Investors with a high tolerance for risk might want to check out the ASX tech stock in this article.
That’s because if analysts at Bell Potter are on the money with their recommendation, it could double your money for you over the next 12 months.
Which ASX tech stock?
The tech stock in question is environmental technology company Calix Ltd (ASX: CXL).
It is focused on solving global challenges in industrial decarbonisation and sustainability. This includes CO2 mitigation, sustainable minerals processing, advanced batteries, biotechnology, and water treatment.
Bell Potter highlights that Calix is commercialising and developing a range of environmentally friendly solutions for industry. These solutions are derived from its patented minerals processing technology, the Calix Flash Calciner (CFC). It notes that the CFC is a patented reinvention of the calcination process that produces very high surface area nano-active materials, without the safety concerns or high production costs of nanoparticles.
In addition, Bell Potter points out that the technology can be used to separate and capture the CO2 by-product when decomposing carbonates into oxides, such as during the manufacture of cement and lime.
The broker notes that this CFC technology can be adapted for a broad range of applications based on a variety of minerals. However, the company has prioritised solutions for five target areas with a combined addressable market of $70 billion.
Big returns but high risk
Bell Potter is cautiously positive on the company’s long-term outlook and has reaffirmed its speculative buy rating with a $2.40 price target. Based on its current share price of $1.17, this implies potential upside of 105% for this ASX tech stock over the next 12 months.
To put that into context, a $10,000 investment in this stock today would turn into $20,500 if the broker is proven correct with its recommendation and valuation.
Though, it is worth highlighting that you could just as easily lose half your money (or more) from a speculative investment like this. So, this is really one for only those with a very high tolerance for risk.
Bell Potter concludes:
CXL’s growing suite of CFC applications target global challenges, including decarbonisation of hard-to-abate industrial processes (lime, cement and steel making), and improvement to supply chain efficiency (lithium concentrate value adding). CXL represents a valuable sustainable investing opportunity for ESG-focussed investors. CXL is a development company with prospective operations and cash flows only. Our Speculative risk rating recognises this higher level of risk and volatility of returns.
Should you invest $1,000 in Calix Limited right now?
Before you buy Calix Limited shares, consider this:
Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Calix Limited wasn’t one of them.
The online investing service heâs run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
And right now, Scott thinks there are 5 stocks that may be better buys…
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.
ASX 200 bank shares delivered mixed results in the first half of 2024, and views on the sector’s outlook are also divided.
The S&P/ASX 200 Banks Index (ASX: XBK) has had a notable year, up almost 13% year-to-date. Not yesterday, though. The banking basket slipped into the red by around 40 basis points at the close of trading on Wednesday.
The big four banks — National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), and Westpac Banking Corp (ASX: WBC) — were down less than 1% on Wednesday, but have trended lower generally these past three months.
With the pullback, are ASX 200 bank shares still a smart investment?
What’s happening with the big four ASX 200 bank shares?
All four banking majors trended lower yesterday amid a broader market selloff. The benchmark S&P/ASX 200 Index (ASX: XJO) drifted around 0.5% into the red at Wednesday’s close, similar to the banking index.
However, over the past year, investors who held ASX 200 bank shares have outperformed the broader market.
The benchmark index has lifted around 1.5% in the past year. Meanwhile, the banking sector is up 12.5% â an 11% advantage.
What are experts saying?
Despite these gains, some analysts are concerned about valuations in the sector. Goldman Sachs is one of those parties. It believes offshore banks might be more attractive to those interested in the space.
In 2015 for example, the average Australian bank’s return on equity (ROE) was among the highest globally, the broker notes.
However, from 2015 to 2023, the ROE and return on tangible equity (ROTE) have declined significantly. Now, they rank among the lowest globally.
Goldman Sachs states, “Australian banks now actually earn the lowest ROTE of global comparable banks.” This decline is due to compressed net interest margins and reduced low capital-intensive non-interest income.
Goldman Sachs rates Commonwealth Bank and Westpac as sell. It cites valuation concerns and risks in technology disruption for the view on these two ASX 200 bank shares. “We don’t think [Commonwealth Bank] justifies the extent of its valuation premium to peers,” it noted in its sector analysis.
It has a neutral rating on NAB due to the balance of solid fundamentals but challenging valuations. ANZ meanwhile gets a buy rating for its productivity benefits and improved profitability in its institutional business.
Meanwhile, Airlie Funds Management has reportedly trimmed its position in CBA, supposedly “the most underweight CBA in the history of [the] fund”, according to The Australian Financial Review.
This is despite shares in the banking giant climbing 28% in the last 12 months and last week nudging a 52-week closing high of $124.85.
Citi has some positive comments on CBA — despite rating it a sell. It said the bank’s exposure to, and performance in, retail banking may be enough to “justify continued outperformance versus its peer group”, the AFR reports.
Citi added ASX 200 banks look to be priced at a premium above “core earnings growth fundamentals”.
Valuation concerns
Despite poor ROE and ROTE performance, Australian banks’ price-to-book multiples remain high, making them some of the most expensive banks globally, Goldman Sachs explains.
Australian banks are currently trading at the 96th percentile versus history on a ROE vs. price-to-book multiples basis. The valuation discrepancy has expanded despite weaker relative profitability.
Here is the current list of consensus recommendations for each of the banking majors, with the respective number of buys making up that view:
ANZ â Hold (7 buys)
CBA â Sell (4 buys)
WBC â Hold (4 buys)
NAB â Hold (2 buys)
(All recommendations per CommSec)
Notably, despite the consensus view, each of the ASX 200 banking shares still shows a drop in positivity.
Takeout on ASX 200 bank shares
ASX 200 bank shares have shown strong returns over the past year. However, investors are wise to be cautious, in my view. With concerns about overvaluation and economic headwinds, experts warn it’s essential to consider valuations and profitability in the sector.
As always, you should consider your own personal financial circumstances before any investment decisions.
Should you invest $1,000 in Australia And New Zealand Banking Group right now?
Before you buy Australia And New Zealand Banking Group shares, consider this:
Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Australia And New Zealand Banking Group wasn’t one of them.
The online investing service heâs run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
And right now, Scott thinks there are 5 stocks that may be better buys…
Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
Tim Cook has previously said that Apple doesn't strive to keep people on their phones all day.
Justin Sullivan/Getty
CEO Tim Cook said Apple Intelligence may reduce iPhone usage in an interview with Marques Brownlee.
Cook said he believes AI will help people complete previously time-consuming tasks in less time.
Apple unveiled a number of new AI features for iPhones, iPads, and Macs at its annual WWDC event.
There's a good chance Apple's new AI updates may result in you spending less time on your device.
Apple CEO Tim Cook said it's a "significant possibility" that people use their iPhones less with Apple Intelligence, according to an interview with tech YouTuber Marques Brownlee released Wednesday.
The CEO said as Apple Intelligence continues to get smarter, previously time-consuming tasks may take less time.
The tech giant announced it will integrate AI into its systems at Apple's WWDC event on Monday. The CEO and other executives detailed a number of AI features that will be available on Apple devices with its latest software.
Some of the updates include a new and improved Siri with better language understanding and text capabilities, integration across apps, systemwide Writing Tools, and a revamped Photos app that organizes photos into different categories.
Apple also announced its partnership with OpenAI, which will allow users to opt into a ChatGPT-powered Siri. The AI chatbot is known to help people be more productive and get tasks done quicker.
Cook added that Apple has never been motivated to have people spend their lives on their devices. The CEO has made similar comments before, saying that people need to focus more on the people in the room with them.
"Our model is not one that needs engagement to succeed," Cook said in the interview. "Our model is one that where we want to empower you to be able to do things that you couldn't do otherwise."
Apple has added several features to the iPhone that raise awareness of how much time consumers spend on their devices and which help make their usage more intentional.
Features like Screen Time track how much time you spend on your iPhone and put it "a bit in your face," Cook said. The CEO said last year in an interview with GQ that he monitors his Screen Time "religiously." The CEO also mentioned Focus settings, which allow consumers to silence their phones or only receive specific notifications.
Cook said Apple is homed in on giving consumers tools to do "incredible things" that they couldn't do otherwise.
Henrik Fisker and Geeta Gupta-Fisker mismanaged Fisker to the edge of bankruptcy, former and current workers told Business Insider.
Araya Doheny/Patrick Fallon/Getty Images; Jenny Chang-Rodriguez/BI
Henrik Fisker's second automotive startup is on the brink of bankruptcy.
It was pitched as a Tesla rival, but workers say mismanagement and cutting corners led to compounding problems.
Business Insider spoke with 27 former and current Fisker staff that charted the startup's downfall.
Fisker's staff was in chaos as they prepared to deliver the company's first batch of electric cars to US customers.
It had been four years since famed automotive designer Henrik Fisker unveiled his Tesla rival, an SUV called the Ocean, and the vehicle still wasn't ready.
In the weeks leading up to the big June 2023 event, Fisker staff raced to fix faulty parts on at least four of the 22 EVs that were set to be delivered — even stripping parts off the CEO and CFO's personal cars to repair the vehicles, including door handles and seat sensors, according to 11 sources familiar with the incident.
Two days later, Fisker board member Wendy Gruel's Ocean SUV, one of the cars that had been delivered at the event, shut offon a public road while going full speed, five sources said. Later, the same thing happened to Geeta Gupta-Fisker, Henrik's wife and the company's CFO and COO, workers said.
A Fisker spokesperson denied that workers used parts from pre-production vehicles for customer cars and said Gruel's car didn't stop on a public road. The company said Gupta-Fisker's vehicle had malfunctioned, but the issue was resolved.
When TechCrunch previously reported the incident with Gruel's car, the publication said the company had confirmed the incident and said the issue was fixed.
The issue was unrelated to Fisker's part swapping, but one thing was clear: the electric cars had barely hit the road and already the problems were piling up.
Henrik Fisker's EV startup seemed to be an easy sell at first. The 60-year-old automotive veteran boasts a long history in the industry, known for being the designer behind the Aston Martin V8, the BMW Z8 roadster that famously appeared in a 1999 James Bond film, and helping design Tesla's Model S.
Even though it was Henrik's second automotive startup after his first company went out of business in 2013, some workers told Business Insider that it was easy to dismiss worries early on that his second company could meet the same fate.
For his part, Henrik said he planned to do things differently this time. He would follow Apple's model by outsourcing production through Magna International and he also aimed to target the middle of the market with a more affordable EV option that could compete with Tesla's best-selling Model Y. Fisker Inc emerged in 2016 and went public in 2020 via a SPAC backed by Apollo Global Management. At one point, the company's market value soared as high as $8 billion.
At the time, Fisker was one of several EV startups to burst onto the scene — Rivian, Lucid, and Lordstown all wanted the chance to compete with Tesla. Since then, production and market headwinds have pushed some EV startups to shutter and major players like Ford and GM to scale back their electric-vehicle operations. Even Tesla has struggled, seeing revenue decline and layoffs.
"I was hopeful at first," one former VP, who worked at both Fisker startups, said. "Initially, at least, it seemed like he'd learned from his mistakes. It became obvious later on that they hadn't."
A Fisker spokesperson said it would be "unfair" to compare the two companies.
Today, the company is fighting for its life, pulling out all the stops in an effort to avoid bankruptcy.
Business Insider spoke with over two dozen current and former Fisker employees who worked at the startup during various periods from its launch in 2016 to the present. The workers, whose identities are known to BI, requested anonymity as they were not authorized to comment on Fisker's behalf and feared professional reprisal.
A husband and wife duo who workers say mismanaged their way into a mess
Many of Fisker's woes can be traced back to the husband-wife duo that launched the brand, multiple former and current workers told BI.
They described a disorganized environment in which unqualified people were brought in to lead major programs and basic automotive standards were ignored.
While Henrik often served as a figurehead, Gupta-Fisker was heavily involved in everyday decisions, including on the engineering side, 11workers said. Prior to taking on the role of CFO and COO at Fisker, Gupta-Fisker had served as an investment manager for the Fisker family office and as an advisor at a nonprofit. She had no prior experience in the automotive industry. But at Fisker, the workers said she managed deals with Magna and outside parts suppliers, frequently popped into engineering meetings, and weighed in on everything from parts purchases to software decisions.
A spokesperson for Magna declined to comment on Fisker. A Fisker spokesperson denied comments that Henrik took on a more passive role and said he was "deeply involved."
Henrik Fisker shows off the Fisker Karma. The car he produced under his first automotive venture, which filed for bankruptcy a decade ago.
Reuters/Phil McCarten
49-year-old Gupta-Fisker quickly became known in the company for her shrewd cost-cutting abilities. But, her strategy meant that at times Fisker ended up using components that didn't match the correct specifications for the Ocean, five former and current workers said. Gupta-Fisker made several decisions to use cheaper parts against Fisker executive and Magana executives' advice, two workers said. The mismatches led to issues with over-the-air updates, the five workers said.
The company said Magna oversaw the majority of parts sourcing and a "significant" amount of the parts came from Magna and its suppliers.
In conversations with BI, staff blamed many of the Ocean's faults on the cost-cutting efforts.
Several workers said that in the months leading up to the vehicle's launch, they filed internal reports recommending that the product undergo further testing and development before its release. They said they were told the company planned to proceed anyway.
"The focus was on getting the car to market as soon as possible," one former worker said. "The overarching belief was we could fix things with updates later on."
A Fisker spokesperson said Magna was responsible for testing and releasing the Ocean and it had been fully certified by regulators in the US and Europe. The company has been sending out over-the-air updates since 2023, the company said.
Ahead of the release, Fisker engineers were aware of multiple issues with the vehicle, according to five current and former workers, as well as internal documents viewed by Business Insider. Engineers had identified issues with the effectiveness of the car's door handles, key fobs, and seat sensors.
Over the past year, the National Highway Traffic Safety Administration (NHTSA) has launched four investigations into Fisker's SUV, including issues with inadvertent braking and flaws in the vehicle's door latch system. The company said it is cooperating with NHTSA.
Fisker has also faced dozens of lemon law lawsuits.
Cutting corners led to compounding issues
In its haste to bring the car to market, Fisker failed to set up an effective system for processing repair orders and warranty claims, seven current and former workers said. Technicians were tasked with filling out the work orders and many of them said they hadn't been trained on the process.
In lieu of a working warranty system, some workers began processing the repairs without the proper California Bureau of Automotive Repair codes and EPA license numbers, using "123456" as a placeholder on a number of repairs, according to an internal document viewed by BI. In March, a VP at Fisker warned the issue made the company non-compliant with NHTSA protocols and unable to properly track and report safety concerns.
A Fisker spokesperson said the issue was "an internal error with only draft work orders early in the service process that was immediately corrected."
The Fisker Ocean hit US roads in June 2023.
Fisker
Without a proper system to process warranties or repair orders, the majority of repairs went unaccounted for, seven current and former workers said. That meant there wasn't an adequate way for Fisker to keep track of which parts were being used for repairs for its own financial records. It also meant many customers did not get a record of their repairs, workers said.
Meanwhile, Fisker also struggled to find the necessary parts for all of the fixes. The company hadn't set up much inventory for aftersales parts, so some of the parts used for customer fixes either came directly off the factory line, meaning they were meant for production vehicles, or the parts were stripped off pre-production and production vehicles, 11 workers with knowledge of the issue said.
In one instance, Fisker stripped parts off an engineering test vehicle that had been shipped from Magna's facility in Graz, Austria under an import bond, according to three former workers and emails viewed by BI. The vehicle was supposed to be destroyed in its entirety shortly after it was delivered to comply with the terms of the import. This is typically within a year, according to NHTSA, but the period can be extended in one-year increments up to 3 years. The vehicle's parts were not intended to be used for customers' cars.
The company denied any test vehicles had been used for parts and said all vehicles that had been imported for testing were destroyed under NHTSA's supervision within the allotted time period.
The spokesperson also denied that Fisker had a shortage of after-sales parts: "The Service department made its own forecast for parts, based on their sector knowledge. The Purchasing department supported those requests."
Fisker staff also looked for clever ways to address the parts shortage. In some instances, workers who visited Graz were told by managers to bring parts back in their suitcases to avoid paying import fees, seven workers said. One worker recalled having to leave personal belongings behind to fit air vents and key fobs into their luggage; another said they packed a larger bag to fit trim panels.
Fisker declined to comment on the claims.
A sales scramble amid negative reviews and vanishing demand
Fisker was initially successful in generating interest in the Ocean, with over 65,000 reservations initially placed.
But in the year since the Ocean's release, the company has delivered around 7,000 vehicles, a Fisker spokesperson said. Negative reviews — including YouTuber MKBHD calling it the "worst care I've ever reviewed" — took a toll on the brand, driving thousands of would-be customers to cancel their reservations.
In November, Fisker moved to bring in hiring recruiters to help sell the vehicle, as well as orchestrate the delivery of the car after the sale had been processed, six former workers said. In many cases, the recruiters, who had initially been brought onto the human resources team, had zero experience in automotive sales.
A Fisker spokesperson said that recruiting staff did join the sales efforts, though the company said they were asked to stay because they were successful in the new role.
Marques Brownlee reviewed the Fisker Ocean and called it "the worst car I've ever reviewed."
YouTube
Selling the car wasn't easy either. The recruiters found themselves directly competing with the company's established sales team and there weren't enough leads to go around. Four former workers said Fisker's reservation numbers included many duplicate names in its count and it was difficult to track which customers had connected with a sales worker. As a result, some people on the reservation list would find themselves getting multiple calls per day from different Fisker representatives.
At one point, sales workers were instructed to target customers who had canceled their orders and pepper them with calls in an attempt to get them to reverse their decision, three former workers said.
Fisker also began hosting pop-up events to boost sales, including events in partnership with fan blog Fiskerati, two former employees told BI. The events varied from meetups at Panera parking lots to larger-scale test drive events. In at least one instance, the event was shut down after Fisker failed to get permission from the owner of the location, the two sources said. Queues of Fisker owners that needed repairs also showed up at the events, three former workers said. Fisker told BI that the event hosted at Panera was not a company event.
"Sometimes it was hard to sell the cars when you'd take someone on a test drive and any number of error messages would pop up," one former worker from sales said. "As time went on and it became clear the writing was on the wall, we became even more honest with the customers on the risk," they added.
Fisker said it was aware of the ADAS issues but it was fixed with an update.
Meanwhile, some customers who'd canceled their orders and never paid for the car ended up mistakenly receiving delivery of the vehicle anyway, four former workers said. Former Fisker Ocean owner Kurt Mechling told BI he received delivery of the vehicle before he'd signed off on the order or had his payment successfully processed.
In March, TechCrunch reported that Fisker temporarily "lost track of millions of dollars in customer payments" for multiple months. Four workers with knowledge of the issue confirmed to BI the incident involving misplaced payments occurred.
When the carmaker conducted an internal audit in December over the issue, workers began scrambling to find the missing payments and bring some of the vehicles that had been mistakenly delivered back,the workers said. Some workers were encouraged by upper management to threaten the customers by saying they'd put them on a repossession list which could impact their credit score, the former workers said.
A Fisker spokesperson said the company had an "organized process" to address issues with vehicles that had not been paid for that was in line with industry standards.
Facing the threat of a repeat bankruptcy
Over the past year, Fisker has dropped prices by as much as $24,000 for some versions of the vehicle.
The company warned in March that it might go out of business within the year. The stock was delisted from the New York Stock Exchange in April after it fell to 9 cents per share. Fisker warned staff in an April filing that they will be laid off if the company can't find a buyer or additional investor. The company brought in a chief restructuring officerwho was given "sole authority" over some financial matters, including a potential sale, as part of an agreement with one of its investors.
Layoffs have stripped the staff to the bone. Its workforce is now less than 100 people, according to two sources with knowledge of the issue. Many of the workers who remain are involved in last-ditch efforts to offload Fisker's remaining inventory, the people said.
The company said it does not have less than 100 workers left and continues to sell vehicles in the US and in Europe. It declined to specify how many workers remained.
Meanwhile, workers have been dissatisfied with what they view as Henrik and Gupta-Fisker's inability to take accountability for their actions. A Fisker spokesperson pushed back on the comments questioning Henrik's business prowess.
"I think it's a story of ego. He wanted to make a car and stamp his name on it. Henrik is a great designer, but he doesn't have the business acumen beyond that," an individual who worked with Henrik at several companies, including his first automotive startup. "The lessons he should have learned from the first startup were never implemented and he rushed a car to market once again."
For Henrik, finding a buyer or cash infusion could partially salvage a reputation that has taken a hit over the past six months. Without a rescue, the automotive veteran faces the prospect of a nightmare scenario: back-to-back bankruptcies.
June 12, 2024: Added clarification that NHTSA requires temporarily imported vehicles to be destroyed within 3 years and that Fisker said it had done so within the allotted time period.
Do you work for an EV company like Fisker or Tesla? Reach out to the reporter from a non-work email and device at gkay@businessinsider.com or 248-894-6012.
If you want to make some buy and hold investments for your income portfolio, then it would be worth looking for ASX dividend shares with strong long-term outlooks.
But which shares could deliver the goods for investors over the next decade? Let’s take a look at three quality options:
APA Group could be a great buy and hold option for investors. Just ask its long term shareholders.
They will tell you that the energy infrastructure company is on course to increase its dividend for the 20th consecutive year.
The good news is that analysts at Macquarie believe this ASX dividend share can then continue this trend for the foreseeable future.
The broker is forecasting dividends per share of 56 cents in FY 2024 and then 57.5 cents in FY 2025. Based on the current APA Group share price of $8.33, this equates to 6.7% and 6.9%Â dividend yields, respectively.
Macquarie has an outperform rating and $9.40 price target on its shares.
Another ASX dividend share that could be a good buy and hold investment option is Coles.
It is one of Australia’s big two supermarket operators. In addition, it has a significant liquor store network and a joint ownership in the Flybuys loyalty program.
Combined, these businesses appear well-placed to support solid earnings and dividend growth over the long term.
Morgans appears to believe this is the case and is forecasting fully franked dividends of 66 cents per share in FY 2024 and then 69 cents per share in FY 2025. Based on the current Coles share price of $16.97, this implies yields of approximately 3.9% and 4.1%, respectively.
The broker has an add rating and $18.95 price target on its shares.
A third ASX dividend share that could be a great buy and hold option is Endeavour. It is the liquor giant behind store brands such as BWS and Dan Murphy’s, as well as a large network of hotels.
Goldman Sachs is very positive on the company due to its market leadership position and attractive valuation. It expects this to support the payment of fully franked dividends of approximately 21 cents per share in FY 2024 and then 22 cents per share in FY 2025. Based on the current Endeavour share price of $5.03, this will mean dividend yields of 4.2% and 4.4% yields, respectively.
The broker currently has a buy rating and $6.30 price target on its shares.
Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Apa Group wasn’t one of them.
The online investing service heâs run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
And right now, Scott thinks there are 5 stocks that may be better buys…
Motley Fool contributor James Mickleboro has positions in Endeavour 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 Apa Group, Coles Group, and Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
Who doesn’t enjoy a boost to their income? Dividends are a big reason why many choose to invest. That’s why passive income chasers pay attention when an ASX 200 stock lifts its dividend payout ratio — bigger payments could be ahead.
Yesterday, a $17 billion Australian company highlighted an increase in its payout ratio. The determination, shared in an investor briefing, follows an extended period of debt reduction by one of the country’s steadfast energy providers: Origin Energy Ltd (ASX: ORG).
So, what does it mean for the back pockets of its shareholders?
Dividends to take a bigger share of earnings pie
Operating a utility company can be extremely capital-intensive. Just take a look at the gross margins of Origin and AGL Energy Limited (ASX: AGL). We’re talking respective margins of 20.8% and 28% before removing operating expenses.
Nonetheless, utility companies can still offer a fountain of dividends. Nearly every household’s needs-based nature of electricity and gas provides a reliable income. For Origin Energy, it means investors can enjoy a dividend yield of 4.8% from this ASX 200 stock.
But what about the increased dividend payout ratio?
As per the investor briefing, Origin Energy will target a payout ratio of at least 50% of free cash flow.
This is slightly different from what a standard dividend payout ratio reflects. Typically, this figure is based on the percentage of net income or net profit after tax (NPAT) paid as a dividend. Free cash flow differs from NPAT, representing the company’s operating cash flow minus its capital expenditures.
Previously, Origin Energy’s targeted payout ratio was set between 30% and 50%.
Does it mean more dividends from this ASX 200 stock?
What really matters to most is whether it means more dollars hitting the account. Unfortunately, the answer to this is not as straightforward.
While Origin’s payout ratio now has a higher minimum, future free cash flows (FCF) will be the deciding factor.
Source: Origin Energy June Investor Briefing 2024
As shown on the right-hand side of the image above, the energy company’s adjusted FCF have stagnated across the last three financial years. If Origin’s free cash flow were to fall in FY24, it could mean a bigger slice of a smaller pie.
The share price of this ASX 200 stock is up 17.8% year-to-date.
Should you invest $1,000 in Origin Energy Limited right now?
Before you buy Origin Energy Limited shares, consider this:
Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Origin Energy Limited wasn’t one of them.
The online investing service heâs run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
And right now, Scott thinks there are 5 stocks that may be better buys…
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.
QBE Insurance Group Ltd (ASX: QBE) shares have been in fine form over the last 12 months.
During this time, the insurance giant’s shares have stormed 22% higher.
This is almost triple the return of the ASX 200 index over the same period.
Can QBE shares keep rising?
The good news for investors is that it isn’t too late to invest according to analysts at Goldman Sachs.
According to a note, its analysts have retained their buy rating and $20.90 price target on the company’s shares.
Based on its current share price of $18.32, this implies potential upside of 14% for investors over the next 12 months.
In addition, the broker is forecasting dividend yields of 5%+ each year through to at least FY 2026. This boosts the total potential 12-month return to approximately 19%.
If this proves accurate, it would turn a $10,000 investment into approximately $11,900 if you reinvest the dividends.
Why is the broker bullish?
Goldman notes that the insurance giant has recently held a number of investor meetings. It was pleased with what management said, highlighting that it is confident in can deliver a combined operating ratio (COR) of 95% in North America by 2025. As a reminder, anything below 100% is profitable for insurers.
In light of this, the broker believes that there is upside risk to consensus COR estimates. It said:
In this context, we flag 1) Upside risk to FY25 consensus COR of 92.8% (VA) – we see <92.5% as possible reflecting improvement from North America non core + organic upside. 2) North America non core run off we think could support ~0.7% -1.2% improvement to Group COR alone. 3) Organic trends also suggest possible underlying COR expansion into FY25.
Goldman also highlights a number of other key items and reasons why it thinks QBE shares could re-rate higher from here. It adds:
Rate increases earning through FY25 versus moderating claims inflation expected to remain supportive into FY25 – 1Q24 Group rate was 7.3% versus inflation assumption of 5% for FY24. b) Reinsurance markets increasingly more positive with commentary from 1 June renewals suggest lower rates (particularly in upper layers) which are supportive of direct insurer margins and positive read into 2025. c) QBE’s 2024 perils allowance was rebased to an 80% probability of sufficiency (out of the last 10 years) perhaps suggesting less pressure into FY25 and perils growth more in line with book. Perils experience to date has been below expectations. d) All in, there appears to be strong COR tailwinds to offset moderating yield pressures which is supportive of ROE / Valuation into FY25. 4) Valuation comparison versus global peers also suggests upside for QBE across P/E and P/B particularly in context of strong ROE.
Should you invest $1,000 in Qbe Insurance right now?
Before you buy Qbe Insurance shares, consider this:
Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Qbe Insurance wasn’t one of them.
The online investing service heâs run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
And right now, Scott thinks there are 5 stocks that may be better buys…
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.
The Steadfast Group Ltd (ASX: SDF) share price has dropped 8.9% over the past 12 months to close at $5.41 on Wednesday. The insurance broker’s shares have underperformed the S&P/ASX 200 Index (ASX: XJO), which is up 8% over the past year.
The following chart shows that the Steadfast share price has exhibited little volatility. Over the last 10 years, the maximum drop from the high price to the low has been 16%, except in March 2020 during the height of the COVID-19 pandemic.
While past share price movements don’t predict future trends, the resilient performance of the Steadfast share price seems to be supported by its strong fundamentals, in my view.
Steadfast Group is Australia’s largest general insurance broker network, providing businesses and individuals with a broad range of insurance products and services. The company operates through a network of brokerages, offering risk management solutions and support to its members. Steadfast also has interests in underwriting agencies, giving it a diversified presence in the insurance industry.
Steadfast reported a robust set of numbers in its 1H FY24 results. Underlying revenue rose 19.4% to $790.4 million, and underlying earnings before interest, tax, and amortisation (EBITA) soared by 21.4% to $229 million. While acquisitions supported the growth during the reporting period, the organic growth was also strong at 13.4%.
Its underlying net profit after tax (NPAT) increased by 17.5% to $106 million, while statutory NPAT rose similarly by 18.5% to $100 million. On a per-share basis, underlying diluted earnings rose 12.2% to 10.2 cents per share (cps).
Steadfast’s pricing power and volume growth underscored the strong results, while the company attributes its acquisition strategies as key to success. Managing director & CEO Robert Kelly explained:
Once again, our underlying earnings growth for the half year was driven by sustained organic growth from higher prices from insurers and volume increases in the Group’s insurance broking and underwriting agencies, and continued delivery of our acquisition strategy.
Consistent with our growth strategy, Steadfast Group acquired Sure Insurance, a business that is complementary to the existing portfolio. This acquisition, together with our Trapped Capital acquisitions made during the half year, further enhances Steadfast Group as the largest general insurance broker network and the largest group of insurance underwriting agencies in Australasia.
Additionally, we are progressing well with the implementation of our US expansion strategy with the acquisition of ISU Group with its established and trusted network and experienced management team.
For the full year in FY24, management guides for a 22% growth in its underlying EBITA and 18% in NPAT at the midpoint of its estimated range. Underlying diluted EPS growth is forecast to grow between 11% and 16%.
Consistent dividend payer
Among ASX investors, Steadfast is known for its steady increase in dividends.
Encouraged by a 12.2% growth in its underlying EPS in its half-year FY24 results, the company raised its fully-franked dividend by 12.5% to 6.75 cps.
Since its initial public offering in 2013, the company has consistently increased its dividend payments from 4.5 cps in FY14 to 15.75 cps in the last 12 months to March 2024. All these years, the company maintained 100% franking on its dividends, offering tax benefits to its shareholders. Its payout ratios have also increased over time, hovering around 60% to 75% in recent years.
At the current share price, Steadfast shares offer a dividend yield of 2.9%.
How expensive are Steadfast shares now?
Steadfast shares are trading at 20x FY24’s estimated earnings, which is near the midpoint of its historical trading range of 13 to 25 times.
Its smaller competitor, AUB Group Ltd (ASX: AUB), is trading at a similar multiple with a price-to-earnings ratio (PER) of 20 times based on FY24 earnings estimates provided by S&P Capital IQ.
For comparison, NIB Holdings Limited (ASX: NHF) is trading at a PER of 16 on FY24 earnings estimates, noting nib is an insurance company, which is different from insurance brokers.
Foolish takeaway
While the Steadfast share price has been moving sideways, I think its business fundamentals remain strong.
Based on its historical trading range and compared to its smaller peer, AUB Group, its shares appear to be inexpensive to me. I think it’s a good candidate for any portfolio seeking stable growth.
Should you invest $1,000 in Steadfast Group Limited right now?
Before you buy Steadfast Group Limited shares, consider this:
Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Steadfast Group Limited wasn’t one of them.
The online investing service heâs run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
And right now, Scott thinks there are 5 stocks that may be better buys…
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 no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Steadfast Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
Rob McElhenney and Ryan Reynolds are business partners, costars, and friends.
Randy Holmes/ABC via Getty Images
Rob McElhenney helped support Ryan Reynolds through one of the most stressful times in his life.
Reynolds says McElhenney took on more Wrexham responsibilities while he was working on the new "Deadpool."
"I'm lucky to call him my friend," the Marvel star told Business Insider.
Ryan Reynolds and Rob McElhenney aren't just business partners and costars on "Welcome to Wrexham," the FX docuseries that chronicles the pair buying a down-on-its-luck Welsh football club and turning it into a success. They're also good friends — and according to Reynolds, McElhenney helped him through a particularly stressful time in his life.
"It swallows my life whole," the actor says of making a "Deadpool" movie. Reynolds cowrote, produced, and stars in the latest, "Deadpool & Wolverine," alongside Hugh Jackman's Wolverine. "It becomes an all-hours, all-consuming, time-murdering obsession that needs to be born, raised, and sent to college in the span of 24 months."
Reynolds credits McElhenney with helping him balance his priorities, all while still allowing him to make time for his family, including his wife, Blake Lively, and their four kids.
"Over the last couple years, Rob has covered for me and cared for me in ways I can't fully comprehend," Reynolds tells BI. "He's helped me find space to see my family despite needing me in Wrexham."
Wrexham coowners Rob McElhenney and Ryan Reynolds celebrate Wrexham's promotion.
Martin Rickett/PA Images via Getty Images
Reynolds also noted it's not lost on him that McElhenney is juggling a lot, too — in addition to their shared Wrexham responsibilities, McElhenney also formed a new company, More Better Industries, that has a production arm, a creative consultancy, and an investment arm. That's not to mention his starring role on "It's Always Sunny in Philadelphia," the beloved FX comedy he created that's heading into its 17th season.
"Rob is running multiple businesses, making sure he's a present husband and dad, starring in approximately 42 television shows and somehow, some way, maintaining remarkably even skin," Reynolds jokes.
The duo's friendship, which originally started over DMs about four years ago, is something Reynolds cherishes.
"I fucking love the guy. Now and always," he says of McElhenney. "I'm lucky to know him. I'm lucky to work with him. I'm lucky to call him my friend."
Bethenny Frankel was married to Jason Hoppy from 2010 to 2012, and their divorce took nearly a decade.
Frankel started a YouTube Series chronicling her divorce experience.
She shared some of the dating red flags to watch out for before you marry someone.
In 2010, Bravo aired "Bethenny Getting Married," a one-season reality show documenting Bethenny Frankel's relationship with pharmaceutical sales executive Jason Hoppy.
The marriage lasted two years, and the couple had one child, Bryn Hoppy. The divorce took nearly a decade, finalizing in 2021 after Frankel filed for divorce in 2013.
"It was a brutal, brutal experience," Frankel, 53, told Business Insider. "I thought I would never survive it."
While Frankel shares practical divorce tips on the show, she also emphasizes the importance of spotting red flags early on.
Bethenny Frankel with her daughter, Bryn Hoppy.
Cindy Ord/Getty Images
"You can't marry someone that you wouldn't want to be divorced from," Frankel told BI. "The red flags that you see in dating will become fire engine-red flags when you're getting divorced." She said people can get "vengeful" throughout the process, especially when navigating custody battles.
Frankel shared some of her biggest dating red flags to watch out for early on in a relationship.
Charm is disarming
Frankel told BI that "charming" men should set off alarm bells.
She spoke more about the red flag in her series, stating that her life coach told her to run if charm is someone's primary personality trait.
"You don't own charm, charm owns you," she quoted the coach. Excessive charm is associated with narcissists and dark empaths, who use it to manipulate the people around them, according to therapists.
Lois M. Brenner, a divorce lawyer in New York, previously told Business Insider that she's had many clients say they were love-bombed and had "no idea who this person was" when they married them because of how charming they were at first.
While the song is a joke, Frankel still warned against going after trust fund guys in particular.
"You don't want a trust fund guy because of the way that they're going to ultimately treat you and discard you," she told BI. She believes that they will get bored and toss you aside because "they're insecure and they've been given everything."
Men can still be boys
Immaturity is another quality Frankel said to stay away from, because it can indicate how a partner handles disagreement.
She stressed the importance of being with someone who's emotionally mature. "You don't want to date boys, you want to date men," she told BI, adding that physical age means nothing. "A 65-year-old man could be a boy. A 25-year-old boy could be a man."
On TikTok, Frankel advised viewers to put men they're dating "through a strainer" and be really discerning. "If it's giving boy, it's giving 'bye,'" she said.
A weak 'yes' is a hard 'no'
Frankel said "cracks become craters" once you're married, so it's important to listen to your reservations.
"If you don't have a resounding, emphatic 'yes,' the answer is 'no,'" she told BI.
She added that someone's fears and expectations might make them feel obligated to go through with a marriage, such as their parents liking the person or feeling like they need to hit a certain milestone by a certain age. But none of that means you're ready to marry the person, and the consequences can be dire.
"You have to make smart decisions, and hopefully other people can learn from so many of my mistakes," Frankel said.