Category: Stock Market

ASX 200 property share Goodman Group (ASX: GMG) is trading 0.58% lower on Friday at $30.79.

The industrial property specialist has been on a tear over the past year, up 56%, in fact.

This compares to its peers in the S&P/ASX 200 A-REIT Index (ASX: XPJ), which are trading 16% higher over the same period.

So, why is the Goodman share price growing at nearly quadruple the rate of other ASX 200 real estate stocks?

Go, you good thing!

Goodman Group is the biggest real estate investment trust (REIT) on the ASX 200 with a $58.8 billion market capitalisation.

Last year, it was one of the top five most profitable large-cap ASX 200 shares.

The ASX REIT released its 1H FY24 results last month. Goodman Group reported a 29% year-over-year increase in operating profit to $1.13 billion. This was higher than it had expected and resulted in a FY24 guidance upgrade.

The ASX 200 share rose 7% on the news. So, investors are feeling pretty happy right now.

Why is Goodman outperforming its peers by so much?

Well, one factor is likely its key point of difference in owning and managing many industrial property assets.

Industrial is hot property

Large warehouses and the like are in high demand today due to the expanding digital economy.

And the growth in artificial intelligence is adding fuel to the fire.

Online retailers and cloud computing companies are among the major commercial customers competing fiercely for large industrial properties like the ones Goodman owns.

Industrial property is in short supply nationally, which gives Goodman two major opportunities.

It can maximise its rental returns, with like-for-like net property income (NPI) growth coming in at 5% and portfolio occupancy remaining high at 98.4%.

It also has the money to buy more existing warehouses or the land to build them on.

Goodman has 85 projects in the development pipeline worth a collective $12.9 billion. Data centres make up 37% of the pipeline. The forecast yield on cost is 6.7%.

CEO Greg Goodman reckons cap rates for prime assets are currently attractive, making the group “focused on the buying opportunity”.

Goodman’s total assets under management are now worth $79 billion, down 2% from 30 June 2023.

What’s ahead for Goodman Group?

Commenting on the outlook, CEO Greg Goodman said:

Our focus on providing the essential infrastructure for the digital economy is supporting the positive
outlook for FY24. Data centres will be a key area of growth and the acceleration of data centre activity is a catalyst for the Group to consider multiple opportunities to enhance its returns.

Given positive structural trends, we expect continued customer and investor demand for our high quality industrial and digital infrastructure assets. Supply constraints in our locations are expected to continue to drive rental growth and maintain high occupancy rates across the portfolio.

ASX 200 share price snapshot

This ASX 200 property share has gained 131% in market capitalisation over the past five years.

This compares to 7.3% for the S&P/ASX 200 A-REIT Index.

The post Why is this ASX 200 share rising at nearly quadruple the rate of its peers? appeared first on The Motley Fool Australia.

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More reading

• Is this surging ASX 200 stock an under-the-radar buy?
• ASX 200 soars to another new all-time high on Friday!
• 13 ASX 200 shares with ex-dividend dates next week
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Bronwyn Allen has positions in Goodman Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goodman 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.

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Another ASX reporting season has come to an end. For some companies, February marked a celebratory event; for others, it was a sobering experience — making it a season of ASX winners and losers.

The general consensus among analysts is that results were, on average, better-than-expected. After all, many had speculated in the lead-up to February that this would be the set of figures that finally reflected cost inflation and a softening economy.

Still, not all roads led to Rome. Let’s look at some Aussie companies that rose to the occasion and some that faltered.

Who are the winners of this ASX reporting season?

Arguably the standout sector of the month was ASX retail shares. Fears of corporate earnings feeling the sting of a spending-conscious consumer had set expectations. Investors were anticipating steep falls in revenue and profits as discretionary spending came under scrutiny of more households.

While some shoppers did dial back somewhat amid greater wallet strain, the reduction was not as dire as investors had prepared themselves for.

For example, Harvey Norman Holdings Limited (ASX: HVN) and Kogan.com Ltd (ASX: KGN) reported sales declines of 6.8% and 5.6%, respectively. However, the share prices of these two companies rallied 4.4% and 23.7% on their results.

In the case of Kogan, investors were thrilled with the company achieving a net profit after tax (NPAT) of $10.2 million after netting a $9.6 million loss in the previous first half — fitting for an ASX winner. Meanwhile, investors were willing to forgive Harvey Norman for its 29.4% fall in pre-tax profits.

Another February earnings season ASX winner was chip design software seller Altium Ltd (ASX: ALU), although you wouldn’t think so based on the price move on results day.

Altium shares retreated 0.1% to $65.05 after handing its first-half figures to the market on 27 February. However, this company’s ‘winning’ part of reporting season arrived as a takeover offer before its results were posted.

Nevertheless, Altium’s results were still impressive. Revenue jumped 15.9%, and net profits grew 11.4% for the six months ended 31 December 2023.

The lemons

Earnings among the top 200 ASX companies fell 35% in aggregate, meaning there were some real doozies during the month.

One of the most notable Australian companies taking a deep cut to its earnings was mining behemoth BHP Group Ltd (ASX: BHP). Despite its underlying earnings holding steady at US$6.6 billion thanks to iron ore and copper prices, nickel became BHP’s problem child in the half.

The mining giant incurred a US$2.5 billion impairment on its Western Australia Nickel asset. On top of that, another US$3.2 billion charge was booked related to the dam failure at Brazil Samarco several years ago.

Shifting gears, another company that possibly would have been on the ASX winners list if not for its weaker guidance was Corporate Travel Management Ltd (ASX: CTD). Despite posting revenue and NPAT gains of 25% and 222%, the travel operator sustained a 20% hit to its share price.

The post 3 ASX winners from the reporting season (and 2 losers) appeared first on The Motley Fool Australia.

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More reading

• This ASX 300 company director just cashed out $16 million worth of shares
• ASX dividend investors: Is BHP stock a buy now?
• Why is the BHP share price sinking today?
• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares 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 positions in and has recommended Altium, Corporate Travel Management, and Kogan.com. The Motley Fool Australia has positions in and has recommended Harvey Norman. The Motley Fool Australia has recommended Corporate Travel Management and Kogan.com. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ResMed Inc (ASX: RMD) shares are pushing higher again on Friday.

In afternoon trade, the sleep disorder treatment company’s shares are up 0.5% to $28.97.

This means that its shares now up 37% since hitting a 52-week low of $21.14 back in late September.

To put that in context, if you had invested $20,000 in ResMed shares at its low, your investment would now be worth $27,408.

That’s a return on investment of almost $7,500 in less than six months.

Investors may now be wondering if it is too late to buy the company’s shares. So, let’s find out.

Is it too late to buy ResMed shares?

The good news is that you’re not too late to the ResMed party according to a number of analysts.

For example, Citi has a buy rating and $34.00 price target on the company’s shares. This implies potential upside of 17% for investors from current levels.

Citi believes that the company is well-positioned to benefit from the delayed return from its main rival in the key sleep treatment market.

Don’t worry about Ozempic

Over at Ord Minnett, its analysts are even more bullish with their accumulate rating and $34.00 price target. This suggests that the ResMed’s shares could rise almost 35% over the next 12 months.

Its analysts aren’t concerned above the emergence of weight loss wonder drugs like Ozempic and see minimal impact on sleep treatment demand from them over the medium term.

A best idea

Finally, Morgans has an add rating and $32.82 price target, which would mean a return of 13% for investors.

Its analysts are so positive they have the company on their best ideas list again in March. The broker commented:

While weight loss drugs have grabbed headlines and investor attention, we see these products having little impact on the large, underserved sleep disorder breathing market, and do not view them as category killers. Although quarters are likely to remain volatile, nothing changes our view that the company remains well placed and uniquely positioned as it builds a patient-centric, connected-care digital platform that addresses the main pinch points across the healthcare value chain.

The post Up 37% from their low: Can ResMed shares keep rising? appeared first on The Motley Fool Australia.

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More reading

• 3 reliable ASX shares you can buy at a discount
• Here are the top 10 ASX 200 shares today
• Morgans names more of the best ASX 200 shares to buy in March
• Top brokers name 3 ASX shares to buy today
• 2 ASX 200 dividend shares that could be strong buys this month

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When a director of any ASX 300 company decides to cash out shares, the usual reaction from shareholders is one of raised eyebrows.

After all, ASX directors aren’t exactly amongst the lowest-paid workers in the country. And investors of an ASX 300 share like to see the fortunes of the people who are highly paid to run their companies as closely aligned as possible to their own.

But that’s what investors in ASX 300 online retailer Kogan.com Ltd (ASX: KGN) are confronting today.

The Kogan share price has been on a tear over the past few weeks, thanks to a very well-received earnings report last month. Since that report was dropped on 26 February, this ASX 300 stock has rocketed a whopping 35% or so. That’s including the 1% rise today thus far.

This rise put the Kogan share price up an eye-watering 89% over the past 12 months.

But a Kogan director seems to have taken advantage of this share price surge.

According to an ASX filing this morning, David Shafer made an off-market bulk sale of shares yesterday. Shafer is Kogan’s chief financial officer, chief operating officer and executive director.

Shafer reportedly disposed of 2 million Kogan shares for a price of $8 each. For the mathematically challenged readers out there, that equates to a $16 million sale.

Prior to this sale, Sahfer owned approximately 5.23 million shares. As well as 1.4 million options.

Before any ASX 300 investors jump the gun, Kogan did release an explanation of this sale in conjunction with its notice. Here’s what it said:

The Company notes that with no share sales for more than two and a half years, David has decided to diversify some of his investments.

He remains committed to the Company and has retained the majority of his shareholding. He also has equity-based compensation, including options to align his interests over the long term.

Should shareholders of this ASX 300 stock worry about this sale?

It is universally regarded as a good thing to have directors of an ASX 300 share (or any share for that matter) to be as financially aligned as possible with shareholders.

However, it is good financial practice for anyone to diversify their wealth, including ASX 300 directors. Having a majority of one’s wealth tied up in one stock is something that no one would recommend as sound financial management.

So at the end of the day, it’s up to each shareholder to make an individual decision of how they feel about this sale.

The post This ASX 300 company director just cashed out $16 million worth of shares appeared first on The Motley Fool Australia.

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• Why Alumina, Kogan, Mayne Pharma, and Suncorp shares are racing higher
• Kogan share price jumps 14% on massive profit rebound and dividend return
• Here’s why this ASX small-cap share could be a big winner

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

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The Insurance Australia Group Ltd (ASX: IAG) interim dividend announced last month was 67% higher than last year, at 10 cents per share.

That’s some very nice turbocharged passive income, right there.

And analysts say it’s only going to get better from here.

IAG dividend trajectory

So, IAG investors will be receiving their 10 cents per share on 27 March.

What’s next?

Well, consensus expectations published on CommSec today are for IAG to pay a total dividend of 25 cents in 2024. That means the final dividend, to be announced in August, should be about 15 cents per share.

Last year, 15 cents was what IAG paid in dividends for the entire year. So, you get the drift. IAG dividends are on the increase.

Based on the IAG share price of $6.23 at the time of writing, a total dividend of 25 cents this year would equate to a dividend yield of 4%.

This is nothing spectacular — 4% is the average dividend yield for S&P/ASX 200 (ASX: XJO) stocks.

But we need to remember that the IAG share price has had a significant run-up of late. Over the past 12 months, it’s up 30%. That sort of price growth is obviously going to lower the yield.

What about future IAG dividends?

The consensus forecast is for IAG to pay a total annual dividend of 30 cents in 2025 and 32 cents in 2026. That means yields of 4.8% and 5.1%.

That’s better!

And don’t forget about the franking on top. In 2023, the annual dividend had 30% franking attached. The recent interim dividend for 2024 had 40% franking attached.

Should you buy?

After 30% share price growth, some investors might like to wait for the next pullback in price.

To give you some guidance, the consensus rating is currently a hold. The rating was downgraded from a moderate buy this week.

Goldman Sachs has a 12-month share price target of $6 on IAG shares. So, the broker reckons IAG shares are already trading above value today.

Over to you.

The post Here’s the IAG dividend forecast through to 2026 appeared first on The Motley Fool Australia.

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More reading

• Passive income watch: The ASX stocks dishing out the biggest dividend boosts this earnings season
• IAG shares go ex-dividend tomorrow: Should you buy now?
• Why Inghams, IAG, Neuren Pharmaceuticals, and Pro Medicus shares are sinking today
• IAG share price sinks 6% despite huge dividend boost and buyback
• 5 things to watch on the ASX 200 on Friday

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 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.

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It has been another busy week for 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:

DroneShield Ltd (ASX: DRO)

According to a note out of Bell Potter, its analysts have upgraded this counter drone technology company’s shares to a buy rating and 90 cents price target. The broker made the move on valuation grounds after a sharp pullback in recent sessions dragged its shares down to an attractive level. The Droneshield share price is trading at 62 cents on Friday.

Megaport Ltd (ASX: MP1)

A note out of Citi reveals that its analysts have retained their buy rating and $16.80 price target on this network services provider’s shares. As well as being very impressed with its first half performance, the broker believes recently announced actions will be supportive of growth in the Australian market. Particularly given that there are signs of increasing demand for global WAN solutions locally. The Megaport share price is fetching $15.17 this afternoon.

Viva Energy Group Ltd (ASX: VEA)

Analysts at Macquarie have retained their outperform rating on this fuel retailer’s shares with an improved price target of $4.70. The broker has made some site visits recently and came away feeling very positive on its proposed acquisitions. And thanks to higher fuel margin assumptions, the broker has boosted its future earnings estimates and lifted its valuation accordingly. The Viva Energy share price is trading at $3.50 on Friday.

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

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More reading

• Here are the top 10 ASX 200 shares today
• DroneShield share price down 36% in 6 days. Should you buy the dip?
• Why DroneShield, Magellan, Platinum, and Zip shares are rising today
• Why DroneShield, Healius, Newmont, and Paragon Care shares are pushing higher
• Why this leading broker just upgraded DroneShield shares

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

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Is Ampol Ltd (ASX: ALD) an S&P/ASX 200 Index (ASX: XJO) stock that should be on more investors’ radars?

Ampol shares have lifted by 16% in the past four months, which is a solid rise. The ASX 200 has risen by 12% over the same time period, so the energy company has outperformed the index by 4%.

Ampol describes itself as Australia’s leading transport energy provider – it used to be known as Caltex Australia. The company supplies Australia’s largest branded petrol and convenience network, as well as refining, importing and marketing fuels and lubricants. It also recently launched its electric vehicle charging solutions.

Ampol operates 16 terminals, six major pipelines, 55 ‘wet’ depots and more than 1,800 branded sites (with 690 company-operated sites).

Expert thoughts on the FY23 result

The broker UBS described Ampol’s 2023 full-year result as “solid”, with a special dividend (of 60 cents per share) slightly ahead of what the market was expecting.

After returning $1.3 billion to shareholders at a dividend payout ratio (including special dividends) of 89% of RCOP net profit after tax (NPAT) in FY22 and FY23, UBS thinks investors will be focused on the sustainability of the capital return. The company’s guidance for FY24 and FY25 capital expenditure is approximately 30% higher than what the market (consensus) was expecting.

UBS believes Ampol’s balance sheet has the capacity to absorb higher costs, with debt levels remaining below its target range, despite the increase in capital expenditure.

The broker has forecast “fairly resilient” group earnings before interest and tax (EBIT) for the ASX 200 stock despite higher capital expenditure at the refinery, as well as investments in lower-returning assets like electric vehicle charging. However, this may challenge the sustainability of the capital return over the next few years.

Even though there has been cost-of-living pressures and falling tobacco sales, Ampol’s convenience retail division has “held up” thanks to a shift of sales to higher-margin products. It’s forecasting flat convenience EBIT between 2023 to 2027 as fuel margins normalise.

Is the Ampol share price a buy?

UBS reduced its earnings per share (EPS) forecast for 2024 by 8% and increased its 2025 EPS forecast by 11%, having brought forward the Lytton turnaround.

UBS has a neutral rating on Ampol shares, with a price target of $34.40, suggesting the Ampol share price could fall by around 10% over the next year.

The ASX 200 stock is valued at under 14x FY24’s estimated earnings, according to UBS’ numbers.

The post Is this surging ASX 200 stock an under-the-radar buy? appeared first on The Motley Fool Australia.

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More reading

• ASX 200 soars to another new all-time high on Friday!
• 13 ASX 200 shares with ex-dividend dates next week
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Thursday

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.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to close the week at a record high. At the time of writing, the benchmark index is up 0.8% to 7,827.3 points.

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

Judo Capital Holdings Ltd (ASX: JDO)

The Judo Capital share price is up 4% to $1.34. This may have been driven by a broker note out of Goldman Sachs yesterday. It put a buy rating and $1.66 price target on the bank stock. Goldman said: “We think the market’s skepticism around the at-scale NIM focuses on the lending spread assumption of mid-4%, given the 1H24 spread was <4%.”

Paladin Energy Ltd (ASX: PDN)

The Paladin Energy share price is up 5% to $1.26. This is despite there being no news out of the uranium miner today. However, it is worth noting that most ASX uranium shares are racing higher today. Investors may believe recent weakness in the industry has created a buying opportunity.

Virgin Money UK (ASX: VUK)

The Virgin Money share price is up 33% to $4.08. Investors have been buying the UK-based bank’s shares after it received a takeover offer. Nationwide Building Society has tabled an offer of 220 British pence per share. This equates to $4.26 per share based on current exchange rates and values the bank at approximately $5.7 billion.

WA1 Resources Ltd (ASX: WA1)

The WA1 Resources share price is up 2% to $13.20. This morning, analysts at Bell Potter initiated coverage on the niobium explorer’s shares with a speculative buy rating and $17.65 price target. The broker believes the company’s “Luni [deposit] has the potential to be a globally significant Tier-1 asset characterised by its high-grade and scale.”

The post Why Judo, Paladin Energy, Virgin Money, and WA1 shares are racing higher appeared first on The Motley Fool Australia.

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• 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 positions in and has recommended Judo Capital. 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.

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Block Inc (ASX: SQ2) shares are marching higher again today.

Shares in the global S&P/ASX 200 Index (ASX: XJO) buy now, pay later (BNPL) stock – which acquired Afterpay in January 2022 – closed yesterday trading for $115.78. During the Friday lunch hour, shares are swapping hands for $116.89 apiece, up 1.0%.

That sees Block shares up a whopping 92.5% since the closing bell sounded on 31 October!

For some context, the ASX 200 (breaking into new all-time highs today) is up 15.4% over this same period.

Here’s what’s been piquing ASX 200 investor interest.

What’s boosting Block shares?

The ASX 200 BNPL stock is getting some tailwinds today as investors are increasingly optimistic about the outlook for interest rate cuts, both in Australia and in the United States.

The case for a rate cut from the RBA was bolstered earlier this week when the ABS released some very lacklustre growth figures for the Aussie economy.

And in the US, Fed chair Jerome Powell said that while the world’s top central bank was still “waiting to become more confident that inflation is moving sustainably at 2%… we’re not far from it”.

Block shares, like other BNPL stocks, have proven to be particularly sensitive to higher interest rates. Powell’s dovish words helped Block’s US listed stock close up 2.2% on the New York Stock Exchange (NYSE) overnight.

The big rally for Block really kicked off in early November. That’s when the company boosted its guidance and announced cost cutting measures, including staff reductions.

And the rally picked up pace again on 23 February, when the BNPL company reported its fourth quarter results.

Highlights included a 24% year on year increase in net revenue to US$5.77 billion. And gross quarterly profit of US$2.03 billion was up 22% from Q4 2022.

The fast-rising Bitcoin (CRYPTO: BTC) price also bolstered the bottom line. Block’s Bitcoin gross profit increased 90% year on year to $66 million.

That could be helping Block shares with their ongoing gains this week.

According to data from CoinMarketCap, Bitcoin reached an all-time high on Wednesday of US$69,170.63. It’s still hovering near that record, with the world’s top crypto currently valued at U$67,173.56.

Have you been following along?

Every month the Motley Fool’s analysts scour the boards for top stock picks.

And Block made that list last month.

Motley Fool analyst Tony Yoo tipped Block shares to outperform back on 10 February. At the time the stock was valued at $105.19, 11.1% below current levels.

“The financial services company is on the way up after cleaning up its act in recent months,” Yoo said.

He added:

Management has cut costs, reduced staff share issuances, and generally placed a greater emphasis on cash flow. The revival in the Bitcoin price has helped too, with co-founder Jack Dorsey a firm believer in cryptocurrencies.

The post Up 93% since October, why are Block shares marching ahead again on Friday? appeared first on The Motley Fool Australia.

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More reading

• 6 ASX shares to buy and hold until the next leap year
• Here are the top 10 ASX 200 shares today
• Why these 4 ASX 200 shares grabbed the Motley Fool’s headlines this week
• Here are the top 10 ASX 200 shares today
• Why are ASX tech shares booming on Friday?

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

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Income investors looking for high yields have to navigate a difficult tightrope – determining whether high-yielding dividend stocks are safe ASX shares.

The market is, at the end of the day, a mechanism that investors use to price risk against reward. A company trading with a relatively high dividend yield is often doing so because investors are pricing in a risk that the yield isn’t sustainable going forward.

Many novice dividend investors get caught out thinking that if they buy a dividend stock with a 9% dividend yield, they are buying a safe ASX share and are set to receive that yield year in and year out going forward. Imagine their dismay when the company announces in its next earnings that its dividends are getting cut or even suspended.

Remember, there’s no such thing as a truly safe ASX share or a guaranteed dividend.

So today, let’s talk about three ASX shares that are currently offering dividend yields of more than 5% today. We’ll discuss whether these are safe ASX shares to buy for income investors, or yield traps that might lose you money going forward.

Are these 3 ASX dividend shares safe, or are they traps?

Woodside Energy Group Ltd (ASX: WDS)

At current pricing, ASX 200 energy stock Woodside is trading on a trailing dividend yield of 7.19%. That dividend yield comes fully franked too. So this is a potentially big chunk of change we’re talking about here.

So can investors buy Woodside shares today and expect a 7% cash return on their investment every year? Probably not. Like miners and commodity shares, the profitability of any energy stock is almost entirely dependent on the price of crude oil (and gas if applicable).

If oil prices begin climbing over the coming weeks and months, Woodside might indeed match its previous payouts and remain a 7%-yielder. But if oil prices fall, investors can expect Woodside’s dividends to fall just as quickly.

Indeed, the company’s recently announced final dividend of 60 US cents per share represents a 58% reduction on last year’s equivalent payout. If the interim dividend is cut by a similar amount later this year, Woodside won’t be trading on a 7% yield for too long. Unless its share price drops, of course.

I’m not saying that investors won’t enjoy meaningful dividend income from Woodside shares going forward. I just think that you can’t buy this company’s shares today with the expectation of a 7.19% yield every year.

ANZ Group Holdings Ltd (ASX: ANZ)

Next up is ASX 200 bank ANZ. Income investors have long loved ASX bank shares. And for good reason. Today, ANZ shares are displaying a trailing dividend yield of 5.92%. That comes with full franking credits to boot.

It wasn’t that long ago that ANZ shares’ dividend yield was above 6%, but a rising share price has remedied that at present.

So is ANZ a safe ASX share for income investors?

Well, this is also a tricky question to answer. The dividends from ASX banks tend to be a little cyclical too. Not as much as energy shares, mind you. But bank profits tend to rise and fall in line with what’s happening in the broader economy.

Saying that, I think investors can buy ANZ shares today with a reasonable expectation of at least a 5.92% dividend yield going forward. The bank is well capitalised, with a relatively low (for a bank anyway) dividend payout ratio.

I also take note of what ASX broker Ord Minnet has projected when it comes to ANZ. As my Fool colleague covered this week, the broker has predicted modest dividend rises from ANZ shares over the next two financial years. If accurate, that bodes very well for income investors indeed.

WAM Capital Ltd (ASX: WAM)

Finally, let’s talk about listed investment company (LIC) WAM Capital. WAM Capital is a favourite of many income investors due to its history of providing large and fully franked dividends to investors. At current pricing, WAM Capital shares are trading on a monstrous trailing dividend yield of 9.42% (fully franked).

However, this is the company that I hold the most scepticism on this list about being a safe ASX share for income investors.

For one, WAM Captial hasn’t raised its dividend in six years. It has paid an annual 15.5 cents per share every year since 2018. Further, its most recent update tells us that the company has only 13 cents per share in its dividend profit reserve. And that’s before the next payout (worth 7.75 cents per share) is due to be rolled out next month.

That doesn’t look safe to me.

In addition, the WAM Capital share price has lost around 27% of its value over the past five years. All up, this is the exact opposite of what I would call a safe ASX share for income investors (or any investor).

The post 3 ASX dividend shares with yields above 5% (but are they safe?) appeared first on The Motley Fool Australia.

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More reading

• 2 of the best ASX dividend stocks to buy in March
• Why Camplify, Platinum, Rio Tinto, and Woodside shares are dropping today
• Why are the big 4 ASX 200 bank shares leaping to new 52-week highs today
• What is dragging the Woodside share price lower today?
• Buy these ASX dividend stocks with yields of 5% to 7.5%

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

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