The Pilbara Minerals Ltd (ASX: PLS) share price has declined in the last month, but could it be about to take off?

Pilbara shares have slid 5.7% from $4.17 at market close on 28 February to $3.97 at the time of writing. In late morning trading, Pilbara shares are up more than 3%.

In contrast, the S&P/ASX 200 (ASX: XJO) is 0.16% in the red so far today.

Let’s take a look at the outlook for Pilbara Minerals shares.

Can Pilbara go higher?

RBC Capital markets is tipping the Pilbara Minerals share price could have significant upside.

Analysts have placed an “outperform” rating on Pilbara with a $5.65 price target.

This suggests an upside of 43.8% based on the current share price.

RBC is forecasting strong operational performance and earnings growth for Pilbara in FY23 and FY24, according to a Thomson Reuters report cited by NAB trade.

The broker is predicting Pilbara to more than double lithium carbonate equivalent (LCE) production from 53kt in FY23 to 107kt by FY25.

Pilbara’s share price soared nearly 12% yesterday amid news Liontown Resources Ltd (ASX: LTR) had received and rejected a takeover approach from global lithium giant Albemarle Corp (NYSE: ALB).

Final investment decision

Meanwhile, Pilbara has announced today it has made a final investment decision to lift production capacity at its Pilgangoora Project.

This investment is set to boost spodumene concentrate production from 680,000 tonnes per annum (tpa) to 1,000,000 tpa. This is known as the P1000 project.

Pilbara share price snapshot

Pilbara shares have soared 21% in the past year and 5% year to date.

This ASX lithium share has a market capitalisation of about $11.8 billion based on the current share price.

The post Broker says buy Pilbara Minerals shares now for 44% upside appeared first on The Motley Fool Australia.

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More reading

• Pilbara Minerals share price races higher on ‘important milestone’
• Takeover offer ‘reasonable but not full’: Analyst says Liontown shares are worth more
• Why the outlook for these ASX 200 lithium shares could be ‘very favourable’
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Monica O’Shea 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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AGL Energy Limited (ASX: AGL) was among four S&P/ASX 200 Index (ASX: XJO) energy shares warned by leading superfund HESTA to clean up their act or risk facing divestment last year. And the company’s made notable progress on that front.

In a symbolic move, the superfund – housing $68 billion of assets – removed the historic energy retailer from its climate ‘watchlist’ yesterday. HESTA general manager of responsible investment Kim Farrant commented on the change:

We currently believe the approach AGL and its management team have outlined to shareholders more appropriately balances risks, returns, and decarbonisation.

The AGL share price is trading at $7.73 at the time of writing.

Let’s take a look at the green tick that’s been etched into Australia’s highest carbon emitter.

Own AGL shares? The company’s been granted a climate tick

HESTA – a holder of AGL shares – has removed the company from its climate watchlist, reducing its risk of ‘engagement escalation’.

Such escalation could have seen the superfund voting against the company’s advice on resolutions or director elections and could have led it to consider selling its stake.

The mammoth superfund welcomed the progress made on AGL’s climate transition action plan yesterday. It also said it supports the appointment of Damien Nicks as permanent CEO.

The company revealed its $20 billion plan to ditch coal by 2036 last year. Abandoning coal is expected to leave it with net zero emissions.

The action plan followed the abandonment of AGL’s controversial proposal to split into AGL Australia and Accel Energy.

But HESTA isn’t sated yet. Farrant said “more detail is needed” on the company’s energy transition plan, saying:

We continue to believe that there is additional scope for AGL to continue to develop its decarbonisation ambitions in alignment with the 1.5°C pathway including bringing forward coal-fired power generation closure dates through effective strategy execution and growing investment in renewables and storage.

HESTA is still the lead investor through Climate Action 100+ and will continue engaging with AGL on its decarbonisation plans.

AGL and Origin Energy Ltd (ASX: ORG) have both been removed from the superfund’s watchlist, while ASX 200 shares Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) remain on its climate radar.

The post ‘Risks, returns, and decarbonisation’: AGL shares scrubbed from $68b superfund’s climate watchlist appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
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• Leading brokers name 3 ASX shares to buy today
• Should I buy AGL shares at under $7 each?

Motley Fool contributor Brooke Cooper 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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The Jervois Global Ltd (ASX: JRV) share price has been sold off on Wednesday.

In morning trade, the ASX All Ords mining share is down 30% to a 52-week low of 8.1 cents.

Why is this ASX All Ords mining share crashing?

Investors have been hitting the sell button in a panic this morning after the ASX All Ords mining share released an update on its Idaho Cobalt Operations in the United States.

According to the release, the company has suspended the final construction at the Idaho Cobalt Operations due to continuing low cobalt prices and inflationary impacts on construction costs.

Management believes that doing so will preserve the value of its ore body, allowing it to capitalise on better prices in the future.

In respect to pricing, Jervois expects cobalt prices to recover over the medium term. This is due to the clean energy transition and the company’s expectation that Western cobalt purchasers will increasingly prefer to buy from sources with Western ESG credentials.

The company intends to complete the construction and commissioning of Idaho Cobalt Operations once this happens. It has already spent US$130 million on construction activities.

Interestingly, despite suspending construction, Jervois believes it can still receive funds from the US Government in relation to programs that financially support the development of U.S. supply chains of critical minerals.

Management also advised that its US$100 million senior secured bonds remain due in July 2026, with no prior amortisation. However, it remains in compliance with its bond covenants and there is not expected to be an adverse impact on the bonds following the suspension of construction.

Finally, the ASX All Ords mining share has commenced a review of the operation’s carrying value on its balance sheet, in accordance with applicable accounting standards.

The post Why did this ASX All Ords mining share just crash 30%? appeared first on The Motley Fool Australia.

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More reading

• ‘Risks, returns, and decarbonisation’: AGL shares scrubbed from $68b superfund’s climate watchlist
• Santos share price holds tight amid new project heat
• Pilbara Minerals share price races higher on ‘important milestone’
• No savings? Drip-feed $500 a month into ASX shares and aim to retire in comfort
• Takeover offer ‘reasonable but not full’: Analyst says Liontown shares are worth more

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.

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The Santos Ltd (ASX: STO) share price has regained some small earlier losses and is trading right where it closes yesterday.

Shares in the S&P/ASX 200 Index (ASX: XJO) oil and gas company closed yesterday trading for $6.95. Shares are currently changing hands for, well, $6.95. The ASX 200 is down 0.3% at this same time.

Santos drew out attention today as ASX 200 investors mull over the potential impacts of the Labor government’s new carbon emissions reduction plans on the energy giant’s multi-billion dollar new gas projects.

Putting those concerns aside, the Santos share price should be receiving some modest tailwinds from a 0.1% increase in the price of Brent crude oil. Brent is currently trading for US$78.65 per barrel.

Santos share price in focus as new gas projects take heat

The Santos share price could be a bit volatile amid media reports on two of the company’s major expansion projects.

Yesterday, The Australian reported that incoming premier Chris Minns’ Labor government is expected to fast-track Santos Narrabri gas project in New South Wales.

According to Santos, the $3.5 billion project could supply half of the state’s gas requirements by 2025.

Santos has reportedly already spent some $1.5 billion to bring Narrabri online.

One of the sticking points to date has been the construction of the Hunter Gas Pipeline. The 833-kilometre pipeline will pump gas from the project to the east coast domestic market and potentially connect with the Wallumbilla Gas Supply Hub in Queensland.

The Perrottet government declared New South Wales part of the pipeline critical infrastructure last year. And it looks like the state’s new government will follow through with that, likely offering some upcoming tailwinds for the Santos share price.

According to The Australian, Minns met Santos CEO Kevin Gallagher before the election, and Minns was reportedly eager to see the project completed.

Santos has yet to comment on whether the Labor-Greens deal on the safeguard mechanism will impact the Narrabri project, as it awaits some clarity on the new rules.

What other gas projects could face increased opposition?

In other news that could throw up some headwinds for the Santos share price, The Australian Financial Review reported this morning that the Santos Barossa gas project, located in the Timor Sea, could face some of the biggest hits from the new safeguard mechanism.

That’s because the $5.8 billion project has a high CO2 content of around 18%. And the CO2 levels are reported to be a critical yardstick employed in the new emissions reduction deal.

And this is likely to see costs rise and share prices of the big energy companies potentially take a small haircut.

According to Credit Suisse energy analyst Saul Kavonic, “Let’s be clear, there will be a financial impact from the safeguard mechanism from a cost perspective for the upstream industry,”

Kavonic estimated the impact on the Santos share price could be as much as 20 cents per share. That would represent a 2.9% reduction from the current price.

Santos share price snapshot

As you can see in the chart below, the Santos share price has seen some big swings over the past year amid fast-rising and retracing oil and gas prices. So far in 2023, Santos shares are down 2%.

The post Santos share price holds tight amid new project heat appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Wednesday
• How we beat the stock market by 7% per year: fund manager
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• What Goldman Sachs new oil price forecast could mean for ASX 200 oil shares in 2023

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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The Pilbara Minerals Ltd (ASX: PLS) share price is pushing higher again on Wednesday.

In morning trade, the lithium giant’s shares are up 3.5% to $3.99.

Why is the Pilbara Minerals share price pushing higher?

Investors have been bidding the Pilbara Minerals share price higher after the company made a major announcement.

According to the release, the company’s board has approved the capital investment for the P1000 Project.

This investment in the Pilgan Plant and its supporting infrastructure will deliver a ~320,000 tonnes per annum increase in nameplate spodumene concentrate production capacity.

Once fully commissioned and ramped up in the September quarter of 2025, this will increase the annual production run rate from the Pilgangoora Project to approximately 1 million dry metric tonnes (dmt).

Management notes that this supports its long-term growth strategy to increase production capacity at the Pilgangoora Project in line with market demand.

What will this cost?

The P1000 Project’s estimated capital cost is $560 million across the Pilgan concentrator and supporting infrastructure. This includes the previously announced $38 million of pre-final investment decision capital.

Pleasingly, this investment is expected to deliver attractive returns to the company. In fact, management estimates that it has a forecast payback from incremental cashflows relative to P680 within 12 months.

Furthermore, the capital investment for the P1000 Project is expected to be funded from a combination of existing cash and ongoing cashflow from operations.

Pilbara Minerals’ managing director and CEO, Dale Henderson, commented:

The P1000 Project expansion is an important milestone for Pilbara Minerals. This expansion step facilitates a major lift in production capacity, capitalising on the substantial scale of this Tier-1 hard rock asset which underpins a ~25 year mine life at this new expanded production level.

This reinforces the exceptional scale and quality of our Pilgangoora Project, which is one of the few hard rock lithium production operations globally that has both the resource size and an existing operating platform to enable a rapid scale-up of production to capitalise on the growing demand for lithium products.

Henderson also revealed that its future spodumene production is already in demand with end users. He adds:

The Company has received significant inbound interest for further offtake and downstream partnerships, and we have begun exploring options to maximise the value of the additional product from P1000 including new offtakes and downstream partnerships to extract greater value along the battery minerals supply chain.

The post Pilbara Minerals share price races higher on ‘important milestone’ appeared first on The Motley Fool Australia.

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More reading

• Why the outlook for these ASX 200 lithium shares could be ‘very favourable’
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• 8 ASX 300 lithium stocks surging over 10% today
• Why are ASX lithium shares going gangbusters on Tuesday?

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.

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If someone had $0 in savings and wanted to retire comfortably, I’d say that it’s definitely possible through using ASX shares.

It’s a difficult time to start trying to save. Energy, rent, and food prices have gone up considerably. Interest rates have also increased significantly, hurting borrowers.

However, hopefully each household can identify a way to find $500 a month in savings. Each household’s income potential and expenses are different, so it’s hard to say where to find that $500 each month. But there are plenty of budgeting and other personal finance tips out there that can help.

Aim to retire in comfort

I imagine most people would like to live out their golden years in relative comfort. But how much do we need to be comfortable in retirement?

For starters, I’d suggest it’s having enough so that people don’t need to work. The pension isn’t a massive amount of money and I wouldn’t want to rely on that in the future to live, in case it’s less generous in future decades.

As covered by the Motley Fool’s retirement guide, the Association of Superannuation Funds of Australia’s Retirement Standard suggests that to have a ‘comfortable’ retirement, a couple who own their own home will need an income of about $67,000. A single person will need an annual income of more than $47,000. These numbers are likely to increase in the future.

While that may sound like a lot, time and compounding can help grow relatively small amounts of money into a large nest egg.

How investing $500 a month into ASX shares can grow

If we think about putting $500 a month into the ASX share market, then this translates into $6,000 per year. That’s $60,000 per decade if the monthly amount never changes. Obviously, the more we invest, the quicker we can build wealth to retire.

However, the great thing about investing in ASX shares is that compounding can do a lot of wealth-building for us.

The ASX share market and global share market have both delivered an average return per annum of approximately 10% over the ultra-long term. Of course, past performance is not a reliable indicator of future performance, but I’ll use that as an example of how much money can grow.

Investing $500 a month, growing at an average of 10% per annum for 30 years, can grow into a total of $987,000. Almost $1 million. In this example, we would have invested $180,000 of our own money, while $807,000 of that would have come from investment gains.

Doing that for 40 years would see the nest egg turn into $2.65 million. With just $500 a month. That’s the power of compounding.

Which ASX shares to buy?

The easy option would be to choose exchange-traded funds (ETFs) that invest in a whole range of businesses.

While a lot of Aussies go for the Vanguard Australian Shares Index ETF (ASX: VAS), it’s not my favourite ETF, as good as it is. It owns all of the ASX blue chips. But, Australia is only a small part of the global share market, the ASX is weighted to ASX mining shares and ASX bank shares, and a large amount of returns come as dividends. I love dividends, but receiving dividends usually means paying tax in that financial year, whereas capital growth isn’t taxed until the asset is sold.

So, if I were going to name ETFs, I would want to choose investments that offer global share market diversification and are allocated to a group of businesses that could achieve stronger capital growth than the ASX. A few examples I like include VanEck Morningstar Wide Moat ETF (ASX: MOAT), VanEck MSCI International Quality ETF (ASX: QUAL) and Vanguard Msci Index International Shares ETF (ASX: VGS).

The post No savings? Drip-feed $500 a month into ASX shares and aim to retire in comfort appeared first on The Motley Fool Australia.

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• Does the fall in the Vanguard Australian Shares Index ETF share price make it a no-brainer 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 positions in and has recommended Vanguard MSCI Index International Shares ETF. The Motley Fool Australia has recommended VanEck Morningstar Wide Moat ETF and Vanguard MSCI Index International Shares ETF. 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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Liontown Resources Ltd (ASX: LTR) shares have been on fire this week thanks to a takeover approach.

And while they are pulling back by 5% this morning, the lithium developer’s shares are still up over 60% this week.

Where next for Liontown shares?

Despite its meteoric rise, the team at Bell Potter believes that the Liontown share price can keep rising from here.

According to a note this morning, the broker has retained its speculative buy rating with an improved price target of $3.35.

Based on where its shares are currently trading, this suggests potential upside of 38% for investors over the next 12 months.

Albemarle offer ‘reasonable but not full’

Bell Potter has been looking over Albemarle’s $2.50 per share takeover proposal for Liontown and believes it is reasonable. However, it feels the company is worth far more than what has been tabled.

And with management holding a sizeable number of Liontown shares, it doesn’t appear to believe that Albemarle will be able to bully its way into acquiring the lithium developer. The broker commented:

The corporate interest in LTR from a high-profile US-based industry participant speaks to the quality of Kathleen Valley and the scarcity of growth opportunities in the sector. We view the value of ALB’s proposal as reasonable, but not full; with additional value to be argued from LTR’s de-risking of Kathleen Valley, downstream projects and complementary ESG strategy and location. We also believe LTR will ultimately be capable of realising this value in the absence of a corporate tie-up.

In light of this, Bell Potter appears to see Liontown as a great option for investors looking for lithium exposure. Though, it highlights that as an asset development company, its “speculative risk rating recognises this higher level of risk.”

The post Takeover offer ‘reasonable but not full’: Analyst says Liontown shares are worth more appeared first on The Motley Fool Australia.

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• Why the outlook for these ASX 200 lithium shares could be ‘very favourable’
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• Here are the top 10 ASX 200 shares today
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• 8 ASX 300 lithium stocks surging over 10% today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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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The interest rate has soared in Australia and the US. This has opened up a wide range of opportunities, from technology to property businesses. And at some point, I think there’s going to be a bull market rebound. Thus, there’s a high-yield ASX stock I’ve got my eyes on.

Why does the interest rate changing make such a difference? Legendary investor Warren Buffett once explained:

The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature…its intrinsic valuation is 100% sensitive to interest rates.

But, I don’t think that interest rates are going to stay this high forever. Central banks are trying to crush interest rates. Inflation won’t always be at multi-decade highs. I think in a few years interest rates will eventually come back down to around 3% and perhaps slightly below. It depends on what central banks think a ‘neutral’ rate is.

In my opinion, I think there are a few high-yield ASX stocks that could see investor support when interest rates start returning to that neutral rate.

Rural Funds Group (ASX: RFF)

I think the real estate investment trust (REIT) faces an interesting time ahead as commercial property values come under scrutiny. However, a number of names have already seen heavy share price falls, even if the values on the balance sheet haven’t been cut (yet). At this stage, I wouldn’t rely on the stated net tangible assets (NTA) regarding the valuation of for example, an office building in a REIT.

But, I think farmland valuations may be more resilient considering the global population is still growing and food prices have soared, making it easier for agricultural businesses to afford the higher rent.

That’s one of the main reasons why I like Rural Funds – its rental contracts have growth built in, with some having a link to CPI inflation, others having a fixed 2.5% annual increase, and some contracts having the occasional market review. This is one of the main elements for the REIT’s ongoing distribution growth to investors.

But, there are other pleasing reasons to consider this high-yield ASX stock.

• The yield is a factor of course. The forecast total distribution by Rural Funds for FY23 equates to a yield of 6.1%. Rural Funds aims to grow its distribution by 4% per annum. A 4% increase in FY24, while not guaranteed, would translate into a distribution yield of 6.3%.
• I think the decline of the Rural Funds share price has more than made up for the negative of higher interest rates. Since 7 January 2022, the Rural Funds share price is down 37%. I believe that provides a good margin of safety.
• Rural Funds offers a lot of diversification. It has multiple farm types – almonds, macadamias, vineyards, cattle, cotton and sugar.
• The high-yield ASX stock is investing heavily in its properties to improve its value and usefulness, which will hopefully boost rental income. For example, it’s investing in (improved) irrigation at some locations. Rural Funds is also converting some properties to a ‘higher and better use’, including a large macadamia development, with another 2,000 hectares to be completed by FY25. More developments will commence in FY25.

Foolish takeaway on this high-yield ASX stock

While Rural Funds may not see its share price at a rapid rate from here, I think there’s potential for a recovery when interest rates fall. Until then, investors can get a very pleasing, and typically growing, distribution from this business.

The post A bull market is coming and I want to buy this high-yield ASX stock while it’s still cheap appeared first on The Motley Fool Australia.

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• Here are 2 ASX dividend shares that brokers rate as buys
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Motley Fool contributor Tristan Harrison has positions in Rural Funds Group. 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 Rural Funds 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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The last five years have been rough for AMP Ltd (ASX: AMP) investors, with the company’s share price tumbling 79% in that time.

Stock in the 174-year-old financial institution was trading at $4.99 at this point of 2018.

That was shortly before the company’s dirty laundry – of which there was plenty – was aired by the Banking Royal Commission.

Today, The AMP share price sits at just $1.06 apiece.

That means a $3,000 investment in AMP shares back then probably would have bought 601 securities. Today, that parcel would be worth just $637.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has risen around 21% over the same period.

But could AMP’s dividends have made up for its share price’s poor performance? Let’s take a look.

All dividends paid to AMP shareholders over the last 5 years

Here are all the offerings placed on the table for those invested in AMP shares over the last five years:

AMP dividends’ pay date	Type	Dividend amount
October 2020	Special	10 cents
March 2019	Final	4 cents
September 2018	Interim	10 cents
Total:		24 cents

That’s right, each AMP share provided just 24 cents to investors who bought on 29 March 2018. In fact, the ASX 200 company put a hold on its dividends in mid-2019 as it struggled to right its rocky ship.

That means our figurative parcel would have yielded around $144.24 of passive income over its life – certainly not enough to substantially soften shareholders’ losses.

Though, investors currently have the company’s upcoming 2.5 cent dividend to look forward to. Shareholders have the offering in the bag after the stock traded ex-dividend earlier this month, with the payment to hit accounts next week.

And that might be just the beginning.

AMP shares could be on track to offer a 3.96% dividend yield at its current price. That is if suggestions it could pay 4.2 cents per share of dividends this financial year prove fruitful.

The post Sunk $3,000 into AMP shares 5 years ago? Here’s how much passive income you’ve realised appeared first on The Motley Fool Australia.

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More reading

• Are AMP shares set to become a dividend machine?
• If I had bought $5,000 AMP shares a week ago, here’s how much I’d have now!
• Here are the top 10 ASX 200 shares today
• AMP share price dips despite $337m sale win
• AMP shares: Keep calm and carry on or cash out?

Motley Fool contributor Brooke Cooper 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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There’s been a lot of talk of a recession coming within the next 12 months as rising interest rates stifle economic growth.

Over at exchange traded fund (ETF) provider Betashares, its chief economist, David Bassanese, believes there’s a 50% chance that the global economy will fall into a recession. He commented:

Our most likely scenario is that the lagged impact of policy tightening over the past year, along with further modest tightening in the first half of 2023, soon leads to a notable slowing in global economic growth, such that the US in particular descends into outright recession,

In light of this, Bassanese has suggested that investors take a look at defensive options that could fare better in this environment. Here’s what you need to know:

Global Healthcare ETF – Currency Hedged (ASX: DRUG)

The first ETF to look at is this global healthcare ETF. It provides investors with exposure to the largest global healthcare companies, hedged into Australian dollars. Bassanese notes that the largest global healthcare companies are predominantly pharmaceutical companies, which are often considered “defensive” by nature and can typically pass rising costs on to consumers.

Betashares Australian Quality ETF (ASX: AQLT)

Another option for investors to consider is the Betashares Australian Quality ETF. It aims to track an index that comprises 40 high-quality ASX shares. This includes companies such as CSL Limited (ASX: CSL) and Telstra Group Ltd (ASX: TLS).

Betashares Global Quality Leaders ETF (ASX: QLTY)

This is the international equivalent of the Betashares Australian Quality ETF. It gives investors exposure to a portfolio of approximately 150 global companies (excluding Australia). To be included in the ETF, a company needs to rank highly on four key metrics. These are return on equity, debt-to-capital, cash flow generation ability, and earnings stability. The ETF includes companies such as Alphabet, Microsoft, and Nvidia.

Bonds and cash

Three other ETFs that Bassanese is suggesting investors consider in the current environment have a focus on bonds and cash.

In respect to bonds, the chief economist notes that “market pricing suggests that rate cuts could be on the horizon. If markets are correct about this, and a US recession does occur, this could create favourable conditions for a rally in government bonds.”

As a result, Bassanese has named U.S. Treasury Bond 20+ Year ETF – Currency Hedged (ASX: GGOV) and Australian Government Bond ETF (ASX: AGVT).

And if cash is more to your taste, then the Australian High Interest Cash ETF (ASX: AAA) could be worth considering.

Bassanese concludes:

This year has already presented many unexpected challenges for investors. Some, such as a potential US-led global recession, are already obvious and firmly in the sights of investors. Others – such as the recent spate of US bank failures – can catch investors off guard, remaining obscured until the very last moment. For investors who have positioned their portfolios appropriately, the impact might not be quite so severe.

The post Betashares names 6 ‘defensive’ ASX ETFs to consider for a possible recession appeared first on The Motley Fool Australia.

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More reading

• 3 ‘compelling’ ASX growth shares ECP is backing (You won’t believe #2)
• How to make passive income for life with just $5 a day
• Is time running out to buy high-yield ASX dividend shares?
• Analysts name 2 ASX dividend shares to buy right now
• ‘Attractive numbers’: Expert names ASX dividend share to buy right now

Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has positions in and has recommended 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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