system integrators, and end-users. This has resulted in an overall improved industry outlook for calendar year 2021.

Whilst COVID related risks remain (including to global supply chains), they are abating as vaccines are rolled out.

It notes that good trading conditions have continued into the beginning of the second half. However, it continues to expect Brooklyn revenue to be impacted by the downturn in live events and live sound.

Audinate also advised that it is accelerating its investment in growth, with a target headcount of >140 staff by the end of FY 2021. This is expected to result in an increase in operating costs of between A$2 million to A$3 million in the second half. This news could be holding back the Audinate share price a touch today.

Mr Williams said: “Whilst we remain wary of the potential near-term impacts of COVID, we are cautiously optimistic that the pandemic may serve as a catalyst for an acceleration of the transition from old school analogue cabling to networked audio and video. This bodes well for Audinate’s long term growth opportunities, and we are excited by the path we see ahead for our business.”

More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended AUDINATEGL FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Booktopia Group Ltd (ASX: BKG) share price will be on watch today, after the online book retailer released its half-year results for FY21 (1HY21) this morning.

Here’s a look at what the company has reported today.

Booktopia reports record first-half result

Booktopia reported a revenue increase of 51.1% to $112.6 million for the period.

The company shipped a record 4.2 million orders, compared to 3.2 million orders during the prior corresponding period. The average order value for 1H FY21 was $69.87.

The average annual spend for customers increased from $103.32 to $123.57.

Booktopia’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) (adjusted for IPO and conversion of preference share costs) fired up 502.3% to $8 million.

The company advised that strong ongoing demand and increased distribution capacity supported its 1H FY21 results.

Commenting on Booktopia’s performance, Chief Executive Officer Tony Nash said:

The demand we experienced from the beginning of the 2020 calendar year extended right through to Christmas, helping us to deliver the largest half-year revenue in the company’s history. Our investment in expanding capacity and automation ensured we were able to continue to meet our customer promise despite the unparalleled growth in volumes.

Outlook

Noting the uncertainty that the coronavirus continues to cause the business environment, Booktopia provided a revised FY21 forecast. 

The company is now expecting an FY21 revenue of $217.6 million, 7.9 million units shipped, and an underlying EBITDA of $12.9 million.

January and February 2021 have already delivered revenues in excess of those previously forecast. Booktopia also advised that its present database contains 5 million customers, with 2.3 million repeat customers.

Looking ahead, Mr Nash added that:

We will continue our growth strategy, investing in key areas of the business to cement our online market leadership and drive increased market share. This includes the continued expansion of our Publishing Services and Booktopia Publishing businesses.

The Booktopia share price has jumped 7.31% year-to-date and last closed at $2.79. The business has a current market capitalisation of $383.2 million and 137.4 million shares outstanding.

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Motley Fool contributor Gretchen Kennedy 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 Bruce Jackson.

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There are a few different reasons why the Wesfarmers Ltd (ASX: WES) share price could be a buy right now.

The old conglomerate has been operating for decades and it just reported its FY21 half-year result for the six months to 31 December 2020.

What businesses does Wesfarmers operate?

As a conglomerate, Wesfarmers operates a number of businesses including Bunnings, Kmart, Target, Catch and Officeworks. It has a chemicals, energy and fertilisers division. Wesfarmers also has an industrial and safety division.

How did Wesfarmers perform in the first six months of FY21?

Looking at its performance from continuing operations excluding significant items, Wesfarmers reported that its revenue grew by 16.6% to $17.8 billion.

Underlying earnings before interest and tax (EBIT) increased by 25.2% to $2.2 billion and net profit after tax (NPAT) grew 25.5% to $1.4 billion.

Looking at the underlying earnings before tax of each business, Bunnings earnings grew 35.8% to $1.27 billion, Kmart Group earnings went up 42% to $487 million, Officeworks earnings rose 22% to $100 million and industrial and safety earnings grew $30 million to $37 million. However, the Wesfarmers chemicals, energy and fertilisers earnings dropped 7.5% to $160 million.  

As a result of the performance, Wesfarmers’ board felt comfortable to grow the interim ordinary dividend by 17.3% to $0.88 per share.

3 reasons why the Wesfarmers share price could be a buy

1: Strong Bunnings performance

Bunnings is the key business in the Wesfarmers portfolio, it generates more than half of the underlying profit of the business.

In this result its revenue increased by 24.4% to $9 billion. Excluding the net contribution from property, earnings increased 39%.

Wesfarmers thinks that the trading performance is expected to continue to benefit from consumers continuing to spend more time at home. It continues to invest in its digital capabilities, broadening its commercial markets and strengthening both its in-store and online offering.

Bunnings is going through ongoing store network expansion, with five warehouses and one smaller format store under construction which is expected to open in the second half.

However, growth is expected to moderate from March as the business begins to cycle the initial impacts of COVID-19 in the prior year.

2: Recovery of Kmart Group

Kmart, and particularly Target, have struggled to deliver growth in recent times. In this result Kmart managed to grow revenue by 9% to $5.4 billion.

Wesfarmers said that good progress has been made during the half on executing the planned changes to the Kmart and Target store networks, with initial trading results from converted stores exceeding expectations.

Kmart saw lower clearance costs during the period, with an improved inventory position. Kmart has also been investing in its in-store retail technology, and developing its data and digital capabilities. Its online percentage of sales rose to 8.7%.

Perhaps most importantly, Target’s profitability improved during the half, reflecting a higher proportion of full-price sales and lower operating costs, supported by the ongoing simplification of the business. Target prioritised online growth, with online sales rising to 15.9% of total sales for the half.

Catch continues to grow strongly, with the gross transaction value increasing 95.6%.

3: Diversification

One of the differences between Wesfarmers and most other operating businesses on the ASX is that management are able to acquire (and divest) businesses across different industries.

There’s currently a focus on retail, but it does also own its industrial businesses.

Wesfarmers has also recently announced the joint approval of its final investment decision for the Mt Holland lithium project. Construction of the mine, concentrator and refinery is expected to commence in the first half of FY22. The first production of lithium hydroxide is expected in the second half of the 2024 calendar year. Wesfarmers’ share of capital expenditure for the development of the project is estimated at approximately $950 million.

Valuation

The Wesfarmers share price is trading at 28x FY21’s estimated earnings according to Commsec.

More reading

• ASX 200 Weekly Wrap: ASX lower despite bumper dividends
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• 3 reasons the Wesfarmers (ASX:WES) share price could be in the buy zone
• Wesfarmers (ASX:WES) share price on watch after broker upgrade
• ASX 200 mixed, CSL reports 44% profit growth, TWE soars

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Reliance Worldwide Corporation Ltd (ASX: RWC) share price should react positively to its profit news but a sombre outlook could give investors pause for thought.

However, the nearer-term outlook could be brighter than the company is making it out to be. Management made no mention of the extreme snow storm hitting the US. I’ll explain more later.

Reliance share price gets profit boost

The plumbing products supplier reported an 82% surge in interim net profit to $91.4 million while revenue increased by 13% to $642.4million.

Its bottom line was bolstered by a tax benefit but even adjusting for that, its adjusted net profit still managed an enviable 56% uplift to $99.3 million.

First half revenue growth would have been a more impressive 17% too if not for the weakening US dollar that lowered its Australian dollar adjusted figures.

The growth in profit prompted management to increase its interim dividend by a third to 6 cents a share.

Firing on all cylinders

But what supporters might be most pleased about is that all the markets that Reliance Worldwide operates in reported good growth.

Sales in its Americas division jumped 22% on a constant currency basis. Strong residential renovation and building activity in the US drove most of this increase.

Meanwhile, its Asia Pacific business experienced a 14% sales improvement while Europe, Middle East and Africa (EMEA) jumped 10%.

Government stimulus and pent-up demand

The housing boom in Australia is the main contributor to growth in Asia Pacific. Record low interest rates and government stimulus have benefitted Reliance.

These same factors should also be supportive of the BlueScope Steel Limited (ASX: BSL) share price, CSR Limited (ASX: CSR) share price and Boral Limited (ASX: BLD) share price.

Coming back to Reliance Worldwide, growth in its EMEA division was largely due to the UK. The company reported pent-up demand for its products in that country as COVID-19 lockdown restrictions were eased.

Growth to moderate?

However, management is warning that the strong sales growth may not persist, at least not at the same pace.

For instance, the unwinding of both the HomeBuilder program and some state government incentives could also put the brakes on growth in Australia.

Also, the US housing market experienced a significant upswing since March 2020 and Reliance Worldwide believes things will slow from March this year.

Snowstorm could prove a second tailwind

But this may not be the case for the US, in my opinion. The snow storm that is sweeping over large parts of the US is likely to drive a spike in demand for its unique pipe repair product.

Extreme cold is good for Reliance Worldwide sales as water pipes burst when water freezes. As the snow storm recedes, I believe there will be a lot of pipes that will need repairing in more states than has historically been the case.

After all, you only need to look at Texas to see what I mean.

More reading

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Brendon Lau owns shares of BlueScope Steel Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Reliance Worldwide Limited. The Motley Fool Australia has recommended Reliance Worldwide Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Replacing a wage with a reliable and growing passive income is likely to be a key aim for many people. While that task can take many years to achieve, it is possible to gradually build an income stream from dividend shares that offer rising shareholder payouts.

With many dividend stocks currently trading at attractive prices due to the uncertain global economic outlook, now could be the right time to start investing money in income opportunities. Over time, they could ultimately fully replace a wage to provide financial freedom in retirement.

Investing money in dividend stocks for a passive income

Despite the recent stock market rally, it is still possible to purchase dividend shares that offer high yields at the present time. Some sectors are unpopular among investors, which means that share prices are low. This could allow an investor to earn a relatively high passive income from their capital in 2021 and in the coming years.

Clearly, a large sum of capital would be required to earn an income return that is large enough to replace a wage. For most people, this will not be possible in the short run or even over the next few years. As such, investing money in companies that have high yields, as well as dividend growth potential, could be a shrewd move. They may be able to provide a growing income return that eventually replaces a salary.

Identifying the right dividend shares

Finding the right dividend shares to buy now could be crucial to an investor’s chances of generating a large and growing passive income. As such, buying companies that have affordable dividends could be a sound move. They may be less likely to reduce them. A stock’s dividend affordability can be checked by dividing net profit by dividends paid. A figure above one suggests they are sustainable at their current level given recent profitability.

Identifying dividend growth shares is a more challenging task. They are likely to depend on profit growth, since a rising dividend requires a greater pool of capital to pay it. Companies that could raise their dividends at a fast pace include those businesses operating in industries with recovery potential after the recent economic challenges, as well as companies in sectors that are likely to benefit from long-term shifts in consumer spending and demographics.

Of course, even the highest-yielding stocks and companies with strong dividend growth prospects can fold. Unforeseen circumstances can negatively impact on their financial performances and capacity to make shareholder payouts. Therefore, it is crucial to diversify across a wide range of businesses to create a reliable passive income stream. Over time, and with regular investing in such companies, it is possible to earn a surprisingly large income that may be enough to provide financial freedom in place of a wage.

More reading

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Motley Fool contributor Peter Stephens 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 Bruce Jackson.

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At the start of each week I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Webjet Limited (ASX: WEB) remains the most shorted share on the ASX with short interest of 13.1%. This was up week on week from 12.5%. Last week the online travel agent released its half year results and reported an 89% decline in total transaction value to $267 million and a $40.1 million loss.
• Tassal Group Limited (ASX: TGR) has seen its short interest rise to 12.3%. Short sellers appear to be targeting the seafood producer due to concerns that China could slap duties on Australian seafood exports.
• Speedcast International Ltd (ASX: SDA) has short interest of 9.3%. This communications satellite technology provider’s shares have been suspended for over a year while it undertakes a recapitalisation.
• Mesoblast limited (ASX: MSB) has seen its short interest rebound week on week to 8.8%. This biotech company’s shares have come under pressure in recent months following a series of disappointing trial results.
• Inghams Group Ltd (ASX: ING) has 8.6% of its shares held short, which is flat week on week once again. Much to the dismay of short sellers, this poultry company’s share pushed higher last week after a solid half year update. Inghams posted a 28.4% increase in underlying profit.
• AVITA Medical Inc (ASX: AVH) has seen its short interest rise week on week to 8%. Last week the medical device company reported a 56% in half year revenue to $10.2 million but a loss of $15.8 million. The latter was 13% larger than the prior corresponding period.
• Service Stream Limited (ASX: SSM) has short interest of 7.3%. The essential network services company’s shares have come under pressure this year amid a series of mixed contract updates.
• Resolute Mining Limited (ASX: RSG) has entered the top ten with short interest of 7.3%. This gold miner’s shares are trading close to a 52-week low. Investors have been selling its shares due to industrial disruption at its Syama operation. This recently led to the company providing soft guidance for 2021.
• Western Areas Ltd (ASX: WSA) has seen its short interest fall to 7.2%. Short sellers have been going after the nickel producer due to production issues at its Flying Fox operation.
• Myer Holdings Ltd (ASX: MYR) has 7% of its shares held short, which is down slightly week on week once again. The market appears concerned that COVID-19 is accelerating the structural pressures the department store operator is facing.

More reading

• ASX 200 sinks 1.3%, Cochlear soars, TWE sours
• Brokers name 3 ASX shares to buy right now
• Here’s why the Inghams (ASX:ING) share price is on the rise today
• 5 things to watch on the ASX 200 on Friday
• Top fund manager names these 2 ASX shares as buys

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Avita Medical Limited and Service Stream Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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