The Whitehaven Coal Ltd (ASX: WHC) share price has taken a dive of over 5% after one of its institutional backers sold out.

Whitehaven is one of the largest coal miners in Australia. It has benefited enormously from the big increase in energy prices as countries looked for other sources of energy.

However, coal prices may not stay high forever and winter is nearly over in the northern hemisphere. It has been a warm winter in Europe, so less energy may have been consumed.

With a possible peak of coal prices in the past, and prices stabilising, that could mean that the ASX coal miners have seen their strongest level of profitability.

Under those circumstances, it’s understandable why some investors may be selling out and finding other investment opportunities.

Fund manager sells out

According to reporting by The Australian, the All Ordinaries Index (ASX: XAO) fund manager GQG Partners Inc (ASX: GQG) has sold a significant number of shares.

GQG sold $336 million of Whitehaven shares through investment bank JPMorgan for a price of $7.90 each. The current price is 5% lower than GQG’s sale price.

The Australian noted that GQG had a 5.36% stake in the business.

What to make of this for Whitehaven shares?

Since 21 December 2022, the Whitehaven share price has dropped by around 30%.

The latest quarterly update from the ASX coal share gave some insights into what’s going on.

In the three months to December 2022, it achieved an average coal price of A$527 per tonne, compared to A$581 per tonne in the three months to September 2022.

The company is expecting to report that in the first six months of FY23, it made around $2.6 billion of earnings before interest, tax, depreciation and amortisation (EBITDA) – up from $0.6 billion in the first half of FY22.

It made around $1 billion of cash flow in the three months to December 2022 and around $2.5 billion in the FY23 first half. It finished the period with a net cash position of $2.5 billion.

Whitehaven also reported that its managed run-of-mine production was 4.8 million tonnes, up 21% from the three months to September 2022.

The business is continuing to make major profits, even if sentiment is falling. It is carrying out a major share buyback program and large dividends are also expected.

According to Commsec, it could pay a grossed-up dividend yield of 18%, which is still a high yield.

The post This ASX All Ords fundie just dumped $300 million of Whitehaven shares. Is this a red flag? appeared first on The Motley Fool Australia.

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More reading

• 2 ‘high quality’ ASX 200 shares to navigate a turbulent 2023: expert
• Why did ASX 200 coal shares have such a top run on Tuesday?
• Why Beach Energy, Medibank, Pushpay, and Whitehaven Coal shares are rising
• Here are the top 10 ASX 200 shares today
• 3 ASX dividend shares I’m backing to outperform in 2023

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

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The cryptocurrency industry is back under the microscope of United States regulators, prompting fears of a clampdown. Concerns about what could come next have weakened the Bitcoin (CRYPTO: BTC) price by 4.9% over the past 24 hours.

At the time of writing, the original cryptocurrency is sitting at US$21,853. The latest decline takes the crypto asset’s weekly fall to 7.3% after experiencing a 40% surge throughout January.

Tightening chokehold worries investors

A dark cloud has hung over crypto since it began gaining mainstream popularity. An uncontrollable risk to those who invest in it has always been a damaging regulatory intervention. Various recent developments in this area have brought these concerns to the surface once more.

Yesterday, reports flowed through that the US Securities and Exchange Commission (SEC) was investigating Kraken, a major crypto exchange with more than 9 million clients, for alleged securities violations.

There’s a lot of backstory to this, but what is important is there has been an ongoing debate around the classification of different cryptocurrencies. Namely, what is deemed a security and what is considered a commodity.

The decision is critical for how crypto assets are treated and, ultimately, the price of Bitcoin and others.

Alongside the Kraken reports, Coinbase Global Inc (NASDAQ: COIN) CEO Brian Armstrong revealed rumours of the SEC potentially wanting to crack down on staking for US customers altogether. Armstrong aired this regulation speculation via a tweet, as shown below.

1/ We’re hearing rumors that the SEC would like to get rid of crypto staking in the U.S. for retail customers. I hope that’s not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen.

— Brian Armstrong (@brian_armstrong) February 8, 2023

https://platform.twitter.com/widgets.js

Fast forward to today, and we now know that Kraken will cease its crypto-staking services immediately following a settlement with the SEC. Additionally, the company will pay $30 million for offering unregistered securities.

The move has created unease among investors and the industry. In fact, some believe the stance on staking could be a part of a broader move, labelled ‘Operation Choke Point 2.0’, to remove crypto completely from the US.

Pain for more than the Bitcoin price

Bitcoin might be the most popular crypto to take a hit over the news, but it isn’t the only one languishing after the outcome. Other major assets riding lower following the news include:

• Ethereum (CRYPTO: ETH) is down 6.3% to US$1,546
• Cardano (CRYPTO: ADA) down 8% to 36 US cents
• Solana (CRYPTO: SOL) down 11.8% to US$20.45
• Avalanche (CRYPTO: AVAX) down 11% to US$17.88

Investors will no doubt be closely monitoring whether regulation could begin to creep further into decentralised finance (DeFi). For now, the outlook for staking is much murkier than it was a week ago.

The price of Bitcoin remains 50% below where it was a year ago.

The post Bitcoin price slumps 5% amid regulation fears appeared first on The Motley Fool Australia.

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• Guess which ASX 200 healthcare share is surging 5% on a new US patent?
• Is the AGL share price sell off a buying opportunity?
• Fortescue share price shrugs off layoff rumblings
• Appen share price soars again, up 29% since Monday
• 2 ASX shares with a dividend boost coming

Motley Fool contributor Mitchell Lawler has positions in Bitcoin and Ethereum. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Avalanche, Bitcoin, Cardano, Coinbase Global, Ethereum, and Solana. The Motley Fool Australia has positions in and has recommended Avalanche, Bitcoin, Ethereum, and Solana. 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 share price of S&P/ASX 200 Index (ASX: XJO) biopharmaceutical developer Imugene Limited (ASX: IMU) is soaring on Friday after the company announced a new United States patent.

The patent relates to its B-cell activating immunotherapy PD1-Vaxx. It’s currently in development for non-small cell lung cancer (NSCLC).

Right now, the Imugene share price is trading at 14.2 cents, marking a 5.19% gain.

Let’s take a closer look at the news driving the ASX 200 healthcare share higher today.

ASX 200 healthcare share leaps on patent news

It’s shaping up to be a good day for the Imugene share price after the company announced another patent.

This time, it has patented the PD1-Vaxx and its method of treatment in cancer to 2038.

The company is finalising preparations for a clinical trial in which PD1-Vaxx will be combined with atezolizumab ­– an immune checkpoint inhibitor (ICI) targeting PD-L1 – in patients with NSCLC.

The trial’s objectives are to determine the safety, efficacy, and optimal dose of PD1-Vaxx in combination with atezolizumab as either first-line therapy in ICI treatment-naïve NSCLC patients or ICI pre-treated patients. The study will be conducted in both the United States and Australia.

Commenting on the news driving the Imugene share price higher today, managing director and CEO Leslie Chong said:

It’s vital to our business that we continue locking in intellectual property protection across the portfolio of assets, and I am proud to continue to strengthen our intellectual property.

With the United States being the largest healthcare market in the world, this is a particularly important patent to protect our PD1-Vaxx technology as we continue its development.

Imugene share price snapshot

Sadly, the Imugene share price has been underperforming in recent months.

The stock has lifted just 1% since the start of 2023, compared to the ASX 200’s 7% gain.

Looking further back, the company’s share price has tumbled 57% over the last 12 months. Meanwhile, the index has gained 2%.  

The post Guess which ASX 200 healthcare share is surging 5% on a new US patent? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Guess which ASX 200 giant is aiming to grow its dividends by 39% in FY23
• How I’d aim to build a $53,600 annual passive income from ASX shares and never work again!

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 AGL Energy Limited (ASX: AGL) share price is having another poor session.

In morning trade, the energy company’s shares are down 3.5% to $6.87.

This means the AGL share price is now down more than 13% since the release of the company’s half year results.

Is the AGL share price weakness a buying opportunity?

Unfortunately, one leading broker doesn’t believe investors should be jumping in just yet.

According to a note out of Morgans, its analysts have retained their hold rating and cut their price target on the company’s shares by 12.5% to $6.89.

This is broadly in line with where AGL’s shares trading today.

What did the broker say?

Morgans wasn’t impressed with AGL’s half year results, which fell short of expectations. It commented:

AGL’s 1H result was a significant miss on consensus and our forecast and FY23 underlying net profit guidance was reduced by $20m. […] Underlying net profit was down 55% on pcp, 60% on our forecast and 45% on Visible Alpha consensus. The key driver was a net $123m impact on the wholesale trading business from the tight winter conditions earlier in the half. This also drove a big miss on DPS with an interim dividend of only 8cps.

The top end of FY23 guidance was cut, reducing the mid-point of Underlying net profit guidance by 8% to $240m.

And while Morgans is expecting AGL’s performance to improve and its dividends to start increasing, it recommends investors sit on the fence for the time being. It adds:

We anticipate increasing dividends as earnings begin to recover in the next 12 months however we think the market will want to see clear evidence of this before it regains confidence in the company and the sector.

The post Is the AGL share price sell off a buying opportunity? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Friday
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• Why AGL, Dicker Data, Megaport, and Suncorp shares are dropping
• The AGL dividend has just been slashed. Here’s what you need to know
• AGL share price sinks following 55% profit dive

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 Fortescue Metals Group Limited (ASX: FMG) share price is steady in early trade. 

The S&P/ASX 200 Index (ASX: XJO) iron ore miner closed yesterday trading for $22.52 per share. Thirty minutes after the opening bell, shares are changing hands for $22.52. (We’ll let you do the maths there.)

This comes as rumours of a potential big round of pending layoffs are making the rounds in the financial media.

What’s this about redundancies?

The Fortescue share price is steady in morning trade as ASX 200 investors mull over the implications of the job cuts. 

According to sources cited by The Australian, the miner is eyeing cutting 1,000 jobs or more.

Employees facing the axe include those at environmentally-focused Fortescue Future Industries (FFI).

The cited sources indicated Fortescue has been considering a significant round of layoffs since last year. Some said that up to 500 FFI employees may lose their jobs, out of a total of just over 1,100 employed at the green energy company.

Reductions may also take place among the Fortescue’s head office, finance and IT staff.

Fortescue releases its half-year financial results (1H FY23) on 15 February. It was reported that the board, including chair Andrew Forrest, will debate the merits of the job cuts before then.

The miner has not yet released any statements clarifying its intentions, however, a spokeswoman stated, “People and performance are always our focus.”

“We are always looking for opportunities for continuous business improvement,” she added. “That is how we retain our status as the lowest cost producer in the world.”

At the end of FY22, Fortescue directly employed 11,693 people.

Fortescue share price snapshot

The Fortescue share price, as you can see in the chart below, is up 1% over the past 12 months.

2023 has offered some strong tailwinds for the miner, with shares up 10% year to date.

The post Fortescue share price shrugs off layoff rumblings appeared first on The Motley Fool Australia.

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• Fortescue share price edges higher on ‘potentially massive’ news
• Is the 9%+ Fortescue dividend yield safe for passive income investors?
• Why are ASX 200 iron ore shares being hammered hard on Friday?
• Why are ASX 200 iron ore shares like Rio Tinto sliding lower today?
• Here’s the Fortescue dividend forecast through to 2025

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 Appen Ltd (ASX: APX) share price is racing higher again on Friday.

At the time of writing, the artificial intelligence (AI) data services company’s shares are up 13.5% to $3.35.

This means the Appen share price is now up 29% since Monday’s close.

Why is the Appen share price on fire this week?

With no news out of Appen or broker notes relating to the company, it is difficult to say for sure why its shares are on fire this week.

However, it is worth noting that the emergence of OpenAI’s ChatGPT last year has been a game changer for the AI industry.

While companies have been spending billions on AI activities for years, the arrival of ChatGPT has been leaps and bounds ahead of anything that has been developed before. All in all, it appears that AI is now at an inflection point.

This has led to companies such as Google parent Alphabet and China’s search engine giant Baidu scrambling into action to compete with OpenAI.

This could prove to be very good news for Appen, which has been struggling over the last few years and seen its share price head lower and lower.

How Appen could benefit

Appen provides tech companies with AI data services. It ensures that they have high quality data that companies can then use to train their machine learning models. Without high quality data, it is unlikely that their models would be able to come close to ChatGPT.

So, with Google and Baidu now believed to be upping their investments on AI activities materially, investors appear to believe that Appen could be well-positioned to benefit from increased demand for data services.

Though, it is worth remembering that this is not guaranteed. There’s plenty of competition out there and some companies have taken such activities in-house.

The good news is that investors won’t have to wait long until they get an update from Appen. It is scheduled to release its full year results later this month.

The post Appen share price soars again, up 29% since Monday appeared first on The Motley Fool Australia.

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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 Appen. 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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Stock in electric vehicle (EV) icon Tesla Inc (NASDAQ: TSLA) has had an astonishing start to 2023, recovering much of its 2022 losses within six weeks.

It tumbled 65% last year as soaring inflation drove interest rates higher and celebrity CEO (read: Technoking) Elon Musk staged a dramatic US$44 billion takeover of Twitter.

Tesla stock last traded at US$207.32.

That’s a far cry from its final close of 2021 – US$352.26 – but a whopping 68% higher than it ended 2022 – US$123.81.

So, what’s been bolstering the tech giant’s share price so far this year? Let’s take a look.

Why has Tesla stock soared into the new year?

The first six weeks of 2023 haven’t been entirely easy for those invested in Tesla stock. Though, it’s ultimately been a fruitful year so far.

The company started the year out on arguably the wrong foot, announcing it had delivered a potentially eye-popping 1.3 million EVs in 2022. But, despite marking a new record, that figure fell short of Musk’s previous pledge to increase deliveries by 50% annually.

Musk also faced a legal challenge in recent weeks, with a group of Tesla shareholders taking the billionaire to court on allegations he misled investors by tweeting that he was taking the company private in 2018. A jury cleared Musk of any wrongdoing, the Guardian reports.

Am considering taking Tesla private at $420. Funding secured.

— Elon Musk (@elonmusk) August 7, 2018

https://platform.twitter.com/widgets.js

But it wasn’t the win that’s seemingly sent Tesla stock rocketing in 2023. It’s leapt nearly 44% since the company dropped its quarterly results on 25 January.

Tesla posted US$1.19 of adjusted earnings per share (EPS) for the three months ended December, beating average analyst expectations of US$1.13, The Motley Fool reports. Meanwhile, its revenue for the quarter leapt 37% year-on-year to US$24.3 billion.

That saw its full-year unaudited adjusted EPS come in at US$4.07 while its revenue soared 51% to around US$81.5 billion. Its profits also nearly doubled to reach US$12.6 billion.

Not to mention, investors are likely looking forward to Tesla’s next earnings release after it announced it’s cutting 20% from the cost of its Model 3 and Model Y in the United States and Europe last month, my Fool colleague Mitch reports.

The post Boom! Why has Tesla stock rocketed 68% so far in 2023? appeared first on The Motley Fool Australia.

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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 positions in and has recommended Tesla. 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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Some ASX shares are about to give investors a much bigger payout in FY23. In this period of economic uncertainty, more dividends could be very welcome.

While other businesses are facing trickier economic conditions, which may mean a lower payment to investors.

However, there are others that could be on course to pay very pleasing cash flow to investors this year.

Let’s have a look at two that could increase their payouts in the coming months.

APA Group (ASX: APA)

APA operates over 15,000km of natural gas pipelines around the country, which connects sources of supply with end markets across Australia. It delivers half of the country’s natural gas usage. The business also owns or has an interest in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms).

The business has been growing its distribution each year for over a decade and a half. It funds its distribution from the growing cash flow of its portfolio of assets.

It’s currently investing in more pipelines which can unlock further cash flow. The ASX share is also investing in electrification assets, such as the cable that connects Tasmania and the mainland called Basslink.

APA has provided guidance that it’s going to grow its FY23 distribution per security by 3.8% to 55 cents. That works out to be a distribution yield of 5.1%.

Westpac Banking Corp (ASX: WBC)

Westpac is one of the biggest ASX bank shares and it’s benefiting from the rising interest rates. The bank is passing on interest rate rises to borrowers but not so quick to savers (or at all, in February).

This has the effect of boosting the net interest margin (NIM) of the bank. Higher lending profits are expected to mean stronger overall profits.

Indeed, Morgans suggests that Westpac offers the greatest return on equity (ROE) improvement potential. The major ASX bank share is working on reducing its costs, which could also be a boost for earnings.

According to Commsec, Westpac could grow its annual dividend per share by 10% to $1.38. That suggests the bank could pay a grossed-up dividend yield of 8.25% in the current financial year.

Dividend growth is also forecast for FY24 and FY25. By the 2025 financial year, it could pay a grossed-up dividend yield of 9.1%.

The post 2 ASX shares with a dividend boost coming appeared first on The Motley Fool Australia.

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• ASX 200 investors: A big bank stock that pays 5% dividend income
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• NAB shares: A top tip for passive income?
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• Should I buy Westpac shares for the big dividend?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Apa Group. The Motley Fool Australia has recommended Westpac Banking. 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 REA Group Limited (ASX: REA) share price is on course to end the week in the red.

In morning trade, the property listings company’s shares are down 3% to $120.52.

This follows the release of the realestate.com.au operator’s half year results this morning.

REA share price falls on half year results

• Revenue up 5% to $617 million
• EBITDA down 2% to $359 million
• Net profit after tax down 9% to $205 million
• Interim dividend flat at 75 cents per share

What happened during the half?

For the six months ended 31 December, REA reported a 5% increase in revenue to $617 million. This was driven by 3% growth in Australia, with yield growth across advertising products more than offsetting the challenging market environment. The company’s India business also supported its top line growth, delivering a 48% increase in revenue year over year.

However, with the company’s core operating costs increasing 7%, REA reported a 2% reduction in EBITDA to $359 million. The increased costs reflect higher employee costs from wage inflation and continued investment to deliver strategic initiatives, and increased marketing and travel costs.

And although its net profit fell 9% to $205 million, that didn’t stop the REA board from maintaining its interim dividend at 75 cents per share.

How does this compare to expectations?

According to a note out of Goldman Sachs, its analysts were expecting REA to report a 3% decline in revenue to $606 million and a 6% decline in net profit to $208 million.

So, with REA reporting revenue of $617 million and net profit after tax of $205 million, it has beaten on the top line but missed on the bottom line.

The latter may explain the weakness in the REA share price today.

Management commentary

REA’s CEO, Owen Wilson, appeared pleased with the company’s performance given the tough operating conditions. He commented:

The Australian property market was heavily impacted during the first half by unprecedented consecutive interest rate hikes. While underlying demand remained healthy, uncertainty around future interest rate movements caused some sellers to pause and buyers to re-calibrate as borrowing capacities fell.

Despite these conditions, REA continued to deliver revenue and yield growth during the half. This performance underscores the strength of our products and audience, with customers increasingly relying on our premium products to maximise the impact of their campaigns.

Mr Wilson also revealed that its flagship site, realestate.com.au, maintained its leadership position during the half. He adds:

In a challenging market, the value of realestate.com.au’s unparalleled audience, engaging consumer experiences, and rich data-driven insights becomes increasingly important. We are the number one property portal in each of our markets and remain keenly focussed on building the engagement and loyalty of consumers throughout their property journey.

The release reveals that 12.1 million people visited each month on average, or 55% of Australia’s adult population. Furthermore, its average monthly visits of 117.6 million is 3.3 times more than its nearest competitor.

Outlook

REA has warned that rapid successive interest rate increases and softening consumer sentiment have significantly impacted property prices and volumes in the Australian residential property market.

This saw January national residential new listings falling 9% year over year.

And while REA expects its Australian operating costs to decline in the second half, it has warned that its target of positive operating jaws may not be achieved. Group operating costs are expected to increase in the high-single digits.

Mr Wilson concludes:

REA is focussed on delivering value to our customers at every point in the property cycle. We are continuing our investment in innovation and the growth of our product portfolio. “The uncertainty caused by rising interest rates is likely to continue in the coming months but we do expect that when interest rates stabilise we will see increased activity in the property market. The Australian economy is strong, unemployment is low and immigration is increasing. Each of these underpin our property market.

The post REA share price tumbles on half year earnings miss appeared first on The Motley Fool Australia.

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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 recommended REA 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 S&P/ASX 200 Index (ASX: XJO) share Wesfarmers Ltd (ASX: WES) is a top-quality business in my opinion, which is why I’m watching it closely.

There are few businesses on the ASX that are as old as Wesfarmers. It has a number of businesses within its portfolio, including Bunnings, Kmart, Priceline, Officeworks, Target, Catch, a chemicals, energy and fertiliser division (WesCEF) and industrial businesses.

There are a number of reasons why I think Wesfarmers is one of the best ASX 200 shares around, and why I’d like to talk about it.

At the current Wesfarmers share price, these are some of the reasons why I like it so much.

Diversification

Wesfarmers is known for having a number of retail businesses such as Bunnings, Kmart and Catch.

But, I like that the business has been working on diversifying itself.

It wasn’t too long ago that Wesfarmers acquired Australian Pharmaceutical Industries (API), the owner of Priceline and a couple of other businesses. I think that healthcare could provide defensive earnings for Wesfarmers, enabling it to hold up well.

Wesfarmers has also been seeing a strong performance in its WesCEF business. In FY22, WesCEF generated earnings before tax (EBT) of $540 million (up 40.6%), which was more than $418 million from Kmart Group and more than $181 million from Officeworks.

I like that the ASX 200 share is looking to diversify its portfolio further, such as the lithium projection at Mt Holland which is progressing.

Quality earnings

I think that Wesfarmers shares have high-quality earnings.

Bunnings is the leader in the hardware sector. Kmart is a leading major retailer. Officeworks seems to be the category leader for office products. And so on.

Being the biggest in a sector gives the scale advantages of buying power and other profit margin benefits. This enables Wesfarmers to sell products either at a cheaper price than competitors or sell at the same price and earn more profit.

The biggest contributor to Wesfarmers’ profit is usually Bunnings. Not only does it make the most profit, but it’s very effective at making the profit. For example, in FY22 Bunnings generated $2.2 billion of EBT. Its return on capital was 77.2%, which was enormous. It was even higher in FY21 at 82.4%.

Wesfarmers makes very good returns on the money that it has allocated to its businesses. If the ASX 200 share keeps re-investing then I think it gives it a very good chance of producing good profit growth.

Expected resilient performance

One of the main reasons why I think the Wesfarmers share price is looking more attractive is because it has dropped 25% since its peak in August 2021.

But, I don’t think its profit is going to drop by 25%.

Wesfarmers points out that names like Kmart and Bunnings are seen as leaders in low-cost retail. They could perform well relative to competitors during 2023 and beyond.

I think it’s possible that WesCEF could produce another good result in FY23.

At the moment, the forecast on Commsec suggests that Wesfarmers’ earnings per share (EPS) could rise from $2.08 to $2.22 in FY23 and then $2.27 in FY24. In other words, it’s expected not to even see a decline in profit.

Strong dividend

Whatever happens over the next year or two, the ASX 200 share could keep growing its dividend.

Commsec numbers suggest that Wesfarmers could pay an annual dividend per share of $1.83 in FY23 and $1.93 in FY24. The cash returns could be solid, even if the share price moves up and down.

In FY23, the grossed-up dividend yield could be 5.3%.

I think that the combination of potential long-term profit growth and dividends could mean Wesfarmers is a solid long-term contender.

The post The top ASX 200 share on my watch list right now appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Wesfarmers. 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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