At the start of each week, I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Pilbara Minerals Ltd (ASX: PLS) is still the most shorted ASX share after its short interest rose to 21%. Weak lithium prices have been weighing heavily on sentiment (and profits).
• Syrah Resources Ltd (ASX: SYR) has short interest of 17.6%, which is up week on week. Short sellers don’t appear to believe that graphite prices will improve any time soon. This could mean that Syrah’s cash burn continues for some time to come.
• Core Lithium Ltd (ASX: CXO) has short interest of 12.1%, which is down since last week. This lithium miner has been struggling with falling lithium prices. So much so, it has announced plans to restrict production to reduce costs.
• IDP Education Ltd (ASX: IEL) has 11.1% of its shares held short, which is up sharply week on week. Short sellers have been loading up on the language testing and student placement company’s shares following its half-year results.
• Sayona Mining Ltd (ASX: SYA) has 10.2% of its shares held short, which is down week on week. This lithium miner’s shares were sold off (again) last week after a large shareholder sold its entire stake at a big discount.
• Deep Yellow Limited (ASX: DYL) has seen its short interest ease to 9.8%. Short sellers appear to believe that the market is being too bullish on uranium prices.
• Genesis Minerals Ltd (ASX: GMD) has seen its short interest rise slightly to 9.2%. This appears to have been driven by integration risks from a recent acquisition spree.
• Chalice Mining Ltd (ASX: CHN) has short interest of 9%, which is up week on week. Short sellers have been targeting this mineral exploration company since it revealed that its production is still years away.
• Weebit Nano Ltd (ASX: WBT) has short interest of 8.4%, which is down week on week. Valuation concerns appear to be behind this.
• Flight Centre Travel Group Ltd (ASX: FLT) has 8.4% of its shares held short, which is up week on week. Short sellers appear to be expecting a soft result from the travel agent this week.

The post These are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

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More reading

• 3 things ASX investors should watch this week
• Top brokers name 3 ASX shares to buy next week
• Why ASX 200 investors remain upbeat on Pilbara Minerals shares
• 1 ASX growth stock down 40% to buy right now
• Here’s why I’m steering clear of Core Lithium shares

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 Idp Education. The Motley Fool Australia has recommended Flight Centre Travel Group and Idp Education. 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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On Friday, the S&P/ASX 200 Index (ASX: XJO) ended the week on a positive note. The benchmark index rose 0.4% to 7,643.6 points.

Will the market be able to build on this on Monday? Here are five things to watch:

ASX 200 expected to edge higher

The Australian share market looks set to edge higher on Monday following a mixed finish on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 4 points higher. On Friday in the United States, the Dow Jones was up 0.15%, but the S&P 500 rose slightly, and the Nasdaq dropped 0.3%.

Oil prices fall

It could be a relatively tough start to the week for ASX 200 energy shares Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) after oil prices dropped on Friday night. According to Bloomberg, the WTI crude oil price was down 2.7% to US$76.49 a barrel and the Brent crude oil price was down 2.45% to US$81.62 a barrel. Easing rate cut hopes weighed on oil prices.

ASX 200 result releases

There are plenty of ASX 200 releasing their results today. This includes drinks giant Endeavour Group Ltd (ASX: EDV), telco TPG Telecom Ltd (ASX: TPG), and insurers NIB Holdings Limited (ASX: NHF) and Suncorp Group Ltd (ASX: SUN). Goldman Sachs expects the latter to post cash earnings of $678 million for the first half.

Gold price rises

ASX 200 gold shares Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) could have a positive start to the week after the gold price pushed higher on Friday. According to CNBC, the spot gold price was up 0.75% to US$2,045.8 an ounce. Safe haven demand drove the precious metal higher.

Xero shares are a buy

Xero Ltd (ASX: XRO) shares are great value according to analysts at Goldman Sachs. The broker has reiterated its buy rating and $141.00 price target on the cloud accounting company’s shares ahead of its investor day event later this week. While the broker isn’t expecting any medium-term guidance to be provided, if it does, it is forecasting “FY28 Revenue of NZ$3.0bn (VAe $3.1bn), a 16% CAGR (14% sub, +2% ARPU).”

The post 5 things to watch on the ASX 200 on Monday appeared first on The Motley Fool Australia.

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More reading

• Morgans says these ASX shares are buys (with special dividends to come)
• 3 of the safest ASX 200 dividend shares in Australia right now
• How to generate $50,000 of passive income from ASX shares each year
• Why these 4 ASX 200 shares grabbed the Motley Fool’s headlines this week
• Here’s how the ASX 200 market sectors stacked up this week

Motley Fool contributor James Mickleboro has positions in Endeavour Group, Woodside Energy Group, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Xero. The Motley Fool Australia has positions in and has recommended NIB Holdings and Xero. The Motley Fool Australia has recommended Tpg Telecom. 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 final days of the ASX reporting season are now upon us, so there is plenty of data for investors to digest.

Amid the information overload, don’t forget to monitor these events that could impact your ASX shares:

1. Australia monthly inflation

The January consumer price index statistics will be released on Wednesday, which will have a big impact on what the Reserve Bank will do with interest rates.

“Expectations are for inflation to rise 3.5% year-over-year, stalling slightly from January’s 3.4% and snapping a streak of continuous easing,” said eToro market analyst Josh Gilbert.

“Market pricing has shifted in recent weeks, but June is still the first meeting where the expectation is a cut.”

The great news for consumers, mortgage holders, and ASX shares is that economic data has recently been coming in as the RBA predicted.

Gilbert reckons this provides “the potential for three cuts” this year.

“This week, the ABS also reported that Australians experienced the highest recorded rise in wages in almost 14 years, and the first significant pay increase in nearly three years,” he said. 

“This marked the first time since March 2021 that wage growth outpaced inflation — a welcome figure that many Australians will be hoping continues in 2024. “

2. Coles results

One of the big S&P/ASX 200 Index (ASX: XJO) reporting season events will take place Tuesday morning when Coles Group Ltd (ASX: COL) reveals its numbers.

The market will be especially interested after its supermarket rival Woolworths Group Ltd (ASX: WOW) last week copped a $781 million loss.

“Similar to Woolworths, Coles is also expected to report declining profits, but revenue is set to grow at the fastest pace for almost three years, which may prove to be a silver lining.”

With the social contracts of big business under political scrutiny, the grocery giant will walk the tightrope.

“Coles has experienced intensifying scrutiny over the past couple of months, with an influx of media interest and the Australian government directing the ACCC to review prices and competition in the supermarket sector following accusations of price gouging,” said Gilbert.

“Balancing profitability alongside customer relations is no easy task, and this will be an ongoing challenge for Coles,” 

3. Flight Centre results

Wednesday will see travel agent Flight Centre Travel Group Ltd (ASX: FLT) make its contribution to reporting season.

Gilbert pointed out how the COVID-19 pandemic forced the company to slim down, which ended up a blessing in disguise.

“Around 15,000 staff were laid off in a bid to greatly reduce costs. 

“This appeared to be a good move for the company, with Flight Centre announcing solid results for FY23, reporting revenue that was up 126% to $2.28 billion, and EBITDA rising by 260% to $300 million.”

Travel demand remains high, according to Gilbert, but the wind has been taken out of sky-high airfares from 2023.

“Investors will be focused on future guidance given that the market expects solid profits for the full year that have not been since the pandemic.

“Any shift away from current guidance will put shares under pressure, but reaffirming guidance will put shares on the front foot.”

The post 3 things ASX investors should watch this week appeared first on The Motley Fool Australia.

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More reading

• 3 of the safest ASX 200 dividend shares in Australia right now
• Own Flight Centre shares? Here’s what you need to know ahead of its results
• ASX earnings: What can we expect from Coles shares next week?
• Analysts say these ASX dividend shares are top buys
• These are the 10 most shorted ASX shares

Motley Fool contributor Tony Yoo 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 Australia has recommended Flight Centre Travel 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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There is no doubt Nvidia Corp (NASDAQ: NVDA) is one of the hottest stocks on the planet right now.

The computer chip maker is raking in sales from the artificial intelligence (AI) boom, beating expectations every quarter for the past year or so.

The stock has now rocketed 232% for the past year, incredibly rising 16.4% on a single day on Thursday US time.

Whether it can keep up this cracking pace is up for debate. Some sceptics are even suggesting the AI hype might already be a bubble.

So is there an ASX stock on fire like Nvidia?

Yes, there is. 

And it’s going about its business with far less publicity.

What does Audinate do?

Audinate Group Ltd (ASX: AD8) is best described as an audio networking technology provider.

The company was born out of a team working at the government research organisation National Information and Communications Technology of Australia (NICTA) in the 2000s.

Co-Founder and chief executive Aidan Williams remembers the genesis when he was playing music twenty years ago.

“I was constantly connecting my synth to a mixer, to a sound card, MIDI cables, all sorts of different connections,” he said.

“To me, it seemed like a networking problem. Why make all those different connections when you could integrate it into a single network?”

The solution to this ended up as Audinate’s flagship product Dante.

Dante is a networking protocol that is now embedded into many audio products. The “language” allows equipment like instruments and mixers to talk to another, to produce lossless audio.

The Aussie company that could be an ‘unregulated monopoly’

The innovation is now dominant enough in the entertainment industry that Medallion Financial Group managing director Michael Wayne said back in 2021 Audinate “has the potential to be an unregulated monopoly”.

“You can liken it to Bluetooth, if you like. Except Bluetooth isn’t as good a technology and it’s owned by a cooperative.”

While not widely discussed in the financial media, investors in the know have already made plenty of money from Audinate shares.

Similar to Nvidia, the stock has soared over the past 12 months, now going for 155% higher.

Over the past five years Audinate shares have returned a phenomenal 307%, for a 32.4% compound annual growth rate (CAGR).

And many experts believe the Aussie success story still has plenty of legs.

Broking platform CMC Invest currently shows none of the seven analysts covering the stock rating it as a sell. Three say buy while four are recommending a hold.

The post 1 ASX stock I think is just as hot as Nvidia (without all the hype) appeared first on The Motley Fool Australia.

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• Here’s how the ASX 200 market sectors stacked up this week
• The Brainchip share price is up 213% this month. Is Nvidia to blame?
• Is the Nvidia share price on course to reach US$1,400?
• Why are ASX tech shares booming on Friday?
• Nvidia stock pops 10% after-hours following ‘insane result’

Motley Fool contributor Tony Yoo has positions in Audinate Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Audinate Group and Nvidia. The Motley Fool Australia has positions in and has recommended Audinate Group. The Motley Fool Australia has recommended Nvidia. 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 team at Morgans has been working extra hard this month, running the rule over results when they’re released.

Two ASX shares that have fared well are listed below. Here’s why the broker believes they are buys:

Super Retail Group Ltd (ASX: SUL)

Morgans responded to this retailer’s half-year update by upgrading its shares to an add rating with a $17.50 price target.

The broker thinks the company is outperforming the competition and appears to believe it will continue. It expects this to allow Super Retail to pay a special dividend in August. As a result, it expects a generous 6% dividend yield for FY 2024. Morgans said:

The strength of Super Retail Group’s (SUL) portfolio was apparent in a strong 1H24 result in which sales increased 3% despite cycling strong comps. In our opinion, the business is outperforming the competition across most of its retail operations as it leverages its brand equity, strong omnichannel credentials, well subscribed loyalty programmes and extensive network of stores. PBT was down only (5)% compared, for example, with JB Hi-Fi’s (20)% decline. Although there is some work to do at rebel, in particular, we believe SUL will continue to deliver strong returns and remains likely to declare a special dividend in August.

Suncorp Group Ltd (ASX: SUN)

Morgans still sees value in this insurance giant’s shares despite a strong gain last week.

That gain was driven by news that the sale of its banking business to ANZ Group Holdings Ltd (ASX: ANZ) has been approved by the Australian Competition Tribunal.

The broker has retained its add rating and lifted its price target to $16.42. It commented:

ANZ has won on its appeal with the Australian Competition Tribunal for the right to buy Suncorp’s bank, overturning the ACCC’s previous decision to block the deal. We have always thought the SUN bank sale price (~12.5x earnings and ~1.3x NTA when announced) was reasonably solid, and the deal value is above Morgans current valuation for the bank (1x NTA).

Morgans believes some of the proceeds of the sale will be returned to shareholders. It adds:

We remove the bank from our SUN earnings forecasts from August, and factor in a pro-rata capital return and a A$300m special dividend from the net sale proceeds.

The post Morgans says these ASX shares are buys (with special dividends to come) appeared first on The Motley Fool Australia.

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• Why these 4 ASX 200 shares grabbed the Motley Fool’s headlines this week
• Here are 3 ASX retail shares moving up to 19% on half-year results today
• Here are the top 10 ASX 200 shares today
• Why ARB, Bravura, Hub24, and Suncorp shares are storming higher
• ANZ shares tumble despite Suncorp Bank takeover approval

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 positions in and has recommended Super Retail Group. The Motley Fool Australia has recommended Jb Hi-Fi. 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 was another busy week for Australia’s top brokers. This led to the release of a large number of broker notes.

Three ASX 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:

BHP Group Ltd (ASX: BHP)

According to a note out of Goldman Sachs, its analysts have retained their buy rating and $49.40 price target on this mining giant’s shares. The broker was happy with BHP’s half-year result, noting that it was broadly in-line with expectations. In light of this, Goldman remains as positive as ever on the miner. Particularly given that it sees the company’s valuation as attractive at current levels. The BHP share price ended the week at $44.55.

Lovisa Holdings Ltd (ASX: LOV)

A note out of Morgan Stanley reveals that its analysts have retained their overweight rating on this fashion jewellery retailer’s shares with an improved price target of $32.50. This follows the release of a half-year result that came in ahead of expectations. The broker was also pleased with Lovisa’s strong start to the second half. The Lovisa share price was fetching $29.17 at Friday’s close.

Pilbara Minerals Ltd (ASX: PLS)

Analysts at Morgans have retained their add rating on this lithium miner’s shares with a trimmed price target of $4.50. According to the note, Pilbara Minerals’ half-year profits fell short of expectations. However, Morgans remains positive on the miner. Particularly given how it believes the company is well-positioned to benefit more than most when lithium prices rebound. The Pilbara Minerals share price ended the week at $3.67.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

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• Why ASX 200 investors remain upbeat on Pilbara Minerals shares
• Better buy: Fortescue or BHP shares?
• I’d aim to turn a $20,000 savings account into $25,400 of passive income
• Here are the top 10 ASX 200 shares today
• Here’s how these 3 ASX 200 shares just earned substantial broker upgrades

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

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I’d wager that almost all ASX investors love banking a good dividend. There’s the perk of receiving passive income, of course, the appeal of which needs little explanation. But ASX dividends usually come with franking credits attached as well, which are particularly useful to retirees.

Here at the Motley Fool, we are always harping on about the advantages of investing in shares compared to other asset classes. But should ASX dividend shares be the only option for someone who is planning their retirement?

Well, this is a difficult question to answer in a general sense. Every person’s retirement needs will be slightly different, meaning there is no ‘one size fits all’ approach we can advocate.

However, we can point out a few facts that could serve as guiding lights.

Should retirees put all of their money into ASX dividend shares?

Firstly, the returns of ASX shares, as alluded to above, simply outperform most other asset classes on average over long periods of time. They outperform ‘safer’ investments, like fixed-interest government bonds, cash savings and term deposits, usually loved by retirees, by quite a lot.

As such, this logic dictates that investors should be prepared to invest most of their retirement nest eggs in ASX shares. And preferably those that pay generous, fully franked dividends.

However, this logic ignores the main fallibility of shares – market volatility. As anyone who’s ever owned shares can attest to, the market is a frighteningly wild place to have your capital stored away in. Especially your entire life savings.

Share valuations can change on a whim. And they can often take years to recover from a severe slump or market crash. That’s why these assets are often described as ‘risky’.

Whilst it’s true that most retirees simply own shares for the dividend income they produce, dividend income can also be volatile. After all, we saw many of the popular ASX dividend shares on our market slash their payouts during 2020 and into 2021.

This is why diversification is still important for any investor, including a retiree.

Diversification: Still important in retirement

So yes, shares have historically produced the best long-term returns on average. However, the volatility that comes with them means that diversifying into other asset classes is still a prudent strategy.

The proportions that you wish to put into different asset classes is a matter for every individual, their family and their financial adviser.

But a rule of thumb that many professions advocate is that it’s good practice to keep at least three years’ worth of retirement living expenses in cash assets like savings accounts and term deposits.

That’s, at least in theory, enough to ride out any market (or dividend) slump that the world can throw at us. It would have certainly been adequate for a retiree to ride out the COVID crash of 2020.

Meanwhile, the rest of your capital can be invested in other assets that might generate higher returns, but also come with peace-of-mind-sapping volatility.

The post Should I stick to only ASX dividend shares in retirement? appeared first on The Motley Fool Australia.

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More reading

• Here’s the CBA dividend forecast through to 2026
• 3 of the safest ASX 200 dividend shares in Australia right now
• Why ASX 200 investors remain upbeat on Pilbara Minerals shares
• How to generate $50,000 of passive income from ASX shares each year
• 1 ASX growth stock down 40% to buy right now

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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Commonwealth Bank of Australia (ASX: CBA) shares are a popular option for income investors.

It isn’t hard to see why this is the case.

Earlier this month, the banking giant released its half-year results and reported a 3% decline in cash net profit after tax to $5,019 million.

However, that didn’t stop the CBA board from lifting the bank’s fully franked interim dividend by 2.4% to $2.15 per share.

This represents a payout ratio of 72%, which means that approximately $3.6 billion of CBA’s cash profits are being distributed to shareholders next month.

But what’s next for the CBA dividend? Should we expect more bumper payouts in the future? Let’s find out what analysts are expecting from the bank.

CBA dividend forecast

According to a note out of Goldman Sachs, its analysts have upgraded their medium term earnings and dividend estimates following the release of the bank’s half-year results.

The broker now expects CBA to pay a fully franked final dividend of $2.40 per share for the second half of FY 2024.

This will bring the bank’s total dividends for FY 2024 to $4.55 per share, which represents an attractive dividend yield of approximately 4% for investors. It also means a modest 1.1% increase on FY 2023’s dividend of $4.50 per share.

What’s next?

Looking further ahead, Goldman Sachs now expects the CBA dividend to be $4.55 per share again in FY 2025. This will mean another dividend yield of approximately 4% for shareholders.

And for a third year in a row, Goldman believes that the bank will be paying out a fully franked $4.55 per share in FY 2026. So, that is of course another 4% yield for shareholders to look forward to that year.

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

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• Why is the CBA share price sinking on Wednesday?
• High rates, falling profits: Why are ASX bank shares losing out this reporting season?
• You need to act fast if you want to receive the next CBA dividend
• Why these 3 top ASX 200 stocks grabbed the Motley Fool’s headlines this week
• 5 steps to becoming a milionaire with ASX shares

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.

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Looking for ‘safe’ ASX 200 dividend shares on the share market is a journey without end. You can get close, but you’ll never quite cross the line.

That’s because there’s no such thing as a ‘safe dividend share’. Companies are never under any obligation to fund a dividend. So technically, we can’t even call a company that has paid a dividend every year for a century an absolutely 100 per cent safe income stock.

But, we can get close. So today, let’s discuss three ASX dividend shares that I think get about as close as you can get to being reliable income providers.

3 of the safest ASX 200 dividend shares on the market

Telstra Group Ltd (ASX: TLS)

First up is ASX 200 telco Telstra. Telstra is a beloved income stock for many ASX investors, and for good reason. The telco has been a strong dividend payer for decades now. It was also a star performer over the pandemic, keeping its payouts steady whilst others were delivering deep dividend cuts.

Telstra’s earnings base is highly defensive – think about how many Australians would be to give up their mobile connections or home broadband.

Coupled with Telstra’s tangible edge in network quality and coverage, I regard this company as one of the safest ASX shares money can buy for dividend income. At recent pricing, Telstra shares offer a fully-franked dividend yield of 4.51%.

Coles Group Ltd (ASX: COL)

Coles is another ASX dividend share that has demonstrated great strength and reliability in recent years. Similarly to Telstra, Coles shareholders got through 2020 and 2021 unscathed when it came to income. In fact, Coles was able to increase its annual dividend in both years.

Again, the company’s earnings base proves why this was possible. Food, drinks and household essentials are essential buying for every Australian. And that means Coles, as one of the cheapest places to buy these life essentials, is always going to have a reliable stream of customers.

Coles shares last traded on a fully-franked dividend yield of 4.2%.

Transurban Group (ASX: TCL)

Finally, let’s discuss ASX 200 toll road operator Transurban. If you live in Sydney or Melbourne, chances are you’d be intimately familiar with this company, or at least with the vast network of arterial toll roads it operates. Transurban owns almost every tolled road in Sydney, as well as several more across Melbourne, Brisbane and North America.

Many of Transurban’s routes are major traffic arteries and difficult to avoid when motoring around our largest cities. Traffic volumes tend to be resilient to economic maladies like inflation and recessions, giving Transurban another defensive earnings base.

Speaking of inflation, Transurban has the right to raise its tolls on many of its roads every quarter by at least the rate of inflation. This makes it a great investment and gets close to a safe ASX dividend share for investors who want to keep ahead of price increases.

At the last traded price on Friday, Transurban shares came with a trailing dividend yield of 4.60%.

The post 3 of the safest ASX 200 dividend shares in Australia right now appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today

Motley Fool contributor Sebastian Bowen has positions in Telstra Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group. The Motley Fool Australia has positions in and has recommended Coles Group and Telstra 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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Like every S&P/ASX 200 Index (ASX: XJO) lithium stock, Pilbara Minerals Ltd (ASX: PLS) shares have been hit hard by free-falling lithium prices.

With global supply growth of the battery critical metal now outpacing the demand growth outlook over the medium-term, lithium prices have cratered by around 80% from their November 2022 highs.

This was reflected in Pilbara’s half year results (1H FY 2024), released on Thursday. Though investors took those results in stride, with Pilbara Minerals shares closing the day flat.

What did the ASX 200 lithium stock report?

On the positive side of the ledger, the ASX 200 lithium miner achieved a 7% year on year increase in sales volumes for the six months. Though that was far from enough to counter the 67% slide in its average realised price.

Lower lithium prices drove a 65% decrease in revenue to $757 million. And underlying profit after tax was down 78% from 1H FY 2023 to $273 million.

The pricing pressure saw Pilbara Minerals shares come without a dividend for the half. The company first began paying dividends in 2023.

That will, however, help the miner maintain its strong balance sheet. Pilbara had a cash balance of $2.1 billion as at 31 December.

Commenting on the suspended dividend, Megan Stals, market analyst at online brokerage platform Stake said, “Some investors may be disappointed that Pilbara is deferring its dividend. But, given low lithium prices, it appears to be a sensible move for the balance sheet as headwinds continue to weigh on the sector.”

Why ASX 200 investors are buying Pilbara Minerals shares

Commenting on the outlook for Pilbara Minerals shares on the day of the results, CEO Dale Henderson said:

With the company’s low unit-cost structure and strong balance sheet, Pilbara Minerals is uniquely placed to better withstand periods of softer pricing whilst continuing to build-out the production base to capitalise on improved pricing conditions.

Stals said those lower costs offer Pilbara an advantage over most rival ASX lithium stocks.

“Pilbara’s relatively low unit costs have so far seen the company withstand softer pricing, providing a competitive advantage over others in the sector,” she said.

Stals also noted that the miner could benefit down the track as it was moving ahead with two major expansion projects.

“The company’s large relative size means there could be the opportunity to increase market share in time for the next lithium upturn.”

This means that “investors could see the current price slump as an opportunity to buy” Pilbara shares, she said.

Indeed, the data from the Stake platform indicates numerous ASX 200 investors are already eyeing the longer-term potential.

According to Stals:

Trading volume on Stake shows that enthusiasm for lithium stocks has slightly tapered off in recent months, but Pilbara remains within our top ten most popular buys.

Following Thursday’s results, she said, “We have seen twice as many buys as sells, showing investors are on the whole still positive about Pilbara’s long-term prospects.”

The post Why ASX 200 investors remain upbeat on Pilbara Minerals shares appeared first on The Motley Fool Australia.

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More reading

• Brokers name 3 ASX shares to buy now
• Here’s why Pilbara Minerals shares could crash 21%
• Pilbara Minerals shares lower on disappointing half-year earnings miss
• Pilbara Minerals share price on watch amid 78% half-year profit decline and no dividend
• Pilbara Minerals shares could drop 12% on upcoming results if history repeats itself

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.

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