Category: Stock Market

Chances are that if you own ASX shares, or have ever been involved with the world of the ASX share markets, you would have heard about the wonders of franking credits and a ‘fully-franked dividend‘.

Whenever you hear someone discussing ASX dividend investing, it will only be a matter of time until franking comes up.

Franking is a unique feature of Australia’s tax system. And understanding franking and how it relates to personal finances is vital, particularly around this time of year when our tax lodgings are coming up.

So, let’s start at the beginning.

What are franking credits?

Franking credits were first introduced in the 1980s to correct what many saw as an unfair point of our tax system.

When a company pays a dividend, it can only do so from a pool of profits that have already been taxed at the corporate level. Before franking was introduced, dividend payments to shareholders were treated as ordinary income subject to income tax. This effectively meant they were taxed twice.

Recognising that this practice of taxing dividends twice was arguably unfair, the Federal Government introduced franking. Put simply, if a company today pays a dividend from a pool of cash that has already been taxed, that dividend comes with a receipt of sorts that confirms the tax already paid. That ‘receipt’ is officially known as a franking credit (sometimes called an imputation credit).

Those investors who receive these franking credits in recognition of the taxes that have already been paid can use them as a tax deduction against other income. If someone receiving the franking credits has no taxable income (a retiree, for example), they can claim the franking credits back as a cash refund.

Franking and tax time

Most ASX shares that pay dividends are taxed in Australia. As such, fully franked dividends are common on the ASX.

Telstra Group Ltd (ASX: TLS), Woolworths Group Ltd (ASX: WOW) and BHP Group Ltd (ASX: BHP) are some examples of shares that almost always fork out fully franked dividends. As are most of the ASX banks, including the Commonwealth Bank of Australia (ASX: CBA).

However, some companies have operations outside Australia and thus pay their taxes in other jurisdictions. If this is the case, these companies might only pay partially franked dividends or even completely unfranked dividends.

Franking credits are very valuable to almost every ASX investor. For example, let’s say an ASX share pays out a fully franked dividend worth a yield of 5%. In this scenario, the grossed-up yield with the value of the franking credits included would be approximately 7.14%. That extra return can make a big difference to an investor’s wealth over time.

Now, you might understand why almost every ASX investor loves a fully-franked dividend.

So, if you have ASX shares, double-check the franking credits you are entitled to receive and be sure to include them on your tax return.

The post Tax time: If you have ASX shares, here’s what you need to know about franking credits appeared first on The Motley Fool Australia.

More reading

• How much passive income could I earn by investing $100 a month in ASX shares?
• Why Nvidia stock blasted to a $3 trillion market cap on Wednesday
• 3 ASX 200 shares with ex-dividend dates next week
• 3 ASX shares set for dividend increases this year
• Are Woolworths shares a no-brainer buy?

Motley Fool contributor Sebastian Bowen has positions in Telstra Group. 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 positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Australian share market is filled to the brim with dividend-paying shares.

However, not all of these ASX shares will be paying dividends that are larger than what they paid last year.

But three shares that analysts believe are destined to increase their dividends this year (and next) are listed below.

Here’s what they are forecasting for these ASX shares:

Deterra Royalties Ltd (ASX: DRR)

Deterra Royalties has been tipped to pay some big (and growing) dividends to investors. It is a mining royalties company, pocketing money from mining operations such as Mining Area C, operated by BHP Group Ltd (ASX: BHP), without lifting a shovel.

In FY 2023, the company rewarded its shareholders with a fully franked 28.9 cents per share dividend.

According to a recent note out of Morgan Stanley, its analysts are forecasting Deterra Royalties to increase its dividend to 32.7 cents in FY 2024 and then 39 cents in FY 2025. Based on the current Deterra Royalties share price of $4.58, this will mean dividend yields of 7.1% and 8.5%, respectively.

Morgan Stanley also sees plenty of upside for this ASX share. It currently has an overweight rating and $5.60 price target.

Suncorp Group Ltd (ASX: SUN)

Another ASX share that could be destined to grow its dividends is Suncorp. It is one of Australia’s largest insurance companies, operating brands including AAMI, Apia, Bingle, GIO, Shannons, and Vero.

In FY 2023, the insurance giant paid shareholders a fully franked 60 cents per share dividend.

Analysts at Goldman Sachs believe that a big increase is coming in FY 2024, with another more modest increase the year after. It is forecasting fully franked dividends per share of 78 cents in FY 2024 and then 83 cents in FY 2025. Based on the current Suncorp share price of $16.19, this will mean dividend yields of 4.8% and 5.1%, respectively.

Goldman has a buy rating and $17.54 price target on its shares.

Telstra Corporation Ltd (ASX: TLS)

Finally, a third ASX share that looks set to increase its dividend this year and next is telco giant Telstra.

In FY 2023, the company’s return to growth allowed the Telstra board to increase its dividend to a fully franked 17.5 cents per share.

Goldman Sachs believes this trend can continue thanks to the strength of its mobile business. As a result, it is forecasting fully franked dividends of 18 cents per share in FY 2024 and then 18.5 cents per share in FY 2025. Based on the current Telstra share price of $3.53, this equates to yields of 5.1% and 5.25%, respectively.

The broker has a buy rating and $4.25 price target on its shares.

The post 3 ASX shares set for dividend increases this year appeared first on The Motley Fool Australia.

More reading

• Are Telstra shares now a brilliant bargain?
• ‘Undervalued’: 3 ASX 300 shares to buy following significant share price falls
• Buy Rio Tinto and these ASX dividend stocks for 5%+ yields
• 2 ASX income shares with 20%+ upside and 6%+ dividend yields
• Here is the earnings forecast through to 2026 for Telstra shares

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 Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Every so often, the share market throws up some amazing investment opportunities.

Could Woolworths Group Ltd (ASX: WOW) shares be one of these right now?

With its shares down 21% from their highs, let’s see what analysts are saying about the supermarket giant.

Are Woolworths shares a no-brainer buy?

The team at Goldman Sachs thinks that investors should be fighting to get hold of Woolworths shares while they are down in the dumps.

A recent note out of the investment bank reveals that the broker has a conviction buy rating and $39.40 price target on the retailer’s shares.

Based on the current Woolworths share price of $31.99, this implies potential upside of 23% for investors over the next 12 months.

Let’s put that into context. If you were to invest $10,000 into the company’s shares, this would turn into $12,300 if Goldman Sachs’ is on the money with its recommendation and valuation.

But the returns won’t stop there. Your $10,000 investment would also generate income from dividends.

Goldman is forecasting fully franked dividends of $1.08 per share in FY 2024, $1.14 per share in FY 2025, and then $1.23 per share in FY 2026. This represents dividend yields of 3.4%, 3.55%, and 3.85%, respectively.

And in respect to dividend income, this would yield approximately $340, $355, and $385 of dividends for those financial years.

Why Woolies?

Goldman believes that recent weakness means that Woolworths shares are trading at an attractive level for a value entry point. Particularly given the company’s quality and its defensive earnings.

In addition, the broker is positive about Woolworths’ growth outlook due largely to its customer loyalty. It believes this is among the stickiest that you will find in Australia, which bodes well for the future. Goldman summarises:

WOW is the largest supermarket chain in Australia with an additional presence in NZ, as well as selling general merchandise retail via Big W. We are Buy rated on the stock as we believe the business has among the highest consumer stickiness and loyalty among peers, and hence has strong ability to drive market share gains via its omni-channel advantage, as well as its ability to pass through any cost inflation to protect its margins, beyond market expectations. The stock is trading below its historical average (since 2018), and we see this as a value entry level for a high-quality and defensive stock.

The post Are Woolworths shares a no-brainer buy? appeared first on The Motley Fool Australia.

More reading

• Would I be crazy to buy Coles shares at $16?
• About to retire? I’d buy these ASX dividend shares for income
• Here’s how the ASX 200 market sectors stacked up last week
• How I’d try to turn an empty portfolio into $300k by buying cheap ASX shares, starting now
• 3 ASX 200 blue-chip shares to buy now

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 Goldman Sachs Group. 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.

The Wesfarmers Ltd (ASX: WES) share price has surged 34% over the past 12 months to close at $65.40 on Wednesday.

Shares in the retail conglomerate have soared despite challenging economic times as sticky inflation and high interest rates continue to take a toll on consumer spending.

Wesfarmers has outperformed other retailers over the same period, including Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL), which dropped by 16% and 7%, respectively.

So, is it too late to buy Wesfarmers shares?

Strong retail business

Wesfarmers owns a diversified portfolio of retail businesses, including Officeworks, Bunnings, and Kmart, which helps the company perform defensively through various economic cycles.

In the company’s half-year FY2024 results announcement, Wesfarmers managing director Rob Scott highlighted:

Wesfarmers’ retail divisions executed strongly during the half, responding effectively to changing customer needs as households increasingly sought out value.

In this environment, the retail divisions’ core offer of everyday products with market-leading value credentials supported growth in sales and customer transaction numbers.

Weak lithium prices add pressure

While its retail business is going strong, its lithium project is affected by weak global commodity prices.

Wesfarmers is investing in a lithium mining project at Mt Holland, which is in the ramp-up stage. The project’s profitability largely depends on fluctuations in global commodity prices and foreign exchange rates.

Unfortunately, the lithium price plummeted last year, falling 67% from US$45,000 per tonne of lithium carbonate to approximately US$14,500 per tonne today. As my colleague Bronwyn noted here, the outlook remains uncertain as the global lithium price is closely tied to the demand for electric vehicles.

Wesfarmers acknowledged these challenges. In the half-year results briefing, Scott added:

Strong operating performance continued in WesCEF, with good plant availability and production rates during the period. As previously indicated, earnings for the half were impacted by lower global commodity prices relative to the elevated pricing environment over recent years.

The Mt Holland concentrator was successfully commissioned during the half, and operations recently entered the ramp-up phase. Good progress continued on the construction of the Kwinana lithium hydroxide refinery.

How cheap are Wesfarmers shares now?

Wesfarmers shares are trading at 27 times FY24’s estimated earnings, which is at the high end of its historical trading range of 15 to 30 times. The company offers a fully-franked dividend yield of 3%.

Comparing Wesfarmers to its peers, based on earnings estimates provided by S&P Capital IQ:

• Woolworths shares are valued at 22x FY24’s estimated earnings.
• Coles shares are valued at 26x FY24’s estimated earnings.

The outperformance of Wesfarmers compared to its peers prompted Goldman Sachs to downgrade the consumer discretionary stock in favour of staples recently. In this downgrade report summarised by my colleague Bronwyn, Goldman Sachs analysts Lisa Deng and James Leigh highlighted:

… our Buy thesis of resilient retail (Bunning and Kmart) businesses generating ~A$2.0-A$2.5 billion free cashflow to invest behind growth opportunities (Digital and Health) is now fully factored in.

Foolish takeaway

Wesfarmers owns several high-quality retailers with strong customer loyalty. It also invests in diverse industries, including healthcare, chemicals, and industrial businesses.

However, its current valuation isn’t cheap relative to its history, making this a tricky investment decision.

While the Wesfarmers share price may not be a bargain, the company has been an excellent dividend payer over the years. At the current price, Wesfarmers offers a fully franked dividend yield of 3%.

I think it might still be worth considering for long-term dividend investors.

The post Up 34% in a year, is it too late to buy Wesfarmers shares? appeared first on The Motley Fool Australia.

More reading

• 2 great ASX All Ords shares that I’d like to buy
• Do Wesfarmers shares pay a decent ASX dividend?
• ASX retail shares mixed amid modest April sales growth
• ASX investors may choose supermarkets over Wesfarmers shares after ACCC inquiry: broker
• Why did Goldman Sachs just downgrade Wesfarmers shares?

Motley Fool contributor Kate Lee 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 Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Do you have room for some more ASX dividend stocks in your income portfolio?

If you do, then it could be worth checking out the three stocks in this article.

That’s because analysts think they are in the buy zone and destined to provide investors with some very attractive dividend yields in the near term. Here’s what you can expect from them:

Centuria Industrial REIT (ASX: CIP)

Centuria Industrial could be an ASX dividend stock to buy. It is Australia’s largest domestic pure play industrial property investment company.

At the last count, it had a portfolio of 88 high-quality, fit-for-purpose industrial assets worth a collective $3.8 billion. The company notes that these assets are based in key in-fill locations and close to key infrastructure.

Analysts at UBS are positive on the company and believe that some good yields are coming in the near term. The broker is forecasting dividends per share of 16 cents in both FY 2024 and in FY 2025. Based on the current Centuria Industrial share price of $3.17, this represents dividend yields of 5% for income investors in both years.

UBS has a buy rating and $3.71 price target on its shares.

Eagers Automotive Ltd (ASX: APE)

Another ASX dividend stock that could offer a great yield is Eagers Automotive.

It is the leading automotive retail group in Australia and New Zealand, with a long history stretching back over 110 years.

With its shares down heavily this year due to concerns over excess inventory and soft demand, Bell Potter believes investors should be snapping them up on the cheap.

Especially with the broker forecasting some above-average dividend yields from Eagers Automotive.

It is expecting fully franked dividends of 64.5 cents per share in FY 2024 and then 73 cents per share in FY 2025. Based on its current share price of $10.11, this represents dividend yields of 6.4% and 7.2%, respectively.

Bell Potter also sees significant value in its shares at current levels. The broker has a buy rating and $13.35 price target on its shares.

IPH Ltd (ASX: IPH)

A final ASX dividend stock for income investors to consider buying is IPH.

It is an international intellectual property (IP) services group with a network of member firms working throughout 10 IP jurisdictions. IPH has clients in more than 25 countries. This includes Fortune Global 500 companies and other multinationals, public sector research organisations, SMEs, and professional services firms.

Goldman sees it as a great option for income investors and is forecasting fully franked dividends of 34 cents per share in FY 2024 and 37 cents per share in FY 2025. Based on the current IPH share price of $6.39, this represents yields of 5.3% and 5.8%, respectively.

Goldman has a buy rating and $8.70 price target on IPH’s shares.

The post Buy these ASX dividend stocks with 5% to 6% yields appeared first on The Motley Fool Australia.

More reading

• Insiders are buying these 6 ASX All Ords shares
• The worst three performing ASX 200 shares in May unmasked
• These ASX shares can rise 25% to 100%+
• Guess which ASX 200 billionaire is buying up big again
• 4 ASX 200 shares receiving broker upgrades

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 Goldman Sachs Group. The Motley Fool Australia has recommended Eagers Automotive Ltd and IPH. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

On Wednesday, the S&P/ASX 200 Index (ASX: XJO) was on form again and pushed higher. The benchmark index rose 0.4% to 7,769 points.

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

ASX 200 expected to climb again

The Australian share market looks set for another good session on Thursday after a strong night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 51 points or 0.65% higher this morning. In the United States, the Dow Jones was up 0.25%, the S&P 500 rose 1.2% and the Nasdaq jumped 2%. The S&P 500 hit a record high overnight.

Oil prices rebound

ASX 200 energy shares including Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a good session after oil prices rebounded overnight. According to Bloomberg, the WTI crude oil price is up 1.2% to US$74.15 a barrel and the Brent crude oil price is up 1.2% to US$78.47 a barrel. Traders appear to believe that oil has been oversold this week.

Mineral Resources’ $1.3b asset sale

The Mineral Resources Ltd (ASX: MIN) share price will be one to watch today. That’s because the mining and mining services company has just announced a major asset sale. The company has entered into a binding agreement with Morgan Stanley Infrastructure Partners for the sale of a 49% interest in the Onslow Iron project’s dedicated haul road. Management expects the sale to generate total proceeds of $1.3 billion. Mineral Resources will retain a 51% interest in the asset and have exclusive rights to use, operate and maintain the road.

Gold price rises

It could be a good day for ASX 200 gold miners such as Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) today after the gold price pushed higher overnight. According to CNBC, the spot gold price is up 1.1% to US$2,373.3 an ounce. The precious metal rose after bond yields retreated.

Miners set to rise

Mining giants BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) look set to rebound on Thursday after a tough few days. BHP shares rose overnight on both the London Stock Exchange and New York Stock Exchange, which bodes well for today’s session. This was driven by a rebound in commodity prices. For example, the copper price rose 2% to US$4.63 a pound.

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

More reading

• Here are the top 10 ASX 200 shares today
• Is buying ASX gold shares right now a good idea?
• How the latest GDP data could bring ASX 200 investors interest rate relief
• Are headwinds brewing for ASX 200 energy shares?
• Why is the BHP share price tumbling on Wednesday?

Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. 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.

The listed investment company (LIC) Australian Foundation Investment Co Ltd (ASX: AFI) is invested in a wide array of different companies and sectors. I think it’s important to know what you’re invested in with AFIC shares or any other diversified options, so we’ll examine that below.

AFIC is one of the oldest investment companies in Australia. It has been operating since 1928 and delivers its investment strategy for investors at a very low annual management cost of 0.14% (and no performance fees), allowing investors to enjoy the benefits of the returns.

The LIC’s website states it aims to invest in between 60 to 80 companies across a range of sectors. Those investments are “selected for their ability to perform through economic cycles and generate returns over the long-term.”

AFIC shares its biggest 25 investments each month, so let’s examine the portfolio as of 31 May 2024.

Top holdings

The biggest positions are important because they have the largest impact on the performance of AFIC shares and its net tangible asset (NTA) value.

Excluding cash, the largest 25 holdings comprised 79.6% of the portfolio on 31 May 2024. There were ten positions that had a weighting of at least 2.5%, which I’ll list below and their allocation of the portfolio:

• Commonwealth Bank of Australia (ASX: CBA) shares (9.6% of the portfolio)
• BHP Group Ltd (ASX: BHP) shares (8.6%)
• CSL Ltd (ASX: CSL) shares (7.5%)
• Wesfarmers Ltd (ASX: WES) shares (4.8%)
• National Australia Bank Ltd (ASX: NAB) shares (4.6%)
• Macquarie Group Ltd (ASX: MQG) shares (4.5%)
• Westpac Banking Corp (ASX: WBC) shares (4%)
• Transurban Group (ASX: TCL) shares (3.6%)
• Goodman Group (ASX: GMG) shares (3.6%)
• Rio Tinto Ltd (ASX: RIO) shares (2.5%)

Some of its other top 25 holdings are smaller but more growth-focused, such as CAR Group Limited (ASX: CAR), Resmed CDI (ASX: RMD), Reece Ltd (ASX: REH) and Xero Ltd (ASX: XRO).

I’ll also point out that the LIC has a relatively small, but growing, part of the portfolio allocated to international shares. The company reveals its holdings each year in its annual result, with the latest being the 2023 annual report.

Sector allocation

To get an overall picture of how AFIC shares are positioned, let’s look at the industry weightings.

As of 31 May 2024, AFIC had the following investments by sector:

• Banks (20.3%)
• Materials (15%)
• Healthcare (13%)
• Industrials (11.2%)
• Other financials (9%)
• Consumer discretionary (8.2%)
• Communication services (6.5%)
• Real estate (5%)
• Consumer staples (3.9%)
• Energy (3.7%)
• Information Technology (2.7%)
• Cash (1.5%)

While banks and resources may have a large allocation (around 35% between them), it’s lower than how the S&P/ASX 300 Index (ASX: XKO) is positioned. In the Vanguard Australian Shares Index ETF (ASX: VAS) portfolio, which tracks the ASX 300, banks and resources make up more than 50% of the portfolio.

AFIC share price snapshot

The AFIC share price has dropped around 3% since the start of 2024, as shown on the chart below.

The post Considering investing in AFIC shares? Here’s what you’re buying appeared first on The Motley Fool Australia.

More reading

• What you need to know about AFIC shares in June

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 CSL, Goodman Group, Macquarie Group, ResMed, Transurban Group, Wesfarmers, and Xero. The Motley Fool Australia has positions in and has recommended Macquarie Group, ResMed, Wesfarmers, and Xero. The Motley Fool Australia has recommended CSL, Car Group, and Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Almost everyone reading this article will have a superannuation account, and probably with a fair bit of cash in it, too. Since the introduction of the superannuation guarantee in 1992, it has been mandatory that almost all Australian workers quarantine a small portion of their pay packets within a superannuation fund.

This ‘small portion’ has actually grown into a sizeable one over time. Upon the super system’s debut in the 1990s, it was initially set to 3%. But as it stands today, the superannuation guarantee sits at 11% and will rise to 11.5% come 1 July next month.

What is superannuation?

Our superannuation scheme represents a societal grand bargain of sorts. Individual Australians would part with full control over this portion of ‘their’ paycheques in exchange for lucrative tax perks within the super system and the promise of a more comfortable retirement that is less reliant on the Federal Government’s Age Pension.

However, this superannuation bargain has been tested in recent years. There was the pandemic-era decision to allow Australians to withdraw up to $20,000 of their super during the pandemic. That was a decision many found questionable at the time.

There has also been significant debate revolving around the idea that first-home buyers should be able to access their super funds to help purchase their first home.

With the COVID pandemic now in the rearview mirror, most Australians might assume that the super system has gone back to its roots, and is only there to provide a pathway for a comfortable retirement. However, this might not be the case.

Retirement fund or dental account?

Most of the time, superannuation is not allowed to be withdrawn for everyday use. However, there are provisions in place that permit early withdrawals on compassionate grounds. Those might include expected medical expenses or economic or domestic hardship.

But according to reporting in the Australian Financial Review (AFR) last month, it seems that many Australians are exploiting these provisions for illegal access to superannuation.

According to the report, the Australian Taxation Office (ATO) estimates that the 2020 financial year saw $381 million in unauthorised superannuation funds withdrawn from self-managed super funds (SMSFs). Over FY2021, it was $256 million.

Some of the reasons the ATO gave for these withdrawals were a lack of knowledge about the system, financial stress and personal issues. That’s on top of a ‘It’s my money and I will do what I like with it’ attitude.

Between FY2019 and FY2023, the applications for early super withdrawals reportedly increased 40%. Applications for early withdrawal for factors like mortgage stress, disability and palliative care did fall over the period. But they were more than offset by a rise in those seeking early super access for medical expenses. These included everything from dental work to weight loss procedures.

We’re not here to judge individual financial circumstances. However, there are a few reasons why withdrawing from your super should be a move of absolute last report for anyone considering it.

3 reasons why you should leave your super alone

Less super means a poorer retirement

Firstly and most importantly, you’ll hobble your chances of a comfortable retirement. Superannuation has been designed as our primary route to a comfortable retirement. The Age Pension is supposed to serve only as a safety net. If you reach retirement age with little to no super, you’ll have to rely on the incontrovertibly modest Age Pension for the rest of your life.

You’ll lose any autonomy you might have had over your retirement had you not withdrawn any funds. Not to mention being entirely reliant on what the Government decides to pay you. You’ll also be hoping against hope every Budget that the Government can continue to afford to pay your Pension.

Giving up compound interest

Another reason super should be thought of as a last resort is the compounding nature of this investment. When your money goes into your super fund, it is typically invested in assets like ASX shares. These investments compound over time, ensuring that early contributions end up providing the bulk of your wealth once you reach retirement age.

Let’s say a 25-year-old withdrew $10,000 during the pandemic. This could end up costing them more than $180,000 in super balance by the time they reach the retirement age of 67. That’s assuming a modest 7% per annum return. This loss could stretch to nearly $400,000 if they went the whole hog and took out $20,000.

It doesn’t matter the reason for the withdrawal. Any money you take out of super will cost you dearly down the track.

Raiding your superannuation increases the burden on all Australians

The third reason is a selfless one, but worthy of discussion nonetheless. The provision of the Age Pension is a costly program, one of the single costliest items in the Budget.

Now most Australians don’t mind paying their taxes to ensure that all Australians can have a dignified retirement. But the whole point of super is to relieve taxpayers of at least some of the burden of paying for others’ retirements.

If you raid your super early, you will increase the financial burden on all other taxpayers if you then have to claim the Pension because your super balance isn’t enough to cover your own bills. Something to keep in mind if you ever find yourself thinking about dipping into your superannuation savings.

The post 3 reasons it’s a very bad idea to draw down on your superannuation early appeared first on The Motley Fool Australia.

More reading

• Investing like billionaire Bill Ackman: 2 ASX stocks ticking all boxes
• Buy these ASX 200 dividend stocks in June for an income boost
• Capital raise sends Novonix shares down 9% before trading halt
• Here are the top 10 ASX 200 shares today
• Up 260% in 2024, this ASX All Ords stock just hit another all-time high

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Bill Ackman is worth US$9.3 billion today, a fortune that would put the American hedge fund manager in tenth place among Australian rich listers. You won’t find any ASX stocks in Ackman’s portfolio, but his style can be replicated locally.

Renowned painter and sculptor Pablo Picasso said, “Good artists copy, great artists steal.” In a sense, investing is an art form. By studying the greats — Warren Buffett, Peter Lynch, Stanley Druckenmiller, and others — we can craft our own unique investing approach.

A billionaire’s playbook

Ackman’s fund, Pershing Square, presides over approximately US$15 billion in assets under management. According to the latest filing, the fund’s portfolio consists of seven concentrated investments in the following companies:

• Universal Music Group
• Chipotle Mexican Grill Inc (NYSE: CMG)
• Hilton Hotels Corporation (NYSE: HLT)
• Restaurant Brands International Inc (NYSE: QSR)
• Alphabet Inc (NASDAQ: GOOG)
• Howard Hughes Holdings Inc (NYSE: HHH)
• Canadian Pacific Kansas City Ltd (TSE: CP)

There are a few commonalities between each of these companies. A strong brand is an obvious one. Most people know Chiptole, Hilton Hotels, and Google (owned by Alphabet). Branding allows companies to shift away from competing on price, enabling greater profits for shareholders.

Other companies in Ackman’s portfolio rely on different moats, such as efficient scale. Take Canadian Pacific, for example. The railway operator is the first single-line network connecting Canada, the United States, and Mexico.

Ultimately, the company benefits from being the dominant operator in an area where demand is limited and costs are prohibitive for competitors to reach scale.

Another critical factor in Ackman’s stock selection is the contrarian mantra. The Pershing Square founder explained this on the Lex Fridman Podcast (linked above), stating:

Price matters a lot. You can buy the best business in the world, and if you overpay, you’re not going to earn particularly attractive returns. So we get involved in cases where a great business has made a big mistake, or has kind of lost its way, but is recoverable.

In short, it involves investing when a good company is out of favour due to a solvable problem.

2 Ackman-tier ASX stocks

If I applied Bill Ackman’s investing style to the ASX, two companies would come to mind: Sonic Healthcare Ltd (ASX: SHL) and Collins Foods Ltd (ASX: CKF).

Sonic Healthcare is similar to Canadian Pacific, both touting efficient scale. The ASX-listed diagnostics company is dominant in an industry with limited demand. Competitors are held at bay by the large capital investment needed to acquire the necessary testing equipment.

Shares in Sonic are down ~48% from their all-time highs. The fall coincides with a dramatic reduction in COVID-testing revenues, pulling down earnings. However, this could be what Ackman describes as a recoverable issue for a great business.

Secondly, Collins Foods is an ASX stock trading on a forward price-to-earnings (P/E) ratio of ~16 times earnings. This is despite the KFC and Taco Bell food chain flexing a lengthy record of strong growth. Collins Foods’ revenues have more than doubled in less than six years.

The post Investing like billionaire Bill Ackman: 2 ASX stocks ticking all boxes appeared first on The Motley Fool Australia.

More reading

• Now could be an opportunity to snap up overlooked ASX shares
• Here are the top 10 ASX 200 shares today
• Directors keep buying beaten-up Sonic Healthcare shares. Should you?
• Here’s how I’d target a $2,000 second income by investing $35 a week
• 4 ASX 200 shares being scooped up by insiders

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Mitchell Lawler has positions in Sonic Healthcare. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Chipotle Mexican Grill, and Howard Hughes. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Restaurant Brands International. The Motley Fool Australia has recommended Alphabet, Chipotle Mexican Grill, Collins Foods, and Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

There are lots of dividend stocks to choose from on the local share market.

In fact, there’s so much choice, it can often be hard to decide which ones to buy over others.

To narrow things down, I have picked out three dividend options that analysts have recently named as buys and tipped to offer good dividend yields.

Here’s what you need to know about these ASX 200 dividend stocks:

Aurizon Holdings Ltd (ASX: AZJ)

Aurizon could be an ASX 200 dividend stock to buy right now. Across a network spanning thousands of kilometres, it transports commodities, including mining, agricultural, industrial and retail products for a diverse range of customers across Australia.

Ord Minnett thinks it would be a great option for investors. Particularly given its belief that Aurizon could be in a position to boost its dividend nicely next year.

The broker is forecasting partially franked dividends of 18.6 cents per share in FY 2024 and then 24.4 cents per share in FY 2025. Based on the current Aurizon share price of $3.72, this will mean dividend yields of 5% and 6.5%, respectively.

Ord Minnett has an accumulate rating and $4.70 price target on its shares.

Charter Hall Retail REIT (ASX: CQR)

Another ASX 200 dividend stock that could be a good option for income investors is the Charter Hall Retail REIT.

It is a property company with a focus on supermarket anchored neighbourhood and sub-regional shopping centre markets.

Citi rates the company highly due partly to its inflation-linked rental increases. It is expecting this to underpin some big dividend yields in the near term.

The broker is forecasting dividends of 28 cents per share in both FY 2024 and FY 2025. Based on the current Charter Hall Retail REIT share price of $3.34, this will mean very large yields of 8.4%.

Citi has a buy rating and $4.00 price target on its shares.

QBE Insurance Group Ltd (ASX: QBE)

Another ASX 200 dividend stock that could be a buy is insurance giant QBE.

Morgans is very positive on the company. This is due to the strong rate increases that are still flowing through its insurance book and further cost-out benefits. It also highlights that its shares look relatively inexpensive at current levels.

As for income, the broker expects dividends per share of ~99 cents in FY 2024 and then ~108 cents in FY 2025. Based on the current QBE share price of $18.08, this will mean yields of 5.5% and 6%, respectively.

Morgans has an add rating and $20.00 price target on the insurance giant’s shares.

The post Buy these ASX 200 dividend stocks in June for an income boost appeared first on The Motley Fool Australia.

More reading

• 3 reasons to buy QBE shares right now
• 2 top ASX income shares that analysts love
• Buy these ASX 200 dividend shares for passive income in June
• Morgans says these ASX dividend shares are top buys
• Looking to retire? Buy these ASX dividend shares for passive income

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Aurizon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.