Category: Stock Market

The S&P/ASX 200 Index (ASX: XJO) was already struggling today before the latest Australian inflation data hit the wires.

At 11.30am AEST, the benchmark index was down just over 0.6%.

Then the Australian Bureau of Statistics (ABS) released the April consumer price index (CPI) data.

And the ASX 200 promptly dropped another 0.3% to be 0.94% lower at the time of writing.

Here’s why investors are favouring their sell buttons on the heels of the latest Australian inflation figures.

ASX 200 investors eyeing higher interest rates for longer

Most analysts, including the economics team at National Australia Bank Ltd (ASX: NAB), had forecast that April’s monthly CPI indicator would decline to 3.4% year on year from the 3.5% annual figure reported last month.

This would have indicated that the Reserve Bank of Australia’s series of interest rate hikes commenced in May 2022 was continuing to cool down fast-rising prices.

And it would have signalled that ASX 200 investors might yet expect several interest rate cuts from the RBA this year. The current cash rate stands at 4.35%. That’s the highest level since December 2011, and it’s up from the historic low of 0.10% in early May 2022.

But in its latest CPI report, which should have been titled ‘Don’t shoot the messenger’, the ABS threw cold water on hopes for multiple RBA interest rate cuts in 2024.

That’s because the headline CPI indicator rose 3.6% in the 12 months to April 2024, well above consensus estimates.

Commenting on the uptick that’s pressuring the ASX 200 today, Michelle Marquardt, ABS head of prices statistics, said:

Annual inflation increased to 3.6% this month, up from 3.5% in March. Inflation has been relatively stable over the past five months, although this is the second month in a row where annual inflation has had a small increase.

The biggest contributors to price increases in April were housing (up 4.9%), food and non-alcoholic beverages (up 3.8%), alcohol and tobacco (up 6.5%), and transport (up 4.2%).

Electricity prices would have topped this list if not for the introduction of the Energy Bill Relief Fund rebates in July 2023, which could artificially dampen the real level of inflation.

Electricity prices rose 4.2% in the 12 months to April. “Excluding the rebates, electricity prices would have risen 13.9% in the 12 months to April 2024,” Marquardt said.

Underlying inflation, which takes out volatile items like fuel, holiday travel, and fruit and veggies, remained steady on an annual basis.

“When excluding these volatile items from the monthly CPI indicator, the annual rise to April was steady at 4.1%,” Marquardt said.

She added that “Annual inflation excluding volatile items remains higher than for the monthly CPI indicator.”

At 4.1%, that’s more than twice the lower level of the RBA’s 2% to 3% inflation target range.

With inflation again proving sticky, it’s looking more likely that ASX 200 investors will have to wait until 2025 to see the first interest rate relief.

The post Why did the ASX 200 just plunge on the latest Aussie inflation print? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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.

After two consecutive days of gains, the Commonwealth Bank of Australia (ASX: CBA) share price is falling today.

Shares in the S&P/ASX 200 Index (ASX: XJO) bank stock closed up 0.2% yesterday trading for $120.31. In late morning trade on Wednesday, shares are changing hands for $118.80 apiece, down 1.3%.

For some context the ASX 200 is down 0.9% at this same time.

Still, as you can see on the chart above, the CBA share price has been a very strong performer over the past 12 months, hitting a new all-time closing high of $122.26 earlier this month, on 16 May.

Despite slipping from that high, the ASX 200 bank stock remains up 19.3% since this time last year, far outpacing the 6.6% gains posted by the benchmark index over this same period.

And that doesn’t include the two fully franked dividends CBA delivered over the year, totalling $4.55 a share. If we add those back in, then the accumulated value of CommBank shares is up 23.9% in 12 months, with potential tax benefits from those franking credits.

But with Australia’s biggest bank now trading at a price-to-earnings (P/E) ratio of 20.9 times, well ahead of its peers, a growing number of analysts are saying the CBA share price may have flown too close to the sun.

And a substantial correction could be looming.

Is the CBA share price primed for a fall?

Novus Capital’s John Edwards predicts that after the big run higher for the CBA share price, ASX 200 investors would do well to consider taking some profits.

According to Edwards (courtesy of The Bull):

Operating income fell 1% in the third quarter of fiscal year 2024. Net interest income was 1% lower and net interest margins slightly fell. We expect margin pressure on earnings to impact the full year results. CBA shares have risen from $111.86 on April 19 to trade at $120.815 on May 23.

We expect the share price to fall substantially following full year results expected in August. In the meantime, investors may want to cash in some gains.

The CBA share price closed down 2.2% on 9 May, the day the bank released its third-quarter results.

But don’t rush to sell your CommBank stock just yet.

Despite the big run higher for the CBA share price, Tony Paterno, senior investment adviser at Ord Minnett, has a different prediction and ‘hold’ rating on the stock.

“The bank reported an unaudited 2024 third quarter cash net profit after tax of $2.4 billion, down 3% on the quarterly average in the first half. The decline is tracking marginally better than we expected,” Paterno said (courtesy of The Bull).

Paterno added:

Operating expenses were well contained, up by 2%. In the next five years, we assume pricing on loans and customer deposits will enable a modest margin improvement and a return to loan growth in line with the market.

Long-term investors, take note.

The post Why the CBA share price is predicted to ‘fall substantially’: broker appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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.

The S&P/ASX 200 Index (ASX: XJO) growth share Aristocrat Leisure Limited (ASX: ALL) has achieved enormous success in the past decade. One expert believes the company can continue its winning streak.

This business is best known for designing, manufacturing, and selling poker machines used in casinos, pubs, and other venues in Australia, the US, and various other countries. Aristocrat Leisure also has a growing digital gaming presence.

Past performance is not a reliable indicator of future performance, but over the last 10 years, the Aristocrat Leisure share price has risen around 750%, as shown in the chart below.

Christopher Watt from Bell Potter Securities thinks the ASX 200 growth share is still a buy.

Market-beating performance

Writing on The Bull, Watt noted the company’s recent FY24 first-half result delivered “strong earnings that exceeded consensus estimates”.

That result showed revenue rose by 6.1% to $3.27 billion and reported net profit after tax (NPAT) grew by 8.9% to $711.3 million.

Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 17.6% to $1.2 billion, and normalised earnings per share (EPS) increased by 19.5% to $1.12. The profit growth enabled the board of directors to increase the interim dividend per share by 20% to 36 cents.

The ASX 200 growth share explained revenue increased due to strong performance in its North American gaming operations, reflecting the expansion of its installed base and “leading game portfolio performance”. Aristocrat Leisure also attributed the revenue growth to “strong” sales in most of its ‘rest of the world’ markets and encouraging growth for its digital operations.

Bell Potter’s Watt attributed the strong profit performance to corporate costs being lower than expected.

Watt called Aristocrat Leisure a buy. He said:

The stock remains one of the highest quality growth names on the ASX.

Outlook for the ASX 200 growth share

The poker machine business expects to deliver underlying net profit (NPATA) growth in the full-year result. Three factors contribute to that expectation.

First, it’s expecting to achieve “continued strong market share, revenue and profit growth” from its electronic gaming machines division.

Second, it’s working with “disciplined execution” within the Pixel United segment “with a focus on market share and investment efficiency to maintain momentum”.

Finally, it’s working on accelerating the performance of the Aristocrat Interactive division, with “further scaling of content to support broader market access in North America and Europe.”

Aristocrat Leisure share price snapshot

Since the start of 2024, it has risen around 8%, compared to less than 1% for the ASX 200.

The post Buy ‘one of the highest quality’ growth shares on the ASX 200 appeared first on The Motley Fool Australia.

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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 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.

If you are looking for market-beating growth stocks, the ASX is a great starting point. Here, investors can buy small pieces in some of Australia’s most promising, innovative, and generally cool businesses.

NextDC Ltd (ASX: NXT) fits the bill nicely, in my opinion. Shares in the technology player have skyrocketed from $8.15 at the close on 31 October 2022 to $17.63 before market open today. That means a $10,000 investment in this ASX growth stock over this time would now be worth approximately $21,600.

Let’s explore what’s driving this remarkable performance.

What’s driving NextDC’s impressive growth?

NextDC offers colocation services through its top-tier data centres in Australia and the Asia-Pacific region. These are known as “Tier III and Tier IV” centres.

The surge in demand for cloud computing and artificial intelligence (AI) has boosted the need for data centre capacity, propelling NextDC’s growth.

According to a January report from investment bank UBS, its analysts expect AI revenues to grow “15 times, from USD$28 billion in 2022 to USD$420 billion in 2027”.

This was a 72% compounding annual growth rate (CAGR), “making AI one of the fastest-growing and largest segments within global tech”, UBS said.

The recent results of tech firm NVIDIA Corporation (NASDAQ: NVDA) are a testament to this.

Why is NextDC a top ASX growth stock?

The AI boom is expected to drive even more demand for data centres, positioning NextDC for future growth. And I have two more reasons why this demand makes NextDC a standout ASX growth stock.

One, the big end of town, is getting involved. Private equity giants Blackstone Inc, KKR & Co, and Brookfield Infrastructure Partners are betting large on the AI trend, according to a report in The Australian Financial Review.

Blackstone recently completed a US$10 billion acquisition in the industry. The other two firms conducted deals in US data centres worth $US43 billion between 2021 and 2023, more than five times the prior three years, according to the AFR.

Secondly, brokers are bullish. Morgan Stanley recently rated the stock as overweight with a $20.00 price target, suggesting 11.5% upside potential as I write.

Fellow broker Morgans also has a $19.00 share valuation on the company. It notes that “structural demand for cloud and colocation remains incredibly strong”, and expects “significant new customer wins over the next six-to-twelve months”.

Should you invest in this ASX growth stock?

NextDC runs data centres, which are in huge demand, and is well-positioned to meet this rising demand.

The company’s expansion efforts could also make it a compelling ASX growth stock. In the 12 months to December 2023, the company produced $209.1 million in revenue, up 31% year-on-year. It also grew net tangible assets per share from $3.60/share to $4.25/share.

NextDC has delivered outstanding returns, turning a $10,000 investment into $21,000 in less than two years.

The company’s strong market position and rising demand for data centres highlight its potential for continued growth. But remember — past performance is no guarantee of future results.

The post 1 ASX growth stock that turned $10,000 into $21,000 in less than 2 years appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow 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.

BHP Group Ltd (ASX: BHP) shares are back in the green after opening lower this morning.

Shares in the S&P/ASX 200 Index (ASX: XJO) mining giant closed flat yesterday trading for $45.08. In morning trade on Wednesday, shares are swapping hands for $45.13 apiece, up 0.1%.

For some context, the ASX 200 is down 0.8% at this same time.

BHP shares will be catching some headwinds from the 1.2% decline in iron ore prices overnight. The steel making metal dipped to US$117.90 per tonne amid resurgent concerns over Chinese demand.

But foremost on investors’ minds today is tonight’s deadline for the ASX 200 miner’s $74 billion takeover proposal of Anglo American (LSE: AAL).

Following a one-week extension on the heels of the miner’s third offer, BHP now has until 5pm London time today (overnight Aussie time) to commit to a deal or potentially request another extension.

Here’s what’s happening with BHP shares.

Will the third bid be a winner?

Investor focus homed in on BHP shares on 26 April when the miner made its first takeover bid for Anglo American.

BHP is primarily interested in Anglo’s high-quality copper assets and, likely, its Queensland-based coal mines as well.

Copper prices hit record highs last week, having surged 29% over the past 12 months. The red metal is currently trading for US$10,502 per tonne, up from US$8,123 a year ago.

BHP is less interested in Anglo American’s diamond businesses. And the ASX 200 miner has also flagged its intentions to divest Anglo’s South African iron ore and platinum businesses.

Those divestments are complicating matters for Anglo’s board. Anglo’s management says the risk for its own shareholders is too high under the existing structure. Anglo’s investors will be left holding shares in the divested companies, which are forecast to struggle if left to their own devices.

Although, Anglo American has also indicated its own significant restructuring plans. Those include multiple divestments, its Australian coal mines among them.

The Anglo American board also said BHP’s initial offer undervalued the company’s long-term potential, particularly with the strong demand growth forecast for copper.

This saw Anglo’s board also reject BHP’s second offer, made on 14 May and valued at some $64 billion.

The third, and likely final, bid came on 23 May. This current bid values Anglo American at a whopping $74 plus billion. BHP shares closed down 2.9% on the day the bid was revealed.

However, the third bid did earn BHP a one-week extension to engage in discussions with Anglo American, and BHP CEO Mike Henry has flown to London for face-to-face meetings.

Should I buy BHP shares now?

Most likely, we’ll know at market open whether or not the $74 billion BHP deal has gone through or been permanently tabled. And BHP shares could make some big moves based on the outcome.

Unless, of course, the negotiations are extended.

That would require the green light from Anglo American. But according to anonymous sources cited by Bloomberg, any extension on negotiations is far from certain unless the two sides are already nearing a deal.

So, should I buy BHP shares now before the acquisition outcome is announced?

Well, Novus Capital’s John Edwards has the ASX 200 miner as a ‘hold’ for now (courtesy of The Bull).

“The market is concerned BHP may be offering too much for Anglo American,” Edwards said. “On the positive side, Anglo American has some of the best copper mines in the world.”

Indeed, those are the two big concerns.

A successful $74 billion deal could see the ASX 200 miner come under short-term pressure.

However, with the global charge towards electrification showing no signs of slowing down, copper demand growth is widely forecast to see the red metal continue to trade at new all-time highs over the months and potentially years ahead. (Though there will certainly be some pullbacks along the way.)

So I think investors with a long-term horizon would do well to buy BHP shares ahead of the announcement, which could see BHP become the largest copper producer on Earth.

The post Should you buy BHP shares now before tonight’s Anglo American takeover reveal? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) stock just keeps rising. Today’s jump of about 7% as of 1 p.m. ET wasn’t due to any new information from the company. Nvidia released its quarterly earnings last week and the stock jumped on that news.

But today’s move — and the reason why Nvidia shares can keep moving higher — comes from another company’s announcement today. Nvidia’s sales have been soaring, and now investors see another multibillion-dollar customer coming in Elon Musk’s xAI.

How can Nvidia be worth so much?

Nvidia’s stock took off when it started monetizing sales of its processors used for artificial intelligence (AI) applications. Sales of its GPUs continue to rise, with the company saying its sees revenue more than doubling in the current quarter compared to the year-ago period.

Those sales are going to a wide range of technology companies building AI large language models and vastly increasing computing power. Last year, the top customers for Nvidia’s GPU offering included many well-known companies.

But while one Elon Musk company (Tesla) was on that list, another just announced it raised a fresh $6 billion in capital. And many expect much of the funds xAI just raised to be spent on Nvidia’s processing chips.

xAI is Musk’s start-up working to develop artificial intelligence. It just announced a new funding round this weekend that raised $6 billion and values the private company at about $24 billion, according to Musk. Reports have indicated that xAI plans to build a supercomputer to power a new version of xAI’s chatbot named Grok. xAI may partner with Oracle using what could be tens of thousands of Nvidia chips.

With xAI not even making the top dozen customers for Nvidia’s H100 GPUs in 2023, the news is making investors bullish that the backlog of demand for Nvidia’s AI chips has a long tail. That’s why the stock remains a buy even after its recent run to a record level. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Prediction: Nvidia stock will continue to rise…and here’s why appeared first on The Motley Fool Australia.

More reading

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Howard Smith has positions in Alphabet, Amazon, Microsoft, Nvidia, and Tesla. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Baidu, Meta Platforms, Microsoft, Nvidia, Oracle, Tencent, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Alibaba Group and has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

It is fair to say that the lithium industry has been a very difficult place to invest in recent times.

With lithium prices crashing materially over the past 12 months as supply increases and demand softens, a number of ASX 200 lithium stocks have recorded sizeable declines.

While this is disappointing, brokers believe that it could have created a buying opportunity for at least a couple of leading miners.

Let’s take a look at which two miners analysts are currently tipping as buys:

Arcadium Lithium (ASX: LTM)

The first ASX 200 lithium stock that brokers are bullish on is Arcadium Lithium. It is one of the world’s largest lithium miners with operations across several geographies and lithium types.

Bell Potter is very positive on the company due to the diversity of its operations. It believes this positions Arcadium Lithium perfectly for when lithium prices eventually rebound. The broker explains:

LTM provides the largest, most diversified exposure to lithium in terms of mode of upstream production, asset locations, downstream processing and customer markets. It is a key large-cap leverage to lithium prices and sentiment, which we expect to improve over the medium term. The group has a strong balance sheet and growth portfolio.

Bell Potter currently has a buy rating and lofty $10.40 price target on the company’s shares. Based on the current Arcadium Lithium share price of $6.94, this implies potential upside of approximately 50% for investors between now and this time next year.

IGO Ltd (ASX: IGO)

Another ASX 200 lithium stock that could be a buy is IGO.

Goldman Sachs is a big fan of the company due to the low costs of its operations. It believes this leaves IGO well-placed to navigate the current environment of low battery material prices. It explains:

Greenbushes is the lowest cost lithium asset in our coverage. Production growth more than offsets increasing strip ratio: The addition of CGP3 (under construction) and CGP4 (planned) should take Greenbushes production capacity from ~1.5Mtpa today to ~2.4Mtpa (excluding tailings processing of ~0.3Mtpa), and they are planned to be funded from existing Greenbushes debt facilities, combined with Greenbushes cash flows (though we factor in below nameplate). We reiterate our belief that further Greenbushes expansion remains one of the most economically compelling brownfield lithium projects.

The broker has a buy rating and $8.10 price target on IGO’s shares. Based on its current share price, this implies potential upside of 11.5% for investors over the next 12 months.

The post 2 beaten down ASX 200 lithium stocks that analysts love appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro own Arcadium Lithium shares. 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.

There certainly have been some big gains recorded in the gold sector over the last 12 months.

But if you thought it was too late to invest at this side of the market, think again.

That’s because analysts at Bell Potter are tipping one ASX 200 gold stock to rise over 50% from current levels.

Which ASX 200 gold stock?

The ASX 200 gold stock in question is De Grey Mining Limited (ASX: DEG).

De Grey Mining is a Western Australian gold explorer and project developer. It is responsible for one of Australia’s most exciting new gold discoveries – the Hemi project in the Pilbara.

The 100% owned Hemi discovery is an intrusion-hosted form of gold mineralisation which has not been previously encountered in the Pilbara.

Management notes that the high value of the discovery is driven by its size, grade continuity, closeness to surface growth potential. The deposits have the potential to be mined by large scale, low strip ratio, low cost open pit mining methods.

What is the broker saying about De Grey Mining?

Bell Potter notes that the ASX 200 gold stock is currently finalising a fully underwritten equity raising totalling approximately $600 million at an issue price of $1.10 per new share. The broker believes this will see the Hemi project through to development and has described it as a “significant milestone” for the company. It said:

This latest equity raise is a significant milestone for DEG, with the company stating that it completes the equity funding component of the project finance package for the HGP, which has an estimated CAPEX of $1,345m.

In response, the broker has reiterated its speculative buy rating with a trimmed price target of $1.76. Based on its current share price, this implies potential upside of 56% for this ASX 200 gold stock over the next 12 months.

What else did the broker say?

Commenting on the equity raising, Bell Potter adds:

DEG has sought its equity funding earlier than we expected, with debt still to be finalised and key permits for the HGP yet to be obtained. While we do not foresee any reason for these not to be issued, delays are a risk, in our view, as we have recently observed permitting timelines becoming longer in WA. Overall, however, we view it as a positive de-risking event and a major box ticked for project development as the HGP advances towards a final investment decision in mid-CY24, targeting production in 2HCY26.

Another positive is that the broker feels that the equity raising will help the company avoid being taken over. It concludes:

We also see a tactical aspect in DEG being in a stronger position to defend any takeover approaches, which we consider to be reasonably likely. We update our valuation for dilution of the equity issue, partially offset by application of our latest (higher) gold price forecast to our risk-adjusted project valuation. Our valuation drops by 7%, to $1.76/sh. We retain our Speculative Buy recommendation.

The post Why this ASX 200 gold stock could rise 50%+ appeared first on The Motley Fool Australia.

More reading

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

I like investing in S&P/ASX 200 Index (ASX: XJO) blue-chip shares when they’re trading at good value. Good prices don’t usually stick around forever, so it is worth being opportunistic and jumping on them when the stock looks compelling.

Good blue chips are usually among the best in their industry in the country. Being the biggest and best at what they do means they typically have pricing power, strong profit margins, and a strong market position.

I’m bullish about the below three ASX 200 blue-chip shares, so I’m calling them buys today.

Telstra Group Ltd (ASX: TLS)

Telstra is the leading telecommunications business in Australia, with the largest subscriber base and the biggest mobile network.

In the FY24 first-half result, the business added 625,000 mobile services in operation (SIO) over the 12 months to 31 December 2023, representing an increase of 4.6%. This pleasing increase showed that the ASX telco share can continue to lead the market.

Winning more subscribers and strengthening its market position gives it additional financial firepower to invest more than rivals in the telco infrastructure, entrenching its position as the leader.

Adding more subscribers also helps grow its profit margins because the fixed costs of the business are being shared across more users. For example, in the HY24 result, mobile income rose 4% to $5.3 billion and mobile earnings before interest, tax, depreciation and amortisation (EBITDA) increased 13% to $2.5 billion.

As a bonus, Telstra currently offers a grossed-up dividend yield of more than 7%. I think the ASX 200 blue-chip share looks cheap after falling around 20% in the past year, as seen on the chart below.

Woolworths Group Ltd (ASX: WOW)

Woolworths is the biggest supermarket business in Australia, with a market capitalisation of more than $38 billion.

I like the moves by the company in recent years to diversify and grow its earnings through acquisitions. For example, it has bought a majority stake of PETstock and it has expanded into business-to-business (B2B) food supply through PFD.

The Woolworths share price has sunk 16% in 2024 to date, as shown on the chart below. It’s coming under pressure amid scrutiny about its choices relating to inflation and whether it was price gouging.

The ASX 200 blue-chip share reported its FY24 third-quarter update in early May. The average price change in the Australian food division, excluding tobacco and fruit and vegetables, was just 0.1%. This shows that food inflation has significantly eased. Pleasingly, Woolworths Group’s total third-quarter sales increased 2.8%, showing that the business is still growing.

I think the company is a buy at this level, with longer-term tailwinds including population growth and e-commerce growth. In the FY24 third quarter, Woolworths reported its e-commerce sales grew by 18.4% to $1.5 billion.

Brickworks Limited (ASX: BKW)

Brickworks is the biggest brickmaker in Australia and the northeast of the US. The company also has several other building product businesses in Australia, including Bristle Roofing, Austral Masonry, UrbanStone, Terracade, Southern Cross Cement, and Capital Battens.

The FY24 half-year result saw higher margins in its Australian building products division through price increases and productivity improvements. It said it has recently implemented additional initiatives that are expected to deliver $15 million of annualised savings.

Brickworks is undertaking a series of plant closures during the second half of FY24 to carry out maintenance and control inventory, which I think is a wise move. Management said the company is “well-placed to meet [an] expected longer-term uplift in demand” and that Australia “appears to be on the cusp of a significant building boom”.

The ASX 200 blue-chip share also believes structural factors such as e-commerce and the digital economy will continue to drive demand for its prime industrial facilities “for many years to come”. Brickworks owns half of an industrial property trust along with Goodman Group (ASX: GMG) where large warehouses are being built.

The Brickworks share price has fallen 15% since 8 March 2024, making this an excellent time to look at the ASX 200 blue-chip share, in my opinion.

The post 3 ASX 200 blue-chip shares to buy now appeared first on The Motley Fool Australia.

More reading

• Buy these ASX shares and get 5% and 6.5% dividend yields
• Here’s how I’d target a $2,000 second income by investing $35 a week
• 3 reasons this broker thinks Woolworths shares are a cheap buy
• Safeguarding against inflation: A defensive share strategy
• 3 top ASX 300 dividend shares to buy now for $3,000 a month in passive income

Motley Fool contributor Tristan Harrison has positions in Brickworks. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Goodman Group. The Motley Fool Australia has positions in and has recommended Brickworks and Telstra Group. The Motley Fool Australia has recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Owners of CSL Ltd (ASX: CSL) shares have benefited from enormous capital growth over the past decade, powered by its excellent profit growth in that time. This profit generation is enabling larger and larger passive income payouts.

I like dividends because they allow investors to benefit from growth in the value of the business without having to sell shares to access that value.

CSL is one of the biggest companies on the ASX, with a market capitalisation of $135 billion. While it is a massive business, can it provide the same sort of dividend income as National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) or Rio Tinto Ltd (ASX: RIO)?

Let’s look at how much passive income a $10,000 investment could generate with CSL shares.

Dividend potential of CSL shares

Dividends are paid for by the profit a company makes.

CSL’s board decided to declare an FY23 final dividend of US$1.29 per share and a full-year dividend of US2.36 per share. Converted into Australian dollars, the total full-year dividend amounted to approximately A$3.59 per share, an increase of 13%. This came after the company generated net profit after tax (NPAT) of $2.19 billion in FY23.

The passive income growth continued in the FY24 first-half result, with the interim payout of US$1.19 per share. In Australian dollar terms, the half-year dividend was increased 12% to A$1.81.

The last two dividends paid by CSL amount to US$2.48 per share, or A$3.72 at the current exchange rate. That translates into a dividend yield of just 1.3%.

$10,000 investment

If I had $10,000 to invest in the ASX healthcare giant, I’d be able to buy 35 CSL shares.

Assuming CSL paid the same dividends over the next 12 months as the last 12 months, a shareholder would receive $130 of cash if they owned 35 CSL shares.

If its profit continues climbing, the company may be able to significantly increase its passive income in future financial years.

The broker UBS has forecast the company’s dividend per share can increase to US$3.80 per share by FY28. If CSL did pay that amount, it would translate into a dividend yield of 2%, or around $200 in dollar terms.

While the prediction implies the CSL dividend could grow by more than 50% over the next four years, the dividend yield is still expected to be small by FY28.

CSL share price snapshot

Over the past year, the CSL share price has fallen more than 8%. According to UBS’ profit projection, it’s now trading at 30x FY24’s estimated earnings.

Dividends may not be the most compelling reason to look at CSL shares, but its recovery from COVID-19 impacts and the product development pipeline could be more intriguing.

The post How much passive income would a $10,000 investment in CSL shares generate? appeared first on The Motley Fool Australia.

More reading

• How you could retire rich by investing like Warren Buffett with ASX shares
• 3 of the best ASX 200 shares to buy for your retirement portfolio
• Can CSL shares deliver market-beating returns for investors?
• Don’t get clever, just buy stability: 2 defensive ASX shares to buy now
• 4 ASX shares held by billionaire fund managers

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. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.