The Australian share market is tipping into the red this morning but nowhere near the extent of one hard-hit ASX 200 stock.

Fletcher Building Ltd (ASX: FBU) sent out a market update before the market lurched into motion. With shares down 9.6% to $2.91, shareholders are evidently not pleased with the contents. For context, the S&P/ASX 200 Index (ASX: XJO) is starting the week 0.13% lower.

Let’s look at the negative nudge hurting Fletcher Building today.

‘Challenging conditions’ cut down forecast

Investors are reassessing the home builder as light is shed on the current industry landscape.

As per the release, Fletcher highlighted ‘weakened’ market conditions in its materials and distribution divisions — think insulation, plasterboard, roofing, and retailing said products — sending the ASX 200 stock into freefall.

Volumes in New Zealand are down approximately 5% to date in the second half of FY2024 compared to the second quarter. Meanwhile, Australia is the harder hit of the two, with volumes impacted to the tune of 10%.

Fletcher pointed out a ‘notable slowdown’ in house sales and ‘an end to the house price momentum’ previously witnessed throughout the first half in New Zealand as a cause for the weakness.

Today’s update lands 11 days after Australian building approvals data published by the Australian Bureau of Statistics.

The March figures show a 2.2% decline in seasonally adjusted total dwelling units approved year-on-year. Meanwhile, the fall for private sector dwellings excluding houses deepens to 16.8%, as depicted below.

In light of the sector’s softening, the ASX 200 stock has revised its FY2024 earnings before interest and taxes (EBIT) guidance.

The company’s previous estimate was between $540 million to $640 million. Now, Fletcher expects FY24 EBIT before significant items to land between $500 million and $530 million. It marks a 17% reduction from the top-bound estimate.

Furthermore, Fletcher highlighted gross margin pressure across Iplex NZ and Steel.

What could be next for this ASX 200 stock?

Citi analysts have quickly cast their judgment following Fletcher’s guidance downgrade.

The team believes there is a risk that the building company may tap investors for money through a capital raise, stating:

A soft trading update that appears to increase leverage outside the range expected.

Given the potential quantum of the unknowns, we retain our sell rating and believe it may be prudent for a new CEO to shore up the balance sheet.

As of 31 December 2023, Fletcher held NZ$2.18 billion of debt on its balance sheet. Whereas the cash pile stood at a relatively meagre NZ$215 million.

Citi is sticking to its sell rating despite the ASX 200 stock being down 34.5% from a year ago.

The post This ASX 200 stock just slashed its earnings guidance by 17% appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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.

The Sayona Mining Ltd (ASX: SYA) share price is starting the week on a bit of a roller coaster.

Shares in the S&P/ASX 300 Index (ASX: XKO) lithium stock closed on Friday trading for 4.4 cents. In early trade on Monday, shares were changing hands for 4.6 cents apiece, up 4.5%.

But the embattled miner wasn’t able to hold onto those gains. At the time of writing, in later morning trade, shares are trading for 4.2 cents apiece, down 4.6%.

For some context, the ASX 300 is down 0.3% at this same time.

Here’s what’s happening.

ASX lithium stock drops despite promising discoveries

The Sayona Mining share price is failing to lift off today despite the company reporting on some promising exploration results at its North American Lithium (NAL) project, located in Quebec, Canada.

NAL is a joint venture project. Sayona Mining owns 75% of the project, and Piedmont Lithium Inc (ASX: PLL) holds the other 25%.

According to the release, results from 91 drill holes and wedges totalling 26,605 metres have identified high-grade lithium mineralisation to the northwest, northeast, southeast and below the Mineral Resource Estimate (MRE) pit shell.

Management said the newly discovered zones will become a focal point for assessing future mining options at NAL.

The Sayona Mining share price may not be responding positively today, however, as investors await more certainty.

While the miner said that initial assessments indicated the presence of high-grade lithium mineralisation outside the MRE pit shell, it cannot yet confirm that these will substantially increase NAL’s resource portfolio or contribute to extending the lithium project’s life of mine.

Investors should gain more certainty on the size of NAL’s resource and its life of mine estimates as more results come in. Assay results are pending for 24 additional drill holes, totalling 4,592 metres, conducted during the 2023 exploratory drilling campaign.

Commenting on the results that have yet to boost the Sayona Mining share price, interim CEO James Brown said:

We are very excited by these new discoveries at North American Lithium which highlights the potential of this asset with high-grade mineralisation defined to the north-west, north-east, south-east and below the existing MRE.

The team at NAL will now be working to update the Mineral Resource incorporating these significant results. We look forward to continue testing the mineralisation at NAL with further drilling underway.

Sayona Mining share price snapshot

Despite rocketing 33% last week, the Sayona Mining share price remains deep in the red in 2024, down 40%.

Pressured in part by weak lithium prices and a tepid medium-term price outlook for the battery-critical metal, shares in the ASX 300 lithium miner are down 82% over 12 months.

The post What’s happening with the Sayona Mining share price on Monday? appeared first on The Motley Fool Australia.

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

The Lendlease Group (ASX: LLC) share price could be in for more misery after the S&P/ASX 200 Index (ASX: XJO) stock’s tax pain. It’s currently down by 3.5% in initial reaction to an ATO tax bill.

The construction and real estate business has announced a painful amended tax assessment which is likely to hurt earnings.

Lendlease ATO update

On 10 May 2024, the ATO issued Lendlease with a ‘statement of audit position’ and an amended income tax assessment relating to the ATO audit of the partial sale of Lendlease’s retirement living business in FY18.

The amended assessment is for $112.1 million and is made up of three parts.

First, a $62.4 million capital gains tax is coming from the exit of the retirement living trust, a “one-off event that only applies to the 2018 transaction”.

Second, there’s $25.2 million of additional tax from the sale of 25% of the units in the joint venture trust.

Third, the ATO has calculated $24.5 million of interest.

However, Lendlease is hopeful of being able to avoid paying the interest based on the ATO’s previous written undertaking (in February 2020) that no interest or penalties would be applied to FY18.

Why has the ATO decided Lendlease owes a lot more tax?

The ASX 200 stock explained it calculated the gain on the sale by including the liabilities the business took on at the time of the purchase of the assets in its tax cost base. Lendlease considers this to be “in accordance with the lance and consistent with the ATO’s tax ruling on the retirement living industry.”

The ATO has decided those certain liabilities assumed by Lendlease should be excluded from the tax cost base from the calculated gain. The ATO adjustments don’t relate to deductions claimed by Lendlease.

The ASX 200 stock said it “proactively contacted the ATO to review the tax treatment applied to the 2018 sale eight months prior to submitting its tax return and also obtained independent advice before lodgement.”

More tax pain to come?

Since the initial part sale of the retirement living business in 2018, Lendlease has sold down two more tranches of the units in the joint venture trust in FY21 and FY22, totalling 50%.

The ATO hasn’t (yet) issued amended assessments about those additional sales.

If the ATO applies the same treatment to both of those partial sales, the ASX 200 stock has estimated it may mean another $50 million of additional tax, excluding any interest.  

Broker views on the ASX 200 stock

According to reporting by The Australian, the broker Citi thinks this could lead to another profit downgrade for the business. News of this tax bill broke before the business announced the news, and Citi commented earlier:

If confirmed, we believe this could potentially turn into yet another earnings downgrade for FY24, after the downgrade in February 2024.

The retirement sale profits initially seem to have been taken above the line in FY22, and the treatment of this potential tax bill could also be above the line.

While investors are looking ahead to the end of May investor day, we believe this announcement could be a further negative and potentially result in negative share price performance.

The Lendlease share price is already down close to 20% in 2024, as we can see on the chart below.

The post Top broker says this beaten-up ASX 200 stock could have further to fall appeared first on The Motley Fool Australia.

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• 9 ASX 200 shares tumbling to 52-week lows today

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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.

Smaller ASX growth shares have the potential to deliver really good returns because of their ability to scale up from the current starting point.

I want to see businesses that can grow their revenue and profit margins, leading to excellent profit growth and, hopefully, good shareholder returns. Below are two I’m excited about.

Collins Foods Ltd (ASX: CKF)

Collins Foods operates KFC outlets in Australia, the Netherlands and Germany.

I’m optimistic about this company because KFC has a strong brand in the fast food space, and simply rolling out more locations in Australia and Europe could be a good driver of earnings. In the first half of FY24, it added eight new KFCs in the Netherlands and four KFC locations in Australia.

But, the ASX growth share is also growing same store sales (SSS) at a solid pace at the moment. In HY24, KFC Australia saw SSS growth of 6.6%, and KFC Europe’s SSS grew by 8.8%. Existing stores are performing strongly, and the overall network is growing at a solid pace.

As a bonus, it’s also responsible for Taco Bells in Australia, which is a useful growth avenue for the company, though it’s relatively small at this point.

The revenue rose 14.3%, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased 16.7%, and underlying net profit after tax (NPAT) went up 28.7%.

The Collins Foods share price has dropped more than 20% since mid-January, so it looks much better value now. According to Commsec, the ASX growth share is now priced at under 13x FY26’s estimated earnings.

Airtasker Ltd (ASX: ART)

Airtasker offers a platform where people can advertise almost any task they need help with, which individuals and businesses can offer to do for a fee.

The ASX growth share claims to be the leading marketplace for local services in Australia and it’s now trying to do the same thing in the UK. It has signed a 5-year media-for-equity partnership with Channel 4 In the UK.

In the FY24 third quarter, Airtasker marketplace revenue rose 11.5% to $10.1 million, while UK posted tasks increased by 49.1% year over year.

To me, one of the most exciting things is that profit can soar from here, depending on how much it decides to re-invest for more growth. The business has a gross profit margin north of 90%, so new revenue is very profitable.

The FY24 third quarter saw free cash flow of $2.5 million, an improvement of $5.1 million year over year. I think the ASX growth share has a capital-light model which will enable it to make much stronger profit in the next two or three years.

The post 2 top ASX growth shares I’d buy today appeared first on The Motley Fool Australia.

More reading

• How to choose ASX shares for passive income
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Motley Fool contributor Tristan Harrison has positions in Collins Foods. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Airtasker. The Motley Fool Australia has recommended Collins Foods. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Coles Group Ltd (ASX: COL) shares could be a smart buy today. There are several advantages and disadvantages to consider when weighing up whether to dive into the ASX supermarket stock right now. Let’s take a closer look.

The Coles share price has experienced its fair share of ups and downs over the past year, as we can see from the chart above.

Which way is the market going to send the business next? Whilst we can’t know what the company’s share price will do in the short term, here’s what I’m taking into account for the long term.

Positives

The company is delivering solid supermarket sales growth, stronger than that of arch-rival Woolworths Group Ltd (ASX: WOW). In the FY24 third quarter, Coles supermarkets saw sales growth of 5.1% to $9.06 billion. Including liquor sales and the sales to service station operator Viva Energy Group Ltd (ASX: VEA), Coles Group’s total sales increased 3.4%.

Another positive is the impressive growth rate of e-commerce sales, which helped drive the overall numbers. The supermarket’s e-commerce sales increased 34.9% to $856 million over the quarter.

In the early part of the fourth quarter, supermarket volumes remained “positive”. Coles also reported having made “good progress” in addressing “loss” (theft), with efforts continuing in the fourth quarter. If Coles can keep improving on this front, that’s good news for shareholders.

The opening of Coles’ Kemps Creek automated distribution centre and its two customer fulfilment centres will “be yet another step” towards “improving operating efficiency” and differentiating its offer.

In terms of earnings, I like how defensive the supermarket’s revenue is – we all need to eat! According to Commsec estimates, Coles is projected to generate earnings per share (EPS) of 81 cents in FY24 and 95.4 cents in FY26. That puts the current Coles share price at around 20x FY24’s estimated earnings and 17x FY26’s estimated earnings.

The dividend is yet another reason to consider buying Coles shares – the payout has increased every year since listing. Commsec numbers suggest a grossed-up dividend yield of 5.9% in FY24 and 7% in FY26.

Negatives to keep in mind about Coles shares

Coles is not exactly a high-growth ASX stock, so investors should be patient when it comes to capital growth and earnings growth. Furthermore, there’s no guarantee that good sales growth will continue. Population growth is a useful tailwind, but it’s not a given it will translate into earnings growth

Cost inflation is another factor investors should consider. Coles has already said its wages are increasing materially in FY24, and the new warehouses have higher costs (including depreciation).

The final negative factor for me is that Coles’ debt levels have increased due to spending on the new warehouses. Some investors aren’t fans of debt, particularly in an environment of high interest rates.

Foolish takeaway

Ultimately, I think Coles shares are a reasonable long-term buy right now, but there are some downsides to keep in mind. Steady earnings growth and a decent dividend yield could combine to deliver comparatively good overall returns.

The post The pros and cons of buying Coles shares right now appeared first on The Motley Fool Australia.

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• Coles share price holds firm while Woolworths tumbles 18% in 2024. Time to buy?
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has 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.

A high-performing S&P/ASX 200 Index (ASX: XJO) gold stock is marching higher again today.

Shares in the big Aussie gold miner closed on Friday trading for $2.00. At the time of writing, in early morning trade on Monday, shares are swapping hands for $2.03 apiece, up 1.5%.

For some context, the ASX 200 is down 0.1% at this same time.

Investors are bidding up the ASX 200 gold stock after the miner reported on a sizeable resource upgrade at one of its key projects.

Any guesses?

If you said Ramelius Resources Ltd (ASX: RMS), go to the head of the virtual class.

Here’s what’s happening today.

ASX 200 gold stock gaining on expanded resource

The Ramelius Resources share price is in the green on news the Mineral Resource Estimate for its Eridanus project at the Mt Magnet gold mine in Western Australia has been increased by 64%.

The ASX 200 gold stock said the updated Mineral Resource Estimate now includes the adjacent Lone Pine and Theakston deposits. The MRE also incorporates recent drilling and mining information collected at the sites.

This brings the new estimate to 21 million tonnes at 1.7 grams of gold per tonne for a total of 1.2 million ounces.

The increased MRE has positive implications for both open pit and underground options, which remain available beyond the current open pit. The miner noted that this itself is expected to produce some 300,000 ounces of gold once completed and all stockpiles are processed.

In ongoing exploration at the project to improve the analysis of both mining options, Ramelius plans to kick off a 10,000 metre drill program next month. The drill campaign will include 3,300 metres of diamond drilling,

What did management say?

Commenting on the increased MRE boosting the ASX 200 gold stock today, Ramelius managing director Mark Zeptner said, “In keeping with the previously released Mt Magnet 10-Year Plan, the Eridanus project is expected to figure prominently in one form or another for the entirety of the mine plan.”

Zeptner added:

Today’s significant resource upgrade, both in terms of tonnes and grade, augurs well for a mine life well beyond 10 years especially if an open pit option is ultimately chosen.

Given the 64% increase is net of depletion and the current open pit will produce over 300,000 ounces once processed, Eridanus is set to become the third one-million-ounce-plus mine in the Mt Magnet field, after Hill 50 & Morning Star.

With today’s intraday gains factored in, shares in the ASX 200 gold stock are now up 19% in 2024 and up 45% over the past full year.

The post Guess which ASX 200 gold stock is marching higher on a ‘significant resource upgrade’ appeared first on The Motley Fool Australia.

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

The ANZ Group Holdings Ltd (ASX: ANZ) share price is starting the week in the red.

In morning trade, the banking giant’s shares are down by 4% to $27.89.

As a comparison, the benchmark ASX 200 index is currently 0.1% lower in early trade.

Why is the ANZ share price tumbling?

The big four bank’s shares are falling today after trading ex-dividend for its upcoming interim dividend.

When a share trades ex-dividend, it means that the rights to an impending dividend payment are now settled.

As a result, if you were to buy its shares today, the rights to that dividend would stay with the seller and not transfer to the buyer.

Given that a dividend forms part of a company’s valuation, a share price will tend to drop in line with the value of the dividend on the ex-dividend date. After all, it new buyers don’t want to pay for something that they won’t receive.

What is the ANZ dividend?

Last week, ANZ released its first-half results and reported a cash profit of $3,552 million for the six months ended 31 March. This represents a 1% decline compared to the second half of FY 2023.

This reflects a strong performance from the Institutional business, which reported a 12% lift in cash profit to $1,522 million, which was offset by a poor half for the Australia Retail business. It posted a 9% decline in cash profit to $794 million despite delivering above-system home loan growth with pricing above cost of capital.

However, much to the delight of shareholders, that profit decline didn’t stop the bank from increasing its dividend by 2 cents year on year to 83 cents per share. This dividend is partially franked at 65%.

Based on Friday’s closing ANZ share price of $29.09, this dividend equates to an attractive 2.9% dividend yield. And there’s still a final dividend coming in six months.

But what will that dividend be? Analysts at Goldman Sachs believe that a final dividend of 81 cents per share will be declared with the bank’s full year results. This will bring its total dividends for the year to $1.66 per share. This equates to a dividend yield of 5.7% based on last week’s closing price.

When is pay day?

Eligible shareholders won’t have to wait too long until they are paid out the bank’s interim dividend.

ANZ is currently scheduled to make this dividend payment in 7 weeks on 1 July.

ASIC investigation

In other news, also potentially weighing on the ANZ share price is reports that ASIC is investigating the company for suspected contraventions of a number of provisions of the ASIC Act and the Corporations Act.

According to The Australian, the investigation relates to ANZ’s execution of a 2023 issuance of 10-year Treasury Bonds by the Australian Office of Financial Management.

The post Why is the ANZ share price sinking today? appeared first on The Motley Fool Australia.

More reading

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• It was huge week for ASX 200 bank shares. Here’s why
• Where I’d invest $7,000 in ASX dividend stocks right now
• Analysts give their verdict on ANZ shares: Should you buy?

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.

ASX shares that offer dividends can be appealing, but how are you supposed to choose between them all for passive income?

In this article, I’m going to talk about three of my favourite ways to evaluate ASX dividend shares. Some investors may have different priorities, but I’d suggest that each element that I’m going to talk about is important for every income investor to think about.

Dividend yield

The headline-grabber for a lot of dividend investors is the dividend yield, so let’s start there.

This tells us how much of a cash payment an investor can expect from their investment. For example, if someone invested $1,000 in a business with a 4% dividend yield, it’d pay $40 over a year. A 6% dividend yield would pay $60. And so on.

As income investors, we want a certain amount of payout from our stocks. However, a yield that is too big may not be the best option if the dividend is in danger of being cut or if a high dividend payout ratio means little re-investing for growth.

Examples of high-yield dividend shares I’m interested in are Telstra Group Ltd (ASX: TLS) and Metcash Ltd (ASX: MTS). In FY25, according to Commsec, Telstra is projected to pay a grossed-up dividend yield of 7.4%, and Metcash is projected to pay a grossed-up dividend yield of 7.8%.

Stability

Passive income is a useful source of returns, but only if the payments keep coming. If someone is relying on income to pay for their life expenses, then they need those dividends to keep flowing, even during a recession.

Dividends aren’t guaranteed, but some businesses operate in more stable industries than others, resulting in stable profits and resilient payments.

Commodity prices have a history of bouncing around, so while Rio Tinto Ltd (ASX: RIO) has a projected grossed-up dividend yield of 7.5% for FY24, it could easily be substantially smaller in FY25 if the iron ore or copper price crashed in 2025.

Energy infrastructure business APA Group (ASX: APA) provides half of the nation’s gas usage, which provides predictable cash flow to pay growing distributions. It has grown its distribution every year for the past 20 years.

Brickworks Limited (ASX: BKW) has a diversified asset base, which is paying its growing rental profits and rising dividends, enabling Brickworks to grow its dividend every year for the past decade. It hasn’t cut its dividend for almost 50 years.

Sonic Healthcare Ltd (ASX: SHL) is an ASX healthcare share that has grown its dividend most years over the past three decades, including consistent annual growth over the past decade.

Dividend growth

The last few years have shown how important it is for our work/investment income to grow to ensure we stay on top of inflation.

A business like APA has a great track record of slow and steady growth, but there are a number of companies that have grown their dividends at a much faster pace. That means a lower starting dividend yield can catch up to and overtake a high (but stable) yield over the years.

For example, Collins Foods Ltd (ASX: CKF) has grown its annual dividend by around 150% in the past decade.

Pinnacle Investment Management Group Ltd (ASX: PNI) has grown its annual dividend by 210% in the last six years.

Fund manager GQG Partners Inc (ASX: GQG) has just grown its latest quarterly payment by 56% year over year.

Foolish takeaway

By looking at these three passive income factors, I think investors can build a good dividend portfolio without being lured into names that aren’t necessarily the right long-term choice (in my opinion).

I’m a fan of many of the businesses I’ve mentioned, which is why I’m a shareholder in a lot of them for dividends and long-term capital growth.

The post How to choose ASX shares for passive income appeared first on The Motley Fool Australia.

More reading

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• ASX 200 banks vs. mining stocks: Which is the better buy today?
• Here’s how the ASX 200 market sectors stacked up last week
• Why I’d buy high-yield ASX dividend shares for superannuation in retirement

Motley Fool contributor Tristan Harrison has positions in Brickworks, Collins Foods, Metcash, and Sonic Healthcare. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Pinnacle Investment Management Group. The Motley Fool Australia has positions in and has recommended Apa Group, Brickworks, Pinnacle Investment Management Group, and Telstra Group. The Motley Fool Australia has recommended Collins Foods, Metcash, and Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.