Category: Stock Market

PWR Holdings Ltd (ASX: PWH) is a leader in advanced cooling systems, supplying Formula 1 teams, automotive and other tech industries.

Its shares have consistently delivered good returns to their holders. However, since hitting its all-time high of $12.98 in February following its robust 1H FY24 results, the shares have traded weaker, down more than 15%.

Is this recent drop a good time to buy this ASX growth share?

A global leader in cooling systems

Established in 1997 by its current CEO, Kees Weel, PWR Holdings designs, develops, and manufactures advanced cooling systems.

But it’s more than just a radiator producer. The company is a global leader in this niche, delivering high-performance products across the motorsport, automotive, aerospace and defence sectors. In 1H FY24, the company reported a 22% growth in its revenue to $64.2 million.

The motorsport sector is the largest business unit, representing 47% of its 1H FY24 revenue. The company is renowned for its cutting-edge cooling systems used in high-performance motorsports, including Formula 1. PWR’s products are designed to withstand the extreme conditions of competitive racing.

In the automotive sector, representing 22% of its revenue, PWR provides bespoke cooling solutions for high-end and luxury vehicles. Its products are designed to enhance the performance and reliability of supercars and luxury automobiles.

The aerospace and defence sector is relatively new but growing rapidly, with its revenue contribution rising to 12% in 1H FY24 from just 7% a year ago.

PWR Holdings serves a diverse customer base across multiple continents. For the last 12 months to December 2023, PWR generated approximately 90% of its total revenue overseas, mainly in the United Kingdom and the United States.

Superior margins and return on investment

Its precision-focused product portfolio contributed to superior profit margins. PWR Holdings consistently delivers gross margins of 77% to 80%. Operating profit margins have a wider range but are still well above 20%. This level of profitability is exceptional for a manufacturer.

Such high margins flow down to its returns on equity (ROE) of approximately 29%. Impressively, the company maintained such high ROEs over the past decade, with the lowest point being 24% in FY20 during the COVID-19 pandemic.

Are PWR Holdings shares too expensive?

PWR Holdings has demonstrated robust financial performance, driven by its diversified revenue streams and strong market position.

But, some investors may find its current valuations too lofty.

PWR Holdings shares are currently traded at 34x FY25 earnings estimates by S&P Capital IQ. While this is high compared to other manufacturers on the ASX, this is actually not too bad relative to its own price-to-earnings (P/E) ratio history of 20x to 52x.

The market anticipates PWR Holdings’ earnings per share to increase by more than 20% each year in FY25 and FY26. If the company can meet these expectations, the current multiple may still be justified.

The PWR Holdings share price closed flat at $10.96 on Friday. At the current price, the shares offer a dividend yield of 1.25%.

The post Down 15% in 4 months, is it time to buy this ASX growth stock? appeared first on The Motley Fool Australia.

More reading

• 3 of the best growth-focused ASX shares to buy in June

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

Last week, the Reserve Bank of Australia (RBA) held its latest monetary policy meeting to decide on interest rates.

As was widely expected by the market, the RBA board decided to leave the cash rate unchanged at 4.35%.

The central bank noted that inflation remains above target and is proving persistent. As a result, the board “expects that it will be some time yet before inflation is sustainably in the target range.”

What does this mean for interest rates? Will they be going higher before they go lower? Let’s see what the economics team at Westpac Banking Corp (ASX: WBC) is saying following the RBA meeting.

What is Westpac saying about interest rates?

Besa Deda, the Chief Economist from Westpac Business Bank, has been running the rule over the RBA’s remarks.

According to the latest Westpac Weekly economic report, Deda notes that the central bank doesn’t sound overly confident that inflation will fall to its target range. The chief economist said:

Governor Bullock’s remarks, together with the changes to the accompanying Board statement, reveal the RBA has become more alert to upside inflation risks. Additionally, the Board appears less confident inflation is moving sustainably towards the inflation target within a reasonable timeframe.

In perhaps one of the more telling remarks of the press conference, Bullock said “we need a lot to go our way if we are going to bring inflation down to the 2–3% target” and the economy’s narrow path is “getting a bit narrower.”

However, the good news for borrowers is that Deda doesn’t believe the RBA will take interest rates higher from here. This is because Australia’s oldest bank continues to believe that the next quarterly inflation reading will come in lower than what the RBA is forecasting.

In light of this, Westpac remains confident that the next move by the central bank will be to lower interest rates in November. She added:

Our inflation forecasts for the upcoming June quarter report are below that of the RBA’s, leaving us comfortable with our view that the next move in the cash rate will be down and arrive in November. But we acknowledge there’s a greater risk of rate relief slipping into next year. Swap markets have no rate cuts priced for this year and two rate cuts priced in for 2025. The timing of the first rate cut has been pushed out from February to April next year after today’s meeting.

Westpac is forecasting interest rates to fall to 4.1% in November, 3.85% by March 2025, 3.35% by September 2025, and then 3.1% by December 2025.

The post Here’s when Westpac says the RBA will now cut interest rates appeared first on The Motley Fool Australia.

More reading

• Can the good times keep rolling for ASX 200 bank shares in FY25?
• Top 10 most traded ASX shares and US stocks in May
• 2 ASX 200 bank shares smashing new multi-year highs today
• Here’s how much passive income I’d get if I invested $20,000 in Westpac shares now
• What’s the outlook for the Westpac share price in FY25?

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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 have $10,000 sitting in a savings account and no plans for it, then it could be worth putting it to work in the share market.

That’s because the potential returns on offer in the share market could turn your savings into a gold mine if you are willing to be patient.

Turn $10,000 into a gold mine

If you leave $10,000 in a Commonwealth Bank of Australia (ASX: CBA) saving account, it will grow. But at a much slower rate compared to what would be expected from ASX shares.

For example, let’s imagine you are able to average a 4% interest rate on your savings account over the next 20 years. This would turn your $10,000 into approximately $22,000.

Now let’s imagine that you also add an extra $10,000 to your account each year. Doing this for 20 years with an average 4% interest rate would lead to your savings account growing to be worth $330,000.

That’s a bit of a gold mine itself, but just wait until you see what could happen with the share market.

Share market vs savings accounts

Over the long term, the share market has generated an average total return of approximately 10%.

And while there’s no guarantee that this will happen again in the future, I think it is reasonable to base our assumptions on this return.

If you were to invest your $10,000 into ASX shares and averaged a 10% per annum return, your investment portfolio would compound to be worth $67,000 in 20 years.

That’s $45,000 more than if you had just left it in your savings account for two decades.

Now let’s see what would happen if you put an additional $10,000 into the share market each year over the 20 years.

If you did this and achieved a 10% per annum return, your investment would grow materially and become worth approximately $700,000.

That is $370,000 greater than what would have happened if you just stayed with your savings account.

And while it is worth remembering that savings accounts are risk free and ASX shares carry risk, I believe the potential rewards are compelling enough to justify choosing stocks.

Which ASX shares should you buy?

Rather than risking your money in speculative stocks, investors may want to consider buying companies that have strong business models, sustainable competitive advantages, and fair valuations.

This is a strategy that Warren Buffett has used for decades. And given that he has smashed the market return since the 1950s, it’s fair to say the strategy has its merits.

The post How to turn your savings account into a gold mine starting with $10,000 appeared first on The Motley Fool Australia.

More reading

• Can the good times keep rolling for ASX 200 bank shares in FY25?
• 3 top ASX 200 stocks that could create lasting passive income into retirement
• 2 ASX 200 bank shares smashing new multi-year highs today
• Beaten-up ASX 200 stock rebounds 15%. Macquarie says more to come
• 5 things to watch on the ASX 200 on Thursday

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 Woolworths Group Ltd (ASX: WOW) share price has fallen significantly over the past year, as the chart below shows. Currently, it has declined 16% over the past 12 months.  

However, the Woolworths share price has lifted more than 10% since I called it out as a solid buy in early May.

I believe it’s still an attractive opportunity, with more upside in its recovery and longer-term growth.

Ongoing sales growth

The strong sales tailwinds of COVID-19 demand and inflation appear to have subsided. However, the company continues to deliver revenue growth.

In the third quarter of FY24, Australian food sales increased 1.5% to $12.6 billion, while Australian business-to-business (B2B) sales rose 3.2% to $1.1 billion. Total third-quarter sales (including New Zealand and BIG W) sales rose 2.8% to $16.8 billion.

Despite cycling against a very strong FY23 third quarter, where Australian food sales rose 7.6%, Woolworths’ supermarkets were still able to report growth.

It also reported that adjusted’ sales growth in April was “broadly in line” with the third quarter, with inflation continuing to moderate and the number of items sold showing “ongoing modest growth”.

Considering the current economic conditions, I think Woolworths’ recent resilient sales performance has demonstrated its strong market position.

Strong e-commerce results

Woolworths is achieving excellent growth with its e-commerce sales, and if this growth could continue, it could play a more significant role in accelerating growth and helping support the Woolworths share price.

In the FY24 third quarter, WooliesX (which includes e-commerce) grew 17.8% to $1.63 billion.

Woolworths said its e-commerce sales penetration reached 12.4%, an increase of 178 basis points (1.78%) over the prior year.

With the ongoing digitalisation of the economy, Woolworths is leading the way when it comes to online food shopping. Coles Group Ltd (ASX: COL) reported $856 million of e-commerce sales in the FY24 third quarter, much less than Woolworths.  

I think Woolworths’ digital sales can be an important driver of earnings in the coming years.

Solid long-term earnings growth projected

I don’t believe Woolworths is the type of business that will deliver extraordinary earnings growth — supermarket retailing is usually consistent year to year. However, Woolworths is projected to deliver net profit after tax (NPAT) of $1.63 billion in FY24 and $1.64 billion in FY25.

However, after FY25, the broker UBS predicts that Woolworths’ earnings will rise at a good pace in the next few years.

UBS suggests the company’s net profit could rise 7.4% to $1.76 billion in FY26, lift 11.6% to $1.96 billion in FY27 and then rise 10.8% to $2.18 billion.

Those numbers suggest the Woolworths share price is valued at 25x FY24’s estimated earnings and 19x FY28’s estimated earnings.

It’s also projected to pay a grossed-up dividend yield of 4% in FY24 and 5.5% in FY28.

With good profit growth projected in the coming years, I’d say the Woolworths share price is a solid buy at the current level.  

The post The Woolworths share price is down 16%: Time to buy the stock? appeared first on The Motley Fool Australia.

More reading

• Brokers name 3 ASX shares to buy now
• These 3 top ASX 200 shares just earned substantial broker upgrades. Here’s why
• Could Woolworths shares beat the market in FY25?
• Buy these ASX shares for a winning retirement portfolio
• Tax-busters: 5 fully-franked ASX dividend shares I’d buy for FY25

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 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.

ASX 200 bank shares have had a ripper six months of share price growth. This period has included new multi-year highs for all bank stocks except one and a new all-time peak for the biggest of the bunch.

Australia’s biggest bank, Commonwealth Bank of Australia (ASX: CBA), once again reset its record high on Friday, reaching $128.25 per share.

This put it within striking distance of overtaking mining behemoth BHP Group Ltd (ASX: BHP) as the most valuable company on the ASX 200 by market capitalisation.

BHP is the biggest mining company in the world, with a market cap of $218.5 billion at its intraday high on Friday. At CBA’s peak share price yesterday, its market cap was approximately $214.6 billion.

Also this week, National Australia Bank Ltd (ASX: NAB) shares reached a nine-year high of $36.42, and Bendigo and Adelaide Bank Ltd (ASX: BEN) soared to its highest price in almost five years at $11.42.

All of the Big Four ASX 200 bank shares, along with Macquarie Group Ltd (ASX: MQG) and Bendigo Bank, have hit multi-year peaks this year. The Bank of Queensland Ltd (ASX: BOQ) is the only exception.

As shown below, talk of interest rates nearing their peaks back in November set off this run of price growth.

Such a sustained run is a bit unusual, given ASX 200 bank shares are traditionally seen as dividend shares, not growth stocks (with the exception of CBA and Macquarie).

So, can the good times keep rolling in FY25? Let’s find out.

What the experts expect from ASX 200 bank shares in FY25

In a note this month, Goldman Sachs said ASX 200 bank shares valuations are “skewed to the downside” from here.

The broker notes that Aussie banks’ return on tangible equity (ROTE) was the world’s second-highest on average in 2015. Today, the banks’ ROTE is the lowest of comparable global banks. This is due to compressed net interest margins (NIMs) and reduced low capital-intensive non-interest income.

Despite this, ASX 200 bank shares remain the most expensive in the world. The broker notes that “this valuation discrepancy has expanded in recent times, despite weaker relative profitability”.

The broker said: “We recently took a more negative view on Australian banks, reflecting absolute and domestic relative valuations being heavily skewed to the downside.”

Philip King, CIO at Regal Funds Management, said Australian banks are being “attacked from all angles” by new competitors.

They include buy now, pay later operators, non-bank lenders, and the burgeoning private credit sector.

King is holding a short position on CBA shares. He expects earnings per share (EPS) to fall over the next 10 years.

Schroders head of Australian equities Martin Conlon says ASX 200 bank shares’ profits will be “flat at best” unless they can wind back costs, which is difficult for any business to do in today’s economy.

Conlon said: “We have very indebted consumers already. Getting them more indebted is tricky.”

Asset Management portfolio manager Dominic Mlcek says ASX 200 bank shares are facing a “negative environment”. He questions their “lofty valuations” today.

“Given the lack of growth outlook in our view, we’re maintaining an underweight exposure towards the big four,” Mlcek said.

In light of all this, let’s take a look at some 12-month share price targets for the ASX 200 bank shares and compare them to where they are trading today.

Bank share prices compared to FY25 targets

On Friday, Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares closed at $28.94, down 0.86% (see our FY25 outlook article). UBS has a price target of $30. Goldman has a buy rating and target of $28.15.

Westpac Banking Corp (ASX: WBC) shares finished at $27.24 on Friday, down 0.037% (see our FY25 outlook article). Goldman Sachs has a sell rating and target of $24.10. Morgans has a hold rating and target of $24.15. Citi has a sell rating and a $24.75 target. Morgan Stanley has an underperform rating and a $24.50 target.

NAB shares closed at $36.21 on Friday, up 0.055% (see our FY25 outlook article). UBS has a sell rating on NAB shares due to a “fully valued” price. Its 12-month target is $30.

The CBA share price ended the session at $127.68 on Friday, down 0.055% (see our FY25 outlook article). UBS has a $105 price target on CBA shares. Goldman Sachs has a sell rating and a 12-month price target of $82.61.

Macquarie shares closed at $199.03 on Friday, up 1.29%. Morgan Stanley has a buy rating on Macquarie shares with a price target of $215.

Bank of Queensland shares closed at $5.83 on Friday, down 0.17%. Goldman Sachs has a sell rating on BOQ shares and a 12-month share price target of $5.44.

Bendigo Bank shares finished the week at $11.33 per share, down 0.088% on Friday. Goldman Sachs has a neutral rating and a 12-month price target of $10.51.

The post Can the good times keep rolling for ASX 200 bank shares in FY25? appeared first on The Motley Fool Australia.

More reading

• Top 10 most traded ASX shares and US stocks in May
• 3 top ASX 200 stocks that could create lasting passive income into retirement
• 2 ASX 200 bank shares smashing new multi-year highs today
• Beaten-up ASX 200 stock rebounds 15%. Macquarie says more to come
• 5 things to watch on the ASX 200 on Thursday

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen has positions in Anz Group, BHP 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.

The ASX dividend stock Lovisa Holdings Ltd (ASX: LOV) could be an excellent long-term idea for dividends because of its willingness to pay out excess capital and deliver solid passive income.

Lovisa is a retailer of affordable jewellery for younger shoppers around the world.

It is becoming a true global retailer with its presence in so many countries.

Lovisa operates in Australia, New Zealand and Asia, including Singapore, Malaysia, Hong Kong, Taiwan, China, and Vietnam. It also has stores in the African countries of South Africa, Namibia and Botswana; the United Kingdom and Europe, as well as the UAE, the United States, Canada and Mexico.

The business also has franchise arrangements in the Middle East and African region, and in South America.

That global growth is helping fund larger dividend payments from the ASX dividend stock.

Strong store growth unlocking passive income

Due to the low cost of its products, Lovisa is able to open new stores fairly cheaply and quickly. In the FY24 first-half result, Lovisa revealed its global store network increased by 19% year over year to 854 locations.

The FY24 first-half result saw net profit after tax (NPAT) increase 12% to $53.5 million, and the dividend per share was hiked by 31% to 50 cents per share.

The Lovisa HY21 half-year dividend was 20 cents per share, compared to 13 cents per share in the HY18 result. Thus, the dividend has grown by 150% in three years and by 285% in six years.

I’m not expecting as much dividend growth in the next three years, but the payouts could continue to grow at a pleasing rate.

Dividend growth expected to continue

The broker UBS has forecast that the Lovisa annual dividend per share could be 75 cents in FY24 (up 8.7%) year over year, which would have a dividend yield of around 3%, including the franking credits.

UBS has predicted passive income growth for the ASX dividend stock in each of the subsequent financial years.

• In FY25, the annual dividend could increase another 12% to 84 cents per share.
• In FY26, it could rise 18% to 99 cents per share.
• In FY27, it may increase another 19% to $1.18 per share.
• In FY28, the annual payout could jump 14% to $1.35 per share.

If that FY28 payout happens, the Lovisa grossed-up dividend yield could be getting close to 5%.

It’s possible Lovisa may keep the dividend payout ratio at close to 100% of its net profit, in which case the FY28 grossed-up dividend yield could actually be something like 5.4%, based on the UBS projection for profit.

I’m optimistic about Lovisa’s growth prospects and the potential dividend payouts.

The post 1 ASX dividend stock to buy for growth and stay for a 5% yield appeared first on The Motley Fool Australia.

More reading

• These 3 top ASX 200 shares just earned substantial broker upgrades. Here’s why
• Up 78% in a year, is it too late to buy Lovisa shares?
• Here are the top 10 ASX 200 shares today
• What are the best ASX shares to buy with $500 in 2024?
• 5 top ASX growth shares to buy in June

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

It’s almost that time of year again – the moment of truth of whether it will be a bill or a refund from the Australian Taxation Office. Either way, passive income from shares can make tax season less of a burden.

In Australia, we have the added bonus of franking credits, a tax benefit not available to investors in most countries. Depending on the amount of franking and the person’s tax bracket, this situation can sometimes contribute to a tax refund – making ASX dividend-paying shares popular among retirees.

Even without the tax benefit, a little extra income from dividends can be handy if a bill arises.

We asked our Foolish writers which ASX passive income shares they think are worth snapping up before FY24 draws to a close.

Here is what the team came up with:

6 best ASX dividend stocks for June 2024 (smallest to largest)

• Collins Foods Ltd (ASX: CKF), $1.09 billion
• Deterra Royalties Ltd (ASX: DRR) $2.14 billion
• Super Retail Group Ltd (ASX: SUL), $3.13 billion
• Vanguard Australian Shares High Yield ETF (ASX: VHY), $3.74 billion
• Steadfast Group Ltd (ASX: SDF), $6.56 billion
• Woodside Energy Group Ltd (ASX: WDS), $52.33 billion

(Market capitalisations as of market close 21 June 2024).

Why our Foolish writers love these ASX passive income shares

Collins Foods Ltd

What it does: Collins Foods is a KFC franchisee operator in Australia, Germany, and the Netherlands. It also operates Taco Bell outlets in Australia.

By Tristan Harrison: When considering ASX passive income shares to buy, I like to see a stable dividend, growing profit, and a decent starting yield. On that basis, I think the Collins Foods share price looks very appealing right now after dropping by around 20% since the beginning of 2024 and also boosting its prospective dividend yield.

Collins Foods has grown its dividend every year since 2014, with the last two passive income payments amounting to 27.5 cents per share, compared to 11 cents per share paid during 2024 – that’s a rise of 150%.

The company is delivering profit growth via expanding its store network in Australia and Europe and delivering solid same-store sales (SSS) growth. In the FY24 first-half period, KFC Australia SSS growth was 6.6% and KFC Europe SSS growth was 8.8%.

Collins Foods’ continuing operations revenue rose 14.3% to $696.5 million, and underlying net profit after tax (NPAT) rose 28.7% to $31.2 million. This demonstrated good growth and rising profit margins.

According to Commsec estimates, the company is projected to pay a grossed-up dividend yield of 4.2% in FY24 and 5.7% in FY26. The company is valued at around 13x FY26’s estimated earnings. 

Motley Fool contributor Tristan Harrison owns shares of Collins Foods Ltd.

Deterra Royalties Ltd

What it does: Deterra Royalties doesn’t sell a product or service. Instead, this Perth-based company clips the ticket on mining operations where it holds a royalty. Its most material source of income is its 1.232% royalty on revenue from the Mining Area C (MAC) iron ore mine, owned by BHP Group Ltd (ASX: BHP).

By Mitchell Lawler: After last week’s changes, some investors might be dumping Deterra from the passive income pile. 

The company has updated its dividend policy, revising its payout ratio from 100% to “a minimum of 50%” for FY25 and onwards. Hence, the lucrative yield of 7.7% could soon be slashed to a more modest return. 

However, I see this as a major positive for long-term shareholders. The change should allow Deterra to redeploy some capital to acquire additional royalty assets, reducing the company’s reliance on the MAC royalty. 

Deterra is already taking steps in this direction with its recent acquisition of Trident Royalties, which adds 21 royalty and royalty-like offtake assets to its portfolio.

Motley Fool contributor Mitchell Lawler does not own shares of Deterra Royalties Ltd.

Super Retail Group Ltd

What it does: Super Retail is the company behind many of Australia’s most successful recreational retail chains. Its brands include Super Cheap Auto, Rebel, and BCF.

By Sebastian Bowen: If you’re after an investment with significant passive income potential in the dying days of the 2024 financial year, I think Super Retail shares should at least be on your shortlist. This company runs some of the best and most resilient retailing chains around.

Unlike most consumer discretionary companies, the likes of BCF and Super Cheap Auto are famous for their resilience to economic maladies like recession and inflation — a great attribute for an income stock.

I think Super Retail shares are looking attractive right now, too. Since February, this company’s stock has lost around 20% of its value. While this has been painful for existing investors, it has also boosted the Super Retail dividend yield to more than 5.5%. This company’s dividends typically come with full franking credits attached as well, so investors are looking at a grossed-up yield of almost 8%. 

For solid income, I think ASX investors could do a lot worse this June.

Motley Fool contributor Sebastian Bowen does not own shares of Super Retail Group Ltd.

Vanguard Australian Shares High Yield ETF

What it does: The Vanguard Australian Shares High Yield exchange-traded fund (ETF) seeks to track the return of the FTSE Australia High Dividend Yield Index.

By James Mickleboro: I think the Vanguard Australian Shares High Yield ETF could be a great option for income investors this month. Especially those who are not fans of stock-picking.

That’s because this ETF eliminates the need for investors to pick stocks. Instead, it allows you to buy a collection of the highest-yielding ASX dividend shares in one fell swoop. This means you will be buying a slice of the big four banks, Australia’s large-cap miners, and a host of other dividend payers.

It is also important to note that the ETF operates with strict rules with respect to diversification. It limits the proportion invested into any one industry to 40% of the total ETF and 10% for any one company. This ensures you’re not overly exposed to any particular part of the market.

At present, the ETF trades with a dividend yield of 5.3%.

Motley Fool contributor James Mickleboro does not own units of the Vanguard Australian Shares High Yield ETF.

Steadfast Group Ltd

What it does: Steadfast is the largest general insurance brokerage firm in Australasia. It works with independent brokers and supports them with technology, market access, and other business tools. 

By Kate Lee: For those seeking a passive income stream, consistency in dividends is an important consideration. Steadfast boasts a long history of dividend growth, consistently raising its dividends over a decade.

The company’s strong earnings growth has supported this amazing dividend growth over time. Earnings-per-share (EPS) has risen from 7 cents in FY16 to 19 cps in the past 12 months to December 2023. 

I think now is an excellent time to buy this consistent performer as the Steadfast share price has been weak recently, falling about 8% from a year ago. After the drop, Steadfast shares are trading at 19x its FY25 earnings estimates, based on S&P Capital IQ, at a midpoint of its trading history.

Based on the share price of $5.93 at the close of trade on Friday, Steadfast offers a fully-franked dividend yield of 2.66%.

Motley Fool contributor Kate Lee does not own shares of Steadfast Group Ltd.

Woodside Energy Group Ltd

What it does: Woodside is Australia’s largest independent dedicated oil and gas producer. The company has a portfolio of high-quality assets in Australia, the Gulf of Mexico, the Caribbean, Senegal, and Timor-Leste. Woodside continues to actively explore new oil and gas deposits.

By Bernd Struben: With the Woodside share price down 22% over the past year, I think investors buying at current levels are likely to reap an outsized passive income stream for years to come.

Despite the ongoing shift to EVs and renewables, global oil demand is forecast to hit another record high this year. And more nations are embracing gas to provide reliable baseload power.

The ASX 200 energy stock recently caught some headwinds, with Q1 2024 production down 7% year on year. But Woodside maintained its full-year guidance of 185 million to 195 million barrels of oil equivalent.

Last week, the company also achieved a key milestone: pumping its first oil from the Sangomar field offshore of Senegal. The project’s nameplate capacity stands at 100,000 barrels per day.

And with Woodside’s offshore Scarborough LNG project on track for first production in 2026, the longer-term production outlook looks strong.

As for that passive income, Woodside shares trade on a fully franked trailing yield of 7.85%.

Motley Fool contributor Bernd Struben does not own shares of Woodside Energy Group Ltd.

The post Top ASX passive income shares to buy before June 30 appeared first on The Motley Fool Australia.

More reading

• Top 10 most traded ASX shares and US stocks in May
• ASX 200 energy shares smashing the benchmark amid national gas crisis
• 3 top ASX 200 stocks that could create lasting passive income into retirement
• Buy these top ASX 300 dividend stocks today for an income boost
• Own Woodside shares? Here’s how much your company paid in Aussie taxes in 2023

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Super Retail Group. The Motley Fool Australia has positions in and has recommended Steadfast Group and Super Retail Group. The Motley Fool Australia has recommended Collins Foods and Vanguard Australian Shares High Yield ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

One exchange-traded fund (ETF) that is popular with Australian investors is VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT).

With almost $1 billion in net assets, a lot of wealth has been put into this fund.

In fact, that’s more than what is invested in Myer Holdings Ltd (ASX: MYR) and Kogan.com Ltd (ASX: KGN).

But has it been a good investment? Let’s take a look at what a $20,000 investment five years ago would be worth today.

What is the ASX MOAT ETF?

Firstly, let’s take a look at what exactly the VanEck Vectors Morningstar Wide Moat ETF provides investors.

The fund manager, VanEck, describes the ASX MOAT as an ETF that gives “exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar’s equity research team.”

It then notes that the “wide moat ETF aims to provide investment returns before fees and other costs which track the performance of the Index.”

How are the holdings selected?

As it mentions above, this ETF puts together a group of ~54 companies with sustainable competitive advantages that are trading at attractive prices.

These companies will change periodically depending on the status of their competitive advantages or valuation.

VanEck notes that at each quarterly review, current index constituents that are ranked within the top 150% of the eligible universe based on current market price/fair value ratio are given preference for inclusion in the fund.

And from the remaining eligible securities, those with the lowest current market price/fair value ratios are included in the index sector cap.

This has ultimately led to the likes of Google parent Alphabet Inc (NASDAQ: GOOG), automatic test equipment designer Teradyne Inc (NASDAQ: TER), online giant Amazon.com Inc (NASDAQ: AMZN), and Warren Buffett’s Berkshire Hathaway Inc (NYSE: BRK.B) been included in the fund at present.

Big returns

The good news is that the ASX MOAT ETF’s investment focus on sustainable competitive advantages and fair valuations has delivered the goods for investors over the last five years.

In fact, over this period, the ETF has outperformed the market and delivered mouth-watering returns for investors.

Since this time in 2019, the ETF has achieved an average total return of approximately 16.4% per annum.

This means that if you had invested $20,000 into the ASX MOAT ETF five years ago, you would have compounded your way to almost $43,000 today. That’s more than double your original investment.

The post $20,000 invested in the ASX MOAT ETF 5 years ago is worth how much? appeared first on The Motley Fool Australia.

More reading

• 2 of my favourite ASX ETFs for Australian investors
• Why these strong ASX ETFs could be top long term picks
• 16% per annum: What is the VanEck Wide Moat ETF’s secret sauce?
• Looking for ASX growth shares? I rate these 2 as buys
• Which companies are in the VanEck Morningstar Wide Moat ETF (MOAT) portfolio?

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. 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 Alphabet, Amazon, Berkshire Hathaway, and Kogan.com. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Teradyne. The Motley Fool Australia has recommended Alphabet, Amazon, Berkshire Hathaway, Kogan.com, and VanEck Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ResMed CDI (ASX: RMD) shares are trading at $31.94 apiece on Friday, up 0.60% for the day and outpacing the ASX 200, which is up 0.17%.

ResMed stock is up 25.8% in the year to date but this includes a two-month lull over May and June so far.

During this period, the share price has been rangebound between about $31 and $33 per share.

This is well below the 12-month price target of several brokers.

So it begs the question, are ResMed shares a buy while they are stuck in the doldrums?

ResMed shares overcome last year’s panicked sell-off

As the chart above shows, ResMed shares were sold off in the second half of last year.

The sleep apnoea device maker lost market capitalisation mainly because investors started feeling nervous about the potential impact of GLP-1 drugs like Ozempic on demand for ResMed’s products.

They feared an impact because GLP-1 drugs are incredibly effective in treating obesity, and this disease is a common precursor to sleep apnoea.

That fear sent ResMed shares tumbling to a four-year low of $21.14 on 13 October.

But the stock has rebounded significantly after the company and many brokers educated investors.

The key messages included that sleep apnoea has many different causes — not just obesity.

Secondly, the total addressable market (TAM) remains enormous despite any impact GLP-1s might have on rates of obesity worldwide.

What ResMed told shares investors about GLP-1s

ResMed CEO Mick Farrell told investors last October that in-house modelling had quantified the impact of GLP-1s on ResMed’s TAM.

He said GLP-1s may cost the company 200 million people in terms of TAM. However, the total TAM for sleep apnoea worldwide would still be 1.2 billion by 2050 after taking GLP-1s into account.

At the time, 22.5 million people were using ResMed CPAP machines. Thus, Farrell successfully demonstrated the small proportionality of the GLP-1 risk to ResMed’s business.

Then in January, Farrell revealed further in-house research that found GLP-1s were actually bringing in more customers for ResMed.

The research showed a 10% increase in patients on GLP-1s buying sleep apnoea machines.

This is happening partly because the GLP-1 hype has encouraged people to see their doctor about their obesity for the first time. During these consultations, sleep apnoea has also been identified, leading to more people buying ResMed products.

Blackwattle Investment Partners reckon ResMed has actually “turned the GLP threat into an opportunity” by raising awareness of the combined healthcare benefits of GLP-1 drugs and CPAP products.

Brokers say it’s not too late to buy

Bell Potter has a buy rating on ResMed shares and a 12-month price target of $36. Citi has the same rating and price target. Macquarie has an outperform rating on the stock with a $34.85 price target.

Based on these targets, ResMed shares have room for 10% to 13% more share price growth.

Lachlan Hughes, a portfolio manager at Swell Asset Management, says ResMed has “decades of growth ahead as the penetration is low and it’s the number one player in its market”.

The post ResMed shares are in a two-month lull. Is this a chance to buy? appeared first on The Motley Fool Australia.

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

It has been another busy week for many of Australia’s top brokers. This has led to the release of a number of broker notes.

Three broker buy ratings that you might want to know more about are summarised below. Here’s why brokers think these ASX shares are in the buy zone right now:

REA Group Ltd (ASX: REA)

According to a note out of Citi, its analysts have upgraded this property company’s shares to a buy rating with an improved price target of $221.00. The broker highlights that the company has a dominant position in the largest real estate markets and is able to invest heavily in its products and technology. Citi expects the latter to help underpin strong earnings growth over the medium-to-long term. In addition, it sees potential upside from stronger than expected monetisation of seller and mortgage leads and margin support from its flexible cost base. Overall, the broker is expecting this to lead to earnings ahead of consensus estimates in FY 2025 and FY 2026. The REA Group share price is trading at $194.87 today.

Treasury Wine Estates Ltd (ASX: TWE)

A note out of Goldman Sachs reveals that its analysts have reiterated their buy rating on this wine giant’s shares with an improved price target of $15.20. The broker was pleased with the company’s Penfolds update this week. And while it acknowledges that its FY 2025 Penfolds EBITS guidance was ~3.5% below consensus estimates, it believes investors should focus more on the medium term. It highlights that its ~15% CAGR in FY 2026 and FY 2027 EBITS excluding any price increases is strong. It also demonstrates management’s confidence in its execution despite the highly volatile consumer environment. All in all, the broker believes that the building blocks of its EBITS growth to FY 2027 is balanced and of high quality. The Treasury Wine share price is fetching $12.57 on Friday.

Woolworths Group Ltd (ASX: WOW)

Analysts at Morgan Stanley have upgraded this supermarket giant’s shares to an overweight rating with an improved price target of $37.00. This follows the release of the results of a major household survey which has made the broker more positive on the supermarket industry. It feels that the survey points to consumer trends that will result in better than expected same store sales in FY 2025. In addition, Morgan Stanley believes the results point to Woolworths being the biggest winner from these trends. As a result, it has elevated the company to be its top industry pick. The Woolworths share price is trading at $33.63 this afternoon.

The post Brokers name 3 ASX shares to buy now appeared first on The Motley Fool Australia.

More reading

• These 3 top ASX 200 shares just earned substantial broker upgrades. Here’s why
• Guess which ASX 100 stock has ‘high quality’ earnings and could rise 22%
• 5 things to watch on the ASX 200 on Friday
• Treasury Wine share price tumbles on Penfolds China update
• Here are the top 10 ASX 200 shares today

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