Category: Stock Market

Around half of Australia’s top 500 listed companies are in the red today. However, none are doing it quite as tough as this ASX All Ords share.

A trading update has prompted the Peter Warren Automotive Holdings Ltd (ASX: PWR) share price to shift into reverse. A 0.2% retreat across the S&P/ASX All Ordinaries Index (ASX: XAO) is less than ideal… but how about an 11% drop? That’s the punishment being administered to shareholders of this automotive dealership operator.

Shares in this company have now set a new record low, hitting $1.85 apiece. The undesirable milestone means the Peter Warren Automotive share price has cascaded 38% since its 2021 ASX listing.

So, what’s the exact cause of this deep laceration?

Expected profits lose some horsepower

Peter Warren Automotive may not achieve the earnings mileage expected by the market in FY24.

Revenue is apparently not an issue, continuing to grow. However, underlying profit before tax is a different story. Several impactful factors have forced the company to adjust the market’s view of how the full-year results should look.

The company’s full-year FY24 underlying profit before tax is now anticipated to be between $52 million and $57 million. For context, estimates already had down Peter Warren Automotive to generate $68.8 million in before-tax earnings.

At the midpoint, the new guidance reflects a 20.8% downgrade from consensus expectations. Evidently, this is not doing any favours for this All Ords share today.

Three key contributors were referenced as causes for the reduction, as follows:

• More competition between dealerships due to increased supply from car manufacturers, weighing down on new vehicle gross margins
• Subdued demand among customers for new vehicles in light of cost-of-living pressures
• Higher interest rates producing increased interest costs compared to the prior year

Despite the knock to earnings expectations, Peter Warren noted some positive items. These include growth in the number of vehicles sold and an increase in service and parts revenue.

Finally, Peter Warren Automotive highlighted initiatives to reduce the pain of pressured margins. For example, the company is limiting its inventory levels, leaning on growth in its service, parts, and used car segments, and controlling costs.

This All Ords share is not alone

While the Peter Warren Automotive share price is copping the brunt of selling pressure today, other consumer discretionary shares are also feeling the pinch.

In afternoon trading, the consumer discretionary sector is faring the worst on the ASX, down 0.79%. It might have a little to do with April retail trade data hitting the headlines.

The Australian Bureau of Statistics showed a 0.1% month-on-month increase in retail trade last month. Unfortunately, the market expected a 0.2% strengthening after a shocking 0.4% slump in March.

Investors may have interpreted it as another tough month for ASX retailers, including for our All Ords share, Peter Warren Automotive.

The post Guess which ASX All Ords share is diving 11% to record lows today appeared first on The Motley Fool Australia.

More reading

• Why Boss Energy, Elders, Peter Warren, and Serko shares are sinking today

Motley Fool contributor Mitchell Lawler 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.

Investors tend to consider ASX 200 bank shares as dividend payers rather than growth investments, with two exceptions — Commonwealth Bank of Australia (ASX: CBA) and Macquarie Group Ltd (ASX: MQG).

And there’s good reason for those exceptions, too.

Which bank delivers more capital growth than dividends?

At the recent ASX Investor Day in Sydney, investment strategist Marc Jocum from exchange-traded fund (ETF) provider Global X presented the following data on ASX 200 bank shares.

Source: Global X investor presentation, ASX Investor Day, Sydney

As you can see, Macquarie shares are the only ones that delivered more capital growth than dividend income among ASX 200 bank shares over the decade to 31 March 2024.

The Macquarie share price rose 244.7% and dividend returns were 230.8%, providing a total 10-year return of 475.6%.

When selecting shares for investment, Jocum emphasised the importance of a ‘total returns approach’ that takes dividend returns into account. This is important because they offset poor growth periods.

According to his presentation:

Most of the largest Australian banks have had negative capital returns. Dividends can add as an important source of returns and help cushion drawdowns.

CBA shares delivered the second-best capital growth, but it was a sliver of Macquarie’s at just 56.1% over 10 years. However, a 150.7% dividend return contributed to a solid total 10-year return of 206.8%.

What’s happening with ASX 200 bank shares today?

Today, ASX 200 bank shares are lower amid the S&P/ASX 200 Index (ASX: XJO) losing 0.27% in value.

• The Macquarie Group Ltd (ASX: MQG) share price is down 1.11%
• Westpac Banking Corp (ASX: WBC) shares are down 0.79%
• The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is down 0.32%
• Commonwealth Bank of Australia (ASX: CBA) shares are down 0.27%
• The National Australia Bank Ltd (ASX: NAB) share price is down 0.18%
• The Bank of Queensland Ltd (ASX: BOQ) share price is down 0.17%
• Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares are down 0.035%

Should you buy Macquarie shares?

After Macquarie reported its FY24 full-year results earlier this month, top broker Goldman Sachs retained its neutral rating on the ASX 200 bank share and reduced its 12-month price target to $178.74.

The broker noted that Macquarie’s better-than-expected FY24 performance was driven by a lower-than-expected tax rate rather than revenue growth. But it remains optimistic on the ASX 200 bank share.

Goldman said:

Despite this, we remain optimistic on the business’s medium term outlook, given i) an improving macro backdrop (we note GS now expects the rate cutting cycle to commence in November), and ii) MQG is well positioned to benefit from the global push towards decarbonisation, further infrastructure investment, and interest rates reaching their peak levels.

Yesterday, Macquarie announced that Fitch Ratings has upgraded the long-term issuer default rating (IDR) of Macquarie Bank Limited.

The long-term ratings of Macquarie entities are now A+ for Macquarie Bank Limited (up from A) and A for Macquarie Group Limited.

The post Only 1 ASX 200 bank share delivers more capital growth than dividends. Which bank? (Clue: Not CBA) appeared first on The Motley Fool Australia.

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• ASX 200 bank shares: How dividends offset poor capital growth over 10 years
• Macquarie ups the ante on fees with new ASX ETFs
• Why Credit Corp, GUD, Race Oncology, and Spartan Resources shares are rising
• Why ANZ, Fletcher Building, Macquarie, and Sayona Mining shares are dropping today

Motley Fool contributor Bronwyn Allen has positions in Anz Group, Commonwealth Bank Of Australia, and Macquarie Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Bendigo And Adelaide Bank and Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Are you looking to add some growth shares to your investment portfolio in June?

If you are, then the four highly rated ASX growth shares listed below could be worth considering.

Here’s what you need to know about them:

Aristocrat Leisure Limited (ASX: ALL)

The first ASX growth share that could be a buy is Aristocrat Leisure. It is one of the world’s leading gaming technology companies. It has a world class portfolio of pokie machines, a lucrative digital business, and a growing real money gaming business.

Analysts at Citi are very positive on the company. Particularly given its strong performance in the first half of FY 2024 and management’s confidence in its outlook.

Citi has a buy rating and $53.00 price target on Aristocrat Leisure’s shares.

Pro Medicus Limited (ASX: PME)

Goldman Sachs thinks Pro Medicus is a top ASX growth share to buy. It is a leading provider of radiology information systems (RIS), Picture Archiving and Communication Systems (PACS), and advanced visualisation solutions across the globe.

Goldman is very positive on the company’s outlook. It notes that it sees “PME as the clear incumbent technology leader in a growing market with a strong financial profile and significant AI upside.”

The broker has a buy rating and $136.00 price target on its shares.

ResMed Inc. (ASX: RMD)

A third ASX growth share that has been tipped as a buy is ResMed. It is a sleep treatment-focused medical device company.

ResMed has been growing at a strong rate for over a decade. But if you thought its growth was coming to an end, think again. That’s because its industry-leading products have a massive market opportunity. Management estimates that there are 1 billion people impacted by sleep apnoea worldwide, with only ~20% of these sufferers currently diagnosed.

Ord Minnett is bullish on ResMed and has an accumulate rating and $40.00 price target on its shares.

TechnologyOne Ltd (ASX: TNE)

A final ASX growth share for investors to look at in June is TechnologyOne. It is Australia’s largest enterprise software company with locations across six countries. It provides a global SaaS ERP solution that transforms business and makes life simple for users.

Analysts at Morgans were impressed with the company’s half year results this month. In fact, the broker believes that the company’s profit growth is about to go up a gear. Particularly given its successful transition to a software-as-a-service business model.

Morgans currently has an add rating and $20.50 price target on its shares.

The post 4 ASX growth shares to buy to supercharge your portfolio in June appeared first on The Motley Fool Australia.

More reading

• Why Playside Studios, Pro Medicus, Strike Energy, and Winsome shares are charging higher
• 2 no-brainer ASX 200 shares to buy next week
• Here’s how the ASX 200 market sectors stacked up last week
• Brokers name 3 ASX shares to buy now
• 2 ASX 200 shares trading ex-dividend next week

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has positions in Pro Medicus, ResMed, and Technology One. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group, Pro Medicus, ResMed, and Technology One. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool Australia has recommended Pro Medicus and Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The market may be edging lower today but the same cannot be said for the Strike Energy Ltd (ASX: STX).

In afternoon trade, the ASX 200 energy stock is rocketing higher and is up 8% to 22.2 cents.

Why is this ASX 200 energy stock rocketing?

Investors have been scrambling to buy the company’s shares today after it achieved a “significant financial milestone” at the Walyering gas field development.

According to the release, the Walyering gas field in the Perth Basin, which was brought online eight months ago, has now reached payback of its total development capital spend of approximately $30 million (plus operating costs, royalties and taxes incurred to date).

Strike Energy advised that total gross income received to date from the Walyering project is approximately $47 million.

Management notes that this payback profile would be one of the fastest in recent history for a greenfield Australian oil and gas project. It believes this demonstrates the inherent value of the ASX 200 energy stock’s conventional gas play in the Jurassic aged Sandstones within the Cattamarra Coal Measures.

What’s next?

Given the success of the Walyering project so far, investors will be pleased to learn that drilling activities continue on site.

The company advised that Walyering-7 (W7), which commenced drilling 18 days ago, has reached its total planned depth of 4,035 metres (measured depth). This is five days ahead of target and has set a new time/depth record for its drilling performance within the Walyering gas field.

Pleasingly, the ASX 200 energy stock revealed that the W7 well has passed through multiple sandstone reservoirs within the Cattamarra Coal Measures and has registered positive observations on both mud logs and logging while drilling tools. Management advised that it is now preparing to run a series of wireline logs and specialty tools and will evaluate those results before moving to the next stage of completion.

It adds that the W7 well has been drilled from a surface location co-located with the Walyering gas processing facility directionally to the east into a fault compartment north-east of the producing Walyering-5 structure. The company intends to provide further updates as operations and evaluation concludes at the W7 well site.

Despite today’s strong gain, the Strike Energy share price remains one of the worst performers on the ASX 200 index over the last 12 months. During this time, the ASX 200 energy stock is down approximately 53%.

The post ASX 200 energy stock rockets 8% on ‘significant’ milestone appeared first on The Motley Fool Australia.

More reading

• Why Playside Studios, Pro Medicus, Strike Energy, and Winsome shares are charging higher
• Here are the top 10 ASX 200 shares today
• These are the 10 most shorted ASX shares
• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today

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.

The S&P/ASX 200 Index (ASX: XJO) is having a subdued session on Tuesday. In afternoon trade, the benchmark index is on course to record a small decline. It is currently down 0.25% to 7,768.7 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are dropping:

Boss Energy Ltd (ASX: BOE)

The Boss Energy share price is down almost 10% to $4.82. This follows news that the uranium miner’s CEO and managing director Duncan Craib, chair Wyatt Buck, and director Bryn Jones have sold a significant portion of their personal holdings. In respect to its CEO, Duncan Craib sold 3.75 million shares at an average price of $5.63 per share between Tuesday and Friday last week. The company’s leader received a total consideration of over $21 million for the shares. Insider selling rarely goes down well with investors and is considered to be a bearish indicator by many.

Elders Ltd (ASX: ELD)

The Elders share price is down 3% to $8.21. This has been driven by the agribusiness company’s shares going ex-dividend on Tuesday. Last week, Elders released its half year results and reported a sharp profit decline. This led to the Elders board cutting its interim dividend by 22% to 18 cents per share. Eligible shareholders can now look forward to receiving this partially franked dividend in their bank accounts next month on 26 June.

Peter Warren Automotive Holdings Ltd (ASX: PWR)

The Peter Warren Automotive Holdings share price is down 12% to $1.88. This follows the release of a trading update from the automotive retailer this morning. Peter Warren advised that while revenue has continued to grow, it now expects its underlying profit before tax for FY 2024 to be in the range of $52 million to $57 million. Management notes that this is lower than market expectations and has been driven by a significant increase in vehicle supply, which has led to greater competition between dealerships and lower gross profit margins on new vehicles. In addition, customer demand for new vehicles has fallen due to cost-of-living pressures.

Serko Ltd (ASX: SKO)

The Serko share price is down 5.5% to $2.87. Investors have been selling this travel technology company’s shares following the release of its full year results. This was despite Serko reporting a 48% jump in total income to NZ$71.2 million and a 48% improvement in its net loss to NZ$15.9 million. Looking ahead, management is guiding to revenue of NZ$85 million to NZ$92 million in FY 2025. It also expects to become cashflow positive during the year.

The post Why Boss Energy, Elders, Peter Warren, and Serko shares are sinking today appeared first on The Motley Fool Australia.

More reading

• Guess which ASX All Ords share is diving 11% to record lows today
• ASX 200 uranium stock dives 10% amid $26 million insiders sell-off
• 5 things to watch on the ASX 200 on Tuesday
• 2 ASX 200 shares trading ex-dividend next week
• ASX 200 shares vs. property: Which has performed better since the COVID crash?

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

Are you searching for some ASX income shares to buy this week?

If you are, then you may want to check out the two listed below that analysts think are top buys right now.

Here’s what they are saying about them:

Healthco Healthcare and Wellness REIT (ASX: HCW)

Analysts at Bell Potter think that Healthco Healthcare and Wellness REIT could be an ASX income share to buy. It is Australia’s largest diversified healthcare REIT with a portfolio including hospitals, aged care, childcare, government, life sciences, and primary care and wellness property assets.

The broker likes the company due its attractive valuation and exposure to a significant addressable market. It explains:

HCW has underperformed the REIT sector last 3 months (-10% vs. +22% XPJ) following bond yield reversion and is attractively priced at 20% discount to NTA (but only REIT to record flat to positive valuation movement at 1H24) with double digit 3 year EPS CAGR given high relative sector debt hedging and ability to grow its $1bn development pipeline via attractive YoC spread to marginal cost of debt. Longer term, HCW has significant scope for growth with an estimated $218 billion addressable market where an ageing and growing population should underpin long-term sector demand.

Bell Potter is forecasting dividends per share of 8 cents in FY 2024 and 8.3 cents in FY 2025. Based on its current share price of $1.15, this equates to yields of 7% and 7.2%, respectively.

The broker has a buy rating and $1.50 price target on its shares.

QBE Insurance Group Ltd (ASX: QBE)

Over at Goldman Sachs, its analysts think that this insurance giant could be an ASX income share to buy.

It likes the company for a number of reasons. This includes its undemanding valuation. Goldman explains:

We are Buy-rated on QBE because 1) QBE has the strongest exposure to the commercial rate cycle. 2) QBE’s achieved rate increases continue to be strong & ahead of loss cost inflation. 3) North America on a pathway to improved profitability. 4) Valuation not demanding. 5) Strong ROE.

The broker expects this to support partially franked dividends of 62 US cents (93 Australian cents) per share in FY 2024 and then 63 US cents (95 Australian cents) per share in FY 2025. Based on its current share price of $17.84, this equates to yields of 5.2% and 5.3%, respectively.

Goldman has a buy rating and $20.90 price target on QBE’s shares.

The post 2 top ASX income shares that analysts love appeared first on The Motley Fool Australia.

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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 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.

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a small decline. At the time of writing, the benchmark index is down 0.2% to 7,770.7 points.

Four ASX shares that are not letting that hold them back are listed below. Here’s why they are falling:

Playside Studios Ltd (ASX: PLY)

The Playside Studios share price is up 5.5% to 95 cents. Investors have been buying this game developer’s shares after it upgraded its guidance for FY 2024. Playside Studios now expects revenue of $63 million to $65 million and EBITDA of $16 million to $18 million. The company’s earnings guidance upgrade represents a 42% increase on the midpoint of its previous guidance of $11 million to $13 million and is a huge jump from a $1.7 million loss in FY 2023.

Pro Medicus Limited (ASX: PME)

The Pro Medicus share price is up over 2% to $115.77. This morning, this health imaging company announced five new contracts with a combined minimum contract value of $45 million. Management advised that the contracts will be fully cloud deployed and are expected to be completed within the next 6 months. The good news is that there could be more contract wins on the way. CEO, Dr Sam Hupert, said: “Despite record new contract signings this year, our pipeline remains strong with a broad range of opportunities both in terms of size and market segments.”

Strike Energy Ltd (ASX: STX)

The Strike Energy share price is up 8% to 22.2 cents. This follows news that the Walyering gas field development has reached payback (inclusive of royalties and production costs) only eight months after start-up. Management believes this demonstrates the value of Strike Energy’s high margin, low-cost conventional Perth Basin Jurassic portfolio. Total gross income received to date from the Walyering project is approximately $47 million. The company highlights that this “payback profile would be one of the fastest in recent history for a greenfield Australian oil and gas project and demonstrates the inherent value of Strike’s conventional gas play in the Jurassic aged Sandstones within the Cattamarra Coal Measures.”

Winsome Resources Ltd (ASX: WR1)

The Winsome Resources share price is up over 4% to $1.29. Investors have been buying this lithium explorer’s shares following the release of a mineral resource estimate update for its flagship Adina Lithium Project in Canada. According to the release, the mineral resource has increased 33% to 77.9Mt at 1.15% Li2O. Management notes that this confirms Adina’s positioning as one of the largest undeveloped lithium deposits in the world.

The post Why Playside Studios, Pro Medicus, Strike Energy, and Winsome shares are charging higher appeared first on The Motley Fool Australia.

More reading

• Why Appen, Mayne Pharma, Playside, and PYC shares are storming higher
• This ASX 200 healthcare stock just hit an all-time high: Is it too late to buy?
• Here are the top 10 ASX 200 shares today
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Motley Fool contributor James Mickleboro has positions in Pro Medicus. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Pro Medicus. The Motley Fool Australia has recommended Pro Medicus. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

AMP Ltd (ASX: AMP) shares are lower amid new figures from the Australian Prudential Regulation Authority (APRA) showing an 18.1% surge in superannuation benefit payments over the past year.

AMP is one of Australia’s largest retail superannuation fund providers with $111 billion in assets under management (AUM) as of 30 June 2023. The largest provider is AustralianSuper with $300 billion AUM.

The AMP share price is currently $1.10, down 0.9% for the day and up 0.92% over the past 12 months.

There’s no news out of AMP today. Let’s take a look at these APRA numbers and the rising industrywide trend in higher outflows as more baby boomers enter retirement.

Superannuation outflows grow as more baby boomers retire

The APRA data shows greater growth in superannuation outflows than inflows over the 12 months to 31 March 2024.

This is despite an increase in the Superannuation Guarantee — the percentage of wages employers must pay into their workers’ superannuation funds — from 10.5% in FY23 to 11% from 1 July 2023.

In the year to 31 March 2024, $112.9 billion was paid out to superannuation holders, up 18.1% on the $95.6 billion paid out during the year to 31 March 2023.

Inflows in the year to March 2024 totalled $177 billion, up 11.3% on the year to March 2023.

Lump sums and pension payments rise

According to APRA, the bump in outflows represents increased lump sum and pension payments:

This increase was the result of lump sum payments rising by 18.4 per cent to $63.0 billion and pension payments increasing by 17.7 per cent to $49.8 billion.

A separate report by KPMG shows five of Australia’s 13 biggest retail superannuation funds managing assets valued above $50 billion recorded negative net cash flow ratios in FY23.

According to the Australian Financial Review (AFR) today, Mercer, Colonial First State, AMP, BT and Insignia Financial Ltd (ASX: IFL) had combined net outflows of $10.6 billion in FY23.

KPMG partner Linda Elkins told the AFR this represented the start of a “wave” of outflows coming for industry funds.

But she added that the point at which the retirement savings sector’s outflows would outweigh inflows was “not imminent”.

BT had the greatest negative cash flow ratio of the 13 major funds at -5%, followed by AMP at -2.6%.

Meantime, Hostplus, AustralianSuper and REST had the highest growth in cash flow ratios at more than 5% each.

Among the smaller superannuation funds, Hub24 Ltd (ASX: HUB) and Netwealth Group Ltd (ASX: NWL) recorded the highest net cash flow ratio growth at 26.7% and 15.1%, respectively.

AMP shares fell last month after the company released its first-quarter update in which CEO Alexis George noted improvements in the company’s superannuation and investments net cash outflows.

According to the KPMG report:

Insignia, AMP, CFS and Mercer have again experienced net outflows, however they have gained traction from FY22 and decreased the rate of net outflows.

This appears to have been achieved by stemming the flow of rollovers out and focusing on the core aspects of their offerings such as fees and performance.

More people investing in superannuation

The APRA data also shows that more people are voluntarily ploughing money into their superannuation.

Member contributions via salary-sacrificing arrangements or personal contributions totalled $43.7 billion over the year, up 8.2%. Employer contributions totalled $133.3 billion, up 12.4%.

Total superannuation assets in the year to March 2024 totalled $3,862.1 billion, up 11.3% on March 2023. APRA said this growth was due to continued strong contribution inflows and an average 10.9% return on investments.

A recent survey by Findex found that 24% of Australians consider superannuation the most important type of investment for building lifetime wealth.

Older cohorts value it most, with about 40% of baby boomers and 29% of Gen Xers ranking it their no. 1 investment option.

Findex investment relations head Matthew Swieconek offers five key investment actions for Baby Boomers and Gen Xers to take today for an excellent future retirement.

Another recent report found most Australians overestimate how much they need to retire comfortably.

Meantime, my colleague Tristan recently reported on whether AMP shares are a significantly underrated buying opportunity right now.

The post AMP shares lower amid industry ‘wave’ of superannuation payouts to baby boomers appeared first on The Motley Fool Australia.

More reading

• Are AMP shares a significantly underrated buy right now?
• Here are the top 10 ASX 200 shares today
• Here is the dividend forecast to 2026 for AMP shares
• Here are the top 10 ASX 200 shares today
• Why AMP says interest rates won’t rise next week

Motley Fool contributor Bronwyn Allen 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 Hub24 and Netwealth Group. The Motley Fool Australia has positions in and has recommended Netwealth Group. The Motley Fool Australia has recommended Hub24. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Netwealth Group Ltd (ASX: NWL) share price has jumped over 50% in the past year, as shown on the chart below. The company has demonstrated its ability to deliver capital growth and dividend income.

The company provides a platform that enables financial intermediaries and clients to invest and manage a wide array of domestic and international products.

Netwealth’s offering includes non-custodial administration and reporting services, self-managed superannuation fund (SMSF) administration, managed funds, managed accounts, investor-directed portfolio services, and superannuation products.

The company has achieved earnings growth since it was listed in late 2017, which has enabled excellent dividend growth.

Growing dividends

Netwealth has grown its annual dividend every year since it first started paying one in 2018, which is a commendable record.

The 2023 financial year saw the annual payout increase by 20% to 24 cents per share. The FY23 annual dividend was around double the size of the FY19 payout of 12.1 cents per share.

Netwealth’s excellent dividend growth has continued in FY24, with the interim dividend hiked by 27% year over year.

The last two declared dividends come to 27 cents per share, translating to a fully franked dividend yield of 1.3% and a grossed-up dividend yield of 1.9%.

At a time when the Reserve Bank of Australia (RBA) cash rate is above 4%, the Netwealth dividend yield is not particularly appealing, so I wouldn’t call Netwealth shares a buy purely for the passive income.

But we should consider other elements of the investment thesis, not just its dividend potential.

Strong operational performance and margins

Netwealth is delivering strongly on growing its core metrics.

The update for the three months to 31 March 2024 showed funds under administration (FUA) had reached $84.7 billion, an increase of $6.7 billion over the quarter. The FUA growth over 12 months was 28.5%.

It reported FUA inflows of $5.2 billion for the three months to March 2024, which was 40.7% higher than the prior corresponding period. The FUA net inflows for the quarter were $2.7 billion, up 62.2% year over year.

Netwealth also reported its funds under management (FUM) reached $19.7 billion at 31 March 2024, an increase of $1.6 billion for the quarter. FUM net inflows for the quarter were $0.6 billion.

This level of FUA and FUM growth can help drive the company’s earnings higher because it contributes to revenue growth. As a digital platform business, Netwealth can benefit from operating leverage, leading to profit rising faster than revenue.

Netwealth says it’s highly profitable, with a strong earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 47.6% in the HY24 result. It also has “strong cash generation” and a very high level of recurring revenue, resulting in predictable revenue.

The broker UBS currently rates Netwealth as a buy because of the “strong” quarterly FUA and inflow numbers. The broker has a price target of $22.50 on Netwealth shares, implying a possible rise of more than 10% over the next 12 months.

The post Are Netwealth shares a compelling buy for dividends? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• If you’d invested $10,000 in Netwealth shares at the start of the year, here’s how much you’d have now

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

Australia’s inflation rate has experienced notable fluctuations over the last couple of years. It has been significantly influenced by global disruptions such as the COVID-19 pandemic and geopolitical tensions. These factors, coupled with supply chain constraints and rising commodity prices, have escalated costs across various sectors. This poses a challenge for investors looking to maintain the real value of their portfolio returns.

Impact of inflation on real returns

Inflation erodes the purchasing power of money, directly impacting the real returns of investments. For investors in the stock market, this means that nominal gains can be offset by the rising cost of living, leading to diminished actual wealth accumulation. This underscores the importance of strategic investment choices that can outpace inflation and preserve capital.

Defensive share investment strategies

In response to inflationary pressures, one strategy is to focus on defensive stocks in sectors less sensitive to economic cycles. Think consumer staples and utilities. These sectors are considered defensive because they provide essential goods or services that remain in demand, regardless of economic conditions.

Companies like Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) play a critical role in everyday life by providing necessary goods. Despite economic downturns, demand for products from these companies tends to remain stable, making them resilient investment choices during inflationary times. 

Coles reported robust results for 3QFY24. Supermarket sales revenue was up 5.1% to $9,065 million. Woolworths has also demonstrated strong financial performance recently, with group sales up 2.8% over the same period to $16,800 million. Despite these results, both companies’ share prices fell on the day of the quarterly updates.

Both supermarkets have seen their earnings increase year on year since 2020, but their share prices have been heading in the opposite direction. The Coles share price is down 10% over the past year while the Woolworths share price is down 17%. Both companies, however, have the potential to bounce back speedily following corrections in the share price which could serve savvy investors well.

Utilities are another pillar of defensive investing. Companies like AGL Energy Limited (ASX: AGL) supply essential services like electricity and gas. Utilities are indispensable, which can provide a buffer against economic swings. AGL recently raised its earnings guidance for FY24, with net profit after tax (NPAT) expected to be between $760 million and $810 million, up from $680 million and $780 million. 

The AGL share price is down 14% from its peak in July 2023 but has been trending upwards since February 2024, when it announced a quadrupling of interim profit.

Foolish takeaway

Investing in defensive stocks, such as those in the consumer staples and utilities sectors, can present a prudent approach to safeguarding your portfolio against inflation. These sectors offer the dual benefits of stability and consistent demand, which are crucial during times of economic uncertainty and rising prices.

By strategically incorporating such stocks, investors can protect their portfolios and possibly achieve real growth in value. This makes defensive share strategies essential to a well-rounded investment approach during inflationary periods.

The post Safeguarding against inflation: A defensive share strategy appeared first on The Motley Fool Australia.

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Motley Fool contributor Katherine O’Brien 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 positions in and has recommended Coles Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.