Category: Stock Market

ASX bank shares have been tumbling lower in 2020, but could they be back in the buy zone?

Why are ASX bank shares trading cheaply today?

The biggest factor hammering the S&P/ASX 200 Index (ASX: XJO) lower in 2020 is the coronavirus pandemic. COVID-19 has brought the global economy to a standstill as borders have shutdown and people have been forced indoors.

But the Aussie banks have been hit particularly hard this year. In fact, ASX banking shares are underperforming the benchmark index by some margin as loan impairments rise and dividends are slashed.

Initially, APRA was putting pressure on the banks to conserve cash in the current environment. However, investors are now wondering if earnings could suffer and dividends could continue to fall due to lower profits as well.

Is it a good time to buy?

All of these headwinds have spooked investors into selling off the banks in droves. However, the fact is that the ASX bank shares like Commonwealth Bank of Australia (ASX: CBA) remain a pillar of the Aussie economy. While there is the rise of neobanks threatening their business model, many Aussie banks are actually backing their own horses in this race.

For instance, National Australia Bank Ltd. (ASX: NAB) is behind UBank while Bendigo and Adelaide Bank Ltd (ASX: BEN) supports Up. This could mean the increasing popularity of neobanks might not be the death sentence for ASX bank shares that many expect.

Furthermore, despite softer earnings, CBA still posted a half-year cash profit of $4.5 billion. COVID-19 will pass and I think we could see Aussie banks continue to pay strong dividends, albeit at lower levels, well into the future.

Foolish takeaway

No one knows where the ASX 200 is headed in 2020. However, I think the ASX bank shares are still high-quality companies with strong earnings potential. This could mean now is a good time to buy your favourite bank’s shares at a discounted price.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Top brokers pick the latest ASX stocks to buy today
• Is it time to buy ASX banks?
• Here’s why the Fortescue share price hit an all-time high today
• Is the ASX 200 getting too far ahead of itself?

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Are ASX bank shares worth buying despite dividend cuts? appeared first on Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) has been on strong form over the last few trading days, which has led to a number of shares storming higher.

A few shares have even climbed so much they have just hit record highs.

Three shares which are flying high right now are listed below. Here’s why they just hit record highs:

Ansell Limited (ASX: ANN)

The Ansell share price reached a record high of $35.00 on Tuesday. Investors have been fighting to get hold of the health and safety products company’s shares due to the increasing demand it is experiencing during the pandemic. This has particularly been the case for its hand and body protection solutions which offer protection from infective agents. In light of this strong demand, the company was able to reaffirm its guidance. It expects earnings per share in the range of 112 US cents to 122 US cents in FY 2020.

Fortescue Metals Group Limited (ASX: FMG)

The Fortescue Metals share price jumped to a record high of $13.95 yesterday. Investors have been buying the iron ore producer’s shares due to the resilience of the price of the steel making ingredient during the pandemic. With the iron ore price at this level and Fortescue on track for record shipments this year, the miner looks well-placed to deliver bumper profits and free cash flows. This is likely to lead to the company rewarding shareholders with generous dividends and potentially share buybacks.

Pushpay Holdings Ltd (ASX: PPH)

The Pushpay share price stormed to a record high of $6.80 on Tuesday. The donor management system provider’s shares have been racing higher since the release of its full year results earlier this month. Investors were impressed with Pushpay’s 1,506% increase in EBITDAF to US$25.1 million and its very positive guidance for FY 2021. Management expects its EBITDAF to grow 91.2% to 107% next year. But perhaps even better is the company’s longer term ambition of winning a 50% share of the medium to large church market. This represents a US$1 billion revenue opportunity, which is materially more than FY 2020’s operating revenue of US$127.5 million.

More reading

• Here’s why the Fortescue share price hit an all-time high today
• 3 fantastic ASX shares to buy now to get rich later
• Macquarie picks the best stocks to buy for the post COVID-19 rebound
• Could ASX 200 iron ore shares save the Australian economy?
• 3 ASX shares that will have strong dividends in 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia has recommended Ansell Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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Is the Macquarie Group Ltd (ASX: MQG) share price a buy? It’s still down 30% due to the worries about the coronavirus impacts on its profit.

A couple of months ago on 23 March 2020 Macquarie’s share price actually fallen to around $72, so it has actually gone up 47% since then. But is it a buy now? A 30% decline is still a hefty discount to the pre-coronavirus price.

Macquarie is clearly going to experience some financial pain during the rest of the 2020 calendar year. It’s why the global investment bank recognised FY20 credit and other impairment charges of around $1 billion, up from $552 million last year, primarily related to the potential economic impacts of the coronavirus pandemic.

The second half net profit of $1.274 billion was down 13% on the first half of FY20 and down 24% on the second half of FY19. It’s clear that the profit is being hit and the Macquarie share price is matching that trajectory. Assets under management (AUM) were pleasingly up by 10% to $606.9 billion over the year. This provides a reliable source of revenue.

What about the Macquarie dividend?

The Macquarie Board don’t have a lot of control over the Macquarie share price but you can make interesting conclusions from the dividend decision.

Macquarie decided to halve the final dividend to $1.80 pre share, down from $3.60 a year ago. The total FY20 dividend was $4.30 per share, down 25%.

I think Macquarie shareholders can be quite pleased with that final dividend. Keeping more capital on the balance sheet is a good idea – no-one knows what’s going to happen next. But getting income is still good. 

Macquarie did still pay a dividend, unlike Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) which deferred the dividends. And National Australia Bank Ltd (ASX: NAB) cut the dividend by even more than Macquarie.

Is the Macquarie share price a buy?

It has recovered strongly. There’s going to be less profit generation from Macquarie during this period. At the current Macquarie share price I’d much prefer it to Commonwealth Bank of Australia (ASX: CBA) and the other big four ASX banks due to Macquarie’s earnings diversification with its balanced segments, defensive asset management earnings and geographical spread of earnings.

More reading

• Is it time to buy ASX banks?
• Macquarie picks the best stocks to buy for the post COVID-19 rebound
• ASX 200 up 1.35%: Gold miners and Fortescue rocket higher, big four banks tumble
• Why Macquarie, Telstra, United Malt, & Westpac are dropping lower
• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re looking to invest in dividend shares, then I think the three listed below would be great options.

This is because, during these uncertain times, these companies look well-placed to continue paying their dividends as normal.

Here’s why I would buy them for income:

Rural Funds Group (ASX: RFF)

Thanks to the quality of its portfolio and long term tenancy agreements, this agriculture-focused property group remains well-positioned to continue growing its distribution during the pandemic and beyond. Rural Funds recently reaffirmed its distribution guidance of 10.85 cents per share in FY 2020 and then 11.28 cents per share in FY 2021. This equates to yields of 5.85% and 6.1%, respectively.

Telstra Corporation Ltd (ASX: TLS)

Another option to consider is Telstra. I think the telco giant is a great income option due to its generous yield and defensive qualities. The latter has been on show in FY 2020, with Telstra one of only a handful of companies that has been able to reaffirm its guidance. I believe this guidance positions the company well to maintain its 16 cents per share dividend this year. This equates to a fully franked 5.15% dividend yield. And with its headwinds easing and T22 strategy bearing fruit, I suspect a return to growth could be just a couple of years away.

Wesfarmers Ltd (ASX: WES)

A final dividend share to buy could be conglomerate Wesfarmers. It is the company behind the likes of Bunnings, Kmart, Catch, and a wide range of industrial and chemical businesses. It also has a sizeable cash balance which looks likely to fund acquisitions in the near future. Combined, I believe Wesfarmers has a solid and diverse business which is likely to deliver growth in earnings and dividends whatever economic cycle we are in. At present I estimate that its shares offer a FY 2021 dividend yield of approximately 4%.

More reading

• 2 ASX shares I plan to hold til I’m 100
• Macquarie picks the best stocks to buy for the post COVID-19 rebound
• 2 ASX 50 shares for retirees to buy right now
• Forget term deposits and buy these top ASX dividend shares
• 2 ASX shares I would buy for growth and income

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and Telstra Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 3 safe and strong ASX dividend shares to buy right now appeared first on Motley Fool Australia.

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On Tuesday the S&P/ASX 200 Index (ASX: XJO) continued its strong form and charged higher again. The benchmark index climbed 1.8% to 5,559.5 points.

Will the market be able to build on this on Wednesday? Here are five things to watch:

ASX 200 expected to drop lower.

The ASX 200 looks set to end its winning streak on Wednesday. According to the latest SPI futures, the benchmark index is expected to open the day 1.5% or 82 points lower. This follows a disappointing night of trade on Wall Street, which saw the Dow Jones fall 1.6%, the S&P 500 drop 1.05%, and the Nasdaq index slide 0.55% lower.

Sydney Airport update

The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price will be on watch this morning when it provides the market with its latest update. Sydney Airport’s update will reveal the full extent of the impact of the pandemic on its operations. The market will no doubt be also looking for commentary regarding how quickly it expects travel markets to rebound.

Oil prices mixed.

Energy producers such as Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) will be on watch today after a mixed night for oil prices. According to Bloomberg, the WTI crude oil price is up 1.7% to US$32.36 a barrel and the Brent crude oil price has fallen 0.7% to US$34.55 a barrel. Brent crude oil pushed higher on demand hopes.

Gold price rebounds.

Gold miners such as Northern Star Resources Ltd (ASX: NST) and St Barbara Ltd (ASX: SBM) could be on the rise today after the gold price rebounded. According to CNBC, the spot gold price stormed 0.9% higher to US$1,749.50 an ounce. Traders were buying the precious metal amid concerns that recessions are coming in many major economies.

Computershare business update.

The Computershare Limited (ASX: CPU) share price could be on the move today after the release of a business update yesterday evening. According to the release, the majority of the share registry company’s underlying businesses are operating resiliently during the pandemic. It has reaffirmed its management earnings per share guidance of a 20% decline.

More reading

• Top brokers pick the latest ASX stocks to buy today
• Here’s why the Fortescue share price hit an all-time high today
• Is the ASX 200 getting too far ahead of itself?
• Macquarie picks the best stocks to buy for the post COVID-19 rebound
• Are CBA shares in the buy zone?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 5 things to watch on the ASX 200 on Wednesday appeared first on Motley Fool Australia.

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