Buckle up, investors! ASX shares are going to leave foreign stocks in the dust.

That’s the analysis from AMP Ltd (ASX: AMP) chief economist Dr Shane Oliver, who forecasts Australian equities will go gangbusters over the next decade.

“The period of underperformance in Australian shares compared to global shares since 2009 is likely to be over,” Oliver said on the AMP blog.

“Expect a five to 10-year period of trend outperformance, albeit there will be bumps along the way.”

Why ASX shares have struggled the past 13 years

Australian shares have not gone as well as their international peers in the period since 2009, in the aftermath of the global financial crisis.

Oliver reckons there was some mean reversion going on after ASX stocks rocketed up in the 2000s from the commodities boom.

“The slump in commodity prices from 2011 – this weighed heavily on Australian resources shares through much of last decade,” he said.

“Foreign investor fear of a crash in Australia’s expensive housing market has been a periodic theme over the last decade leading many foreign investors to be cautious of Australia.”

The deterioration in the western world’s relationship with China has suppressed Australian shares too.

“This started in 2018 with [former US] president Trump’s trade war but was accentuated through the pandemic,” said Oliver.

“It arguably resulted in foreign investors demanding a risk premium to invest in the Australian dollar and Australian shares.”

Towards the end of the period, the ASX’s lower exposure to COVID-19 pandemic winners — like technology — was also a drag on its performance.

Why ASX shares will rocket the next few years

But heading into 2023, Oliver feels like the tables have turned.

“The commodity price slump from their 2008-2011 highs looks to be over,” he said.

“Commodities [are] embarking on a new super cycle bull market driven by constrained supply after low levels of investment and low inventories for most commodities, decarbonisation driving increased demand for metals and increased defence spending on the back of increased geopolitical tensions which is metal intensive.”

The resources sector’s domination of the ASX will see the local bourse cash in from these new conditions. 

“The risk of a sharp deterioration in the trade relationship with China appears to be receding — at least for a while — helped by a change of government in Australia.”

Australian shares are also starting out cheaper, after a decade of underperformance.

“Australian shares are trading on a lower forward price-to-earnings multiple of 14.5 times than global shares on 15.3 times & US shares on 17.1 times,” said Oliver.

“Australian shares are due for a lengthy period of outperformance.”

Oliver added that the high dividends paid out by Aussie companies would drive higher returns over the coming years.

“Australian shares pay a higher dividend yield than traditional global shares: 4.4% versus 2.5%. This is important because dividend payments are a big chunk of the return an investor will get and so the higher the better,” he said.

“Franking credits add around 1.3% per annum to the post tax return for Australia-based investors.”

The post Why ASX shares will flog global stocks the next few years: economist appeared first on The Motley Fool Australia.

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More reading

• Will AMP shares regain their dividend sparkle in 2023?
• Why ASX shares could be much higher at the end of 2023
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Wednesday

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 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 Telstra Group Ltd (ASX: TLS) dividend is one of the most popular options on the Australian share market for income investors.

It isn’t hard to see why this is the case. Over the last couple of decades, the telco giant has returned billions of dollars of its earnings to shareholders.

And while the NBN rollout hit its dividend payments hard, this headwind is now over and growth is back on the agenda.

In fact, Telstra surprised everyone in FY 2022 by increasing its dividend for the first time in years to a fully franked 16.5 cents per share.

Where next for the Telstra dividend?

The good news is that analysts appear to believe that it is onwards and upwards from here for the Telstra dividend.

For example, according to a note out of Goldman Sachs, its analysts are expecting Telstra to declare an interim dividend of 8.5 cents per share in February with its interim results. This is up from 8 cents per share last year and ahead of the consensus estimate of 8.2 cents per share.

Goldman then expects the same again in August, bringing its full year dividend to 17 cents per share. Based on the current Telstra share price of $4.11, this will mean a 4.1% dividend yield.

In FY 2024, the broker is expecting Telstra to increase its payout by a further 5.9% to 18 cents per share. This will mean a dividend yield of 4.4% for investors that year.

Finally, Goldman expects the Telstra dividend to increase by 11.1% in FY 2025 to a fully franked 20 cents per share. This equates to a yield of almost 4.9%.

Should you invest?

It isn’t just the Telstra dividend that is expected to increase by Goldman Sachs. Its analysts see scope for the Telstra share price to rise meaningfully over the next 12 months.

According to the note, the broker has a buy rating and $4.60 price target on its shares. This implies potential upside of 12% for investors from current levels.

The post Here’s the Telstra dividend forecast through to 2025 appeared first on The Motley Fool Australia.

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More reading

• Buy Telstra shares for its defensive earnings and dividend growth: Goldman Sachs
• Generate passive income with these quality ASX 200 dividend shares: brokers
• 3 things that could super-charge your investment returns over the long term: Scott Phillips
• What could propel Telstra shares over the next year?
• Does Telstra sell bonds to ASX retail investors?

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 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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The dividend income that is expected to be paid by the S&P/ASX 300 Index (ASX: XKO) share Accent Group Ltd (ASX: AX1) is very appealing.

Interest rates have jumped over the last year, bumping up how much income investors can get from ASX shares. But, I think that there are ASX 300 dividend shares that have such strong dividend yields that their yield is still very attractive.

Accent Group is one of those businesses with the potential for growth and good dividends, in my opinion.

It acts as the Australian distributor for a number of brands, and also owns others. Some of the brands involved are Vans, Skechers, Dr Martens, Glue Store, Henleys, Hoka, and The Athlete’s Foot.

How much dividend income could Accent shares pay in 2023?

Accent is expected to pay an annual dividend per share of 11.5 cents in FY23, according to Commsec.

At the current Accent share price, this suggests the grossed-up dividend yield could be 7.5% over the next 12 months. But, that’s just an estimate.

The ASX 300 share is then expected to increase its annual dividend payment to 12 cents per share in FY24 and 13.7 cents per share in FY25.

That means the FY24 grossed-up dividend yield could be 7.8% and the FY25 grossed-up dividend yield 8.9%.

But, based on the earnings estimate for FY23, the company’s dividend payout ratio could be a healthy 78%. The business would still be keeping a fifth of its profit to reinvest back into more growth opportunities.

Recent progress

On 25 January 2023, the business revealed that total sales (including The Athlete’s Foot franchisees) for the 27 weeks to 1 January 2023 was $825 million, up 39%.

Earnings before interest and tax (EBIT) for the first half of FY23 is expected to be between $90 million and $92 million.

Management said trading conditions “continued to be very positive” in November and December, revealing that sales were higher than expected. There was also a year-over-year improvement in the gross profit margin.

Trading in January to the date of the announcement was in line with expectations.

Why I’d buy this ASX 300 dividend share

While the Accent share price has recovered some of the lost ground from 2022, it’s still down around 20% from its November 2021 high.

I think the company’s underlying profitability continues to improve as the business grows its store network and adds brands to its portfolio. The more it expands its reach to potential customers, the stronger position the shoe retailer is in.

At the current Accent share price, it’s valued at under 15x FY23’s estimated earnings and 14x FY24’s estimated earnings. While it would have been better to buy a few months ago, I think it still looks good value for long-term growth, while paying a very good dividend.

The post 7%+ dividend yield! I’d buy this ASX 300 share for passive income in 2023 appeared first on The Motley Fool Australia.

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More reading

• Brokers name 3 ASX shares to buy now
• Why Accent, Mineral Resources, Newcrest, and Whitehaven Coal shares are dropping
• Why Accent, Iluka, Myer, and QBE shares are charging higher today
• Consumer spending defies logic as inflation rages higher, locking in yet another interest rate hike in February
• Accent Group share price jumps 11% on strong sales update

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 recommended Accent 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 Flight Centre Travel Group Ltd (ASX: FLT) share price won’t be going anywhere today. The stock has been placed in the freezer amid a $180 million capital raise, the proceeds of which will help fund a major acquisition.

The S&P/ASX 200 Index (ASX: XJO) travel giant has revealed it’s acquiring UK-based luxury travel brand Scott Dunn – providing an entry point into the UK and US markets.

It also dropped its unaudited results for the first half of financial year 2023.

The Flight Centre share price last traded at $15.83.

Let’s take a closer look at what’s going on – or not going on – with the $3 billion travel agency today.

Why is the Flight Centre share price frozen today

There’s been a deluge of news from Flight Centre today, but its share price probably won’t respond. It’s expected to remain frozen until the company’s $180 million placement is completed.

$211m acquisition of luxury travel brand Scott Dunn

That $180 million – as well as $40 million of cash – will go towards buying Scott Dunn for an enterprise value of $211 million.

According to Flight Centre, Scott Dunn is a high-margin leisure business in the luxury travel segment with large average booking values and strong repeat bookings. It brought in $199 million of total transaction value (TTV) and $51 million of revenue last year.

Flight Centre managing director Graham Turner commented on today’s news, saying:

Scott Dunn provides us with the opportunity to grow our leisure presence in the large UK and US luxury markets in an attractive and growing segment, while also fast-tracking our objective of developing a global luxury collection of travel brands.

High-net-worth, time poor customers highly value the services of Scott Dunn as shown by their customers’ loyalty.

The acquisition is also expected to generate supplier synergies, modest net corporate costs, and be mid-teens percentage earnings per share (EPS) accretive in the 12 months ending June 2023, on a pro forma basis before realising synergies and the transaction costs’ impact

Flight Centre shares to remain frozen amid placement

To fund the purchase, Flight Centre is undergoing a $180 million placement.

It will offer around 12.3 million new shares (6.2% of its existing shares) for $14.60 apiece under the raise – a 7.8% discount to its last traded price.

The company is also conducting a $40 million share purchase plan. That will see new shares on the table for the same price, or lower, than the placement.

The Flight Centre share price has been tipped to return to trade tomorrow on the completion of the placement.

ASX 200 company unveils first-half results

Finally, here are the key takeaways from Flight Centre’s unaudited first-half earnings in comparison to the prior comparable period (pcp):

• Corporate TTV rose 146% to $5 billion and leisure TTV lifted 441% to around $4.4 billion
• Group TTV more than tripled to reach approximately $9.9 billion
• Revenue surged 217% to $1 billion
• Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) beat guidance, jumping to $95 million – up from a $184 million loss
• Operating cash outflow of around $65 million, in line with normal seasonality

The company’s corporate segment is on track to post record TTV this financial year. Meanwhile, its leisure business is benefitting from the resumption of normal travel patterns.

At the end of the period, Flight Centre had a $489 million net cash position. Though, that doesn’t include $800 million of convertible bonds.

It’s now targeting between $250 million and $280 million of full-year underlying EBITDA before any acquisition benefits.

The post Flight Centre share price frozen amid $211m ‘luxury’ acquisition appeared first on The Motley Fool Australia.

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More reading

• These are the 10 most shorted ASX shares
• How much profit could Flight Centre shares make in 2023?
• Here are the 10 most shorted ASX shares
• Is 2023 Flight Centre’s year to return to profit?
• The Flight Centre share price has made a flying start to 2023! Should I buy?

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 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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Well, I’m back from Tamworth.

(What? You didn’t know I was there? You really should read more of my articles!)

For those not in the know, I headed up for 4 days with my young bloke for the Tamworth Country Music Festival.

And if you get the chance, please go and see Troy Cassar-Daley, The Bushwackers, John Williamson, and Colin Buchanan in concert. They were all fantastic, and highly recommended.

You know, there’s something about these sorts of events. The vibe was warm and friendly. Everyone is there to have a good time. There were plenty of coppers about, but I didn’t see a single issue.

It was just a great time.

Now, I could bang on (justifiably) about the beauty of our country, and (again) recommend you check it out as soon as you can, if and when you can.

And I do want to say thanks to those people who came up to say g’day, including Greg from Toyota, and Graham (aka Mr. Elvis).

But this isn’t about me.

It’s about some investing thoughts I had while I was away. They’re loosely related, but each stands alone.

First, I was reminded of the power of community and of ‘fans’. Not just for music, and not just country music. But for artists and businesses in general. If a business can create not just ‘users’ or ‘consumers’, but ‘fans’, they’re off to a very good start. And not just a good start, but a very good chance of continued business.

Greg said he loved working at Toyota, because the product was just so good, and that people in the country loved their Toyotas. (I agreed – we have a Prado and a Hilux!)

Most of the fans at the concerts I went to weren’t at their first Troy/John/Bushwackers/Colin concert. They knew the music, they’d seen the artists before, and they were back again.

See, fans aren’t just fans. They’re usually repeat customers.

Tesla knows all about fandom. So does Apple. And RM Williams. And Toyota.

That’s the beauty of fans. Customers buy once. Maybe twice. But with fans, you’ve usually got repeat customers. Potentially for years.

Next, the value of what some people call ‘discretionary effort’.

While I was at the Wallabadah coffee shop (‘Best Coffee outside of Italy’ apparently!), a group was discussing some plans they had for their community. I didn’t want to eavesdrop, so I didn’t hang around, but I could hear them discussing a plan for some sort of event or promotion.

Sure, this group might have been businesspeople who’d benefit from more exposure, or more people in town, but they were also trying to help the rest of the town. That’s ‘discretionary effort’.

In a business, it’s the extra effort that employees put in over and above the bare minimum required.

No, I’m not talking about exploitation – I’m talking about the extra effort that people make, usually when they believe in the mission or purpose of a company.

When they want their business to be successful, because they see the benefit for all parties.

I’ve worked in businesses with and without it, and while it’s not a guarantee, it’s a good indicator of potential business success.

The last thing that struck me while I was away was when my young bloke and I were discussing hotel room prices.

We had to shift hotels because he wanted to stay an extra day, and the one we were in was booked out.

Now, he’s 10, so I saved some of the detailed pricing lessons for another time, but he was interested in how and why different hotels charged different prices.

He gets the general relationship between price and quality, so he gathered that the ‘nicer’ hotels – in his world, they’re the ones with swimming pools! – charged more than the others.

And I explained that sometimes, like during the Country Music Festival, all of the hotels were full, but they weren’t full all year round.

And that was enough, for him, for now at least.

But it reminded me of the importance of really understanding a business’ economic model, especially when investing.

What costs are truly fixed? Which are fixed in the short-term, but can be flexed? And which costs are variable?

Having an understanding of those relationships can be really helpful, particularly when you’re thinking about cyclical businesses or those with fickle customer bases.

Which businesses will suffer during recessions? Which will be resilient?

When does a sales downturn become uncomfortable, and when does it threaten a company’s very viability?

And, for investors, how do you think about the right price to pay for those companies?

Now, there’s much more to investing than these three observations.

But, if you can put them together, and answer those questions with a degree of evidence-based confidence, I reckon you’re probably a decent way down the road.

A company with fans. Whose employees believe in the mission. And for which you understand the economic drivers and the impact on the bottom line.

If I was looking for a way to create a shortlist of potential investments, I reckon that’s a pretty good filter.

And seriously, get out into the regions. You’ll be glad you did.
Fool on!

The post What country music taught me about investing appeared first on The Motley Fool Australia.

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More reading

• Flight Centre share price frozen amid $211m ‘luxury’ acquisition
• Forget lithium! I’m using the Warren Buffett method to help find winning ASX shares in 2023
• How I’d invest $20,000 in ASX shares in 2023
• Up 18% in a year, is it time to cash in the chips on BHP shares?
• Broker warns that the Fortescue share price could crash 39% from current levels

Motley Fool contributor Scott Phillips has positions in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple. 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’ve got nothing against lithium. It looks likely that this future-facing metal is going to play a big part in the world’s transition to providing cleaner energy. But I’m willing to bet the legendary investor Warren Buffett isn’t interested in investing in lithium.

Buffett is famously generous with giving out investing wisdom. As such, we know what he typically looks for in an investment. Buffett’s methodologies have helped him return upwards of 20% per annum in the investment portfolio of Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) over his 60-year investing career.

Buffett’s typical investing checklist includes finding companies with intrinsic competitive advantages (or ‘moats’), a management team with integrity, an easy-to-understand business model, and (of course), buying it at the right price:

The reason why Buffett hasn’t ever bought a lithium stock? Most fail that first hurdle before they even get off the ground.

Buffett wouldn’t buy lithium

A lithium miner is still a miner, even if the company possesses a key ingredient for a cleaner future. This means that a lithium producer has to sell its products at a common market price. Most of Buffett’s long-term holdings aren’t restricted by this kind of barrier.

Take Berkshire’s largest position: Apple Inc (NASDAQ: AAPL). Apple has some of the best margins in the world because of its globally dominant brand. The company can basically charge whatever it likes for its products, safe in the knowledge that its customers will be happy to pay top dollar for the privilege of owning something with the famous Apple logo on it.

A lithium producer has no such luxury. It has almost no influence over what it can charge the buyers of its products. This doesn’t matter so much when lithium prices are rising. But when the inevitable commodity cycle plays out and lithium prices go through a tough time, all producers will suffer, regardless of ‘brand power’.

So I’m following the Buffett playbook in 2023 and limiting my search to companies that I can understand, have intrinsic competitive advantages, top management teams and compelling prices.

I’ll be taking closer looks at the likes of TechologyOne Ltd (ASX: TNS), Transurban Group (ASX: TCL), Breville Group Ltd (ASX: BRG) and Premier Investments Limited (ASX: PMV).

But I’ll be taking a pass on Core Lithium Ltd (ASX: CXO), Pilbara Minerals Ltd (ASX: PLS) and Liontown Resources Ltd (ASX: LTR). It’s not that these companies are poor businesses. They just don’t fit into the Buffett investing framework I like to try and stick to.

The post Forget lithium! I’m using the Warren Buffett method to help find winning ASX shares in 2023 appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has positions in Apple and Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway, short January 2023 $265 calls on Berkshire Hathaway, and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple, Berkshire Hathaway, and Premier Investments. 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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After all the excitement for the ASX share market in 2022, I think there are some very compelling ASX growth shares that are at prices that could mean excellent returns in 2023.

It’s understandable why asset prices have suffered since interest rates started rising. Warren Buffett, one of the world’s greatest investors, once said:

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.

With that in mind, I’m seeing very good opportunities for potential long-term returns. If I had $20,000 ready to go to invest, these are some of the ASX growth shares I’d want to choose:

Xero Limited (ASX: XRO)

Xero is one of the world leaders when it comes to accounting software, which is cloud-based. The business has millions of subscribers around the world, in places such as New Zealand, Australia, the UK, the USA, Canada, South Africa, and Singapore.

The business continues to grow subscriber numbers, which is a useful boost for revenue. It’s also seeing an increase in average revenue per user (ARPU), partly thanks to price increases.

The Xero share price is down around 30% over the past year, making it look much better value.

With the business now talking about increasing its profit margins, I think it could capture investor attention again when the profit starts flowing through the business and if ARPU keeps rising at a good pace.

I think the company’s global growth runway is still long, which is why I’d invest $8,000 into this ASX share.

Pinnacle Investment Management Group Ltd (ASX: PNI)

Pinnacle is one of the most interesting and compelling S&P/ASX 200 Index (ASX: XJO) shares. Amid the market volatility since November 2021, the Pinnacle share price is down more than 40% from its former height.

It’s logical there would be difficulties during a time of market decline because of the fact that it’s a funds under management (FUM) business. While it doesn’t run funds itself, it helps launch funds management businesses and then receives a cut of their earnings because it owns a stake. Pinnacle can offer services like legal, finance, fund administration, seed FUM and so on to allow the fund manager to focus on investing.

A number of the fund managers that Pinnacle is invested in regularly deliver outperformance, so fund inflows could resume once the interest rates stop going up and the share market seems less intimidating.

Pinnacle has been hit hard, but I think it’s a contender for one of the strongest rebounds over the next 12 months.

It’s exciting that the portfolio of managers continues to grow too. Pinnacle has recently expanded into Canada with a small-cap-focused manager.

I’d put $7,000 into this ASX share.

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is a fast-growing furniture and homewares online retail share. It has grown significantly since the start of COVID-19 and, despite lockdowns being over, is expecting to return to reporting good year-over-year sales growth by the end of FY23.

Over the past year, the Temple & Webster share price has fallen by 33%.

Households weren’t likely to keep spending on the home as strongly forever. But, I think the heavy fall now represents good value with the business heavily focused on the long term. It has a goal of being the largest homewares retailer, online or offline.

It’s investing heavily in growth areas such as marketing and technology. The business is able to offer customers an augmented reality (AR) service so that they can see the product in their space.

As the company grows in size, it can benefit from scale advantages, which could make it a much more profitable business in future years.

I would invest the final $5,000 into this exciting business.

The post How I’d invest $20,000 in ASX shares in 2023 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 positions in and has recommended Pinnacle Investment Management Group, Temple & Webster Group, and Xero. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management Group and Xero. The Motley Fool Australia has recommended Temple & Webster 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 BHP Group Ltd (ASX: BHP) share price has lifted higher in the past year, but is it the time to sell?

BHP shares have risen 18% in the last year and are now fetching $49.23 as of Monday’s close. For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) has returned 14% in the last year.

Let’s take a look at the outlook for the BHP share price.

What’s ahead?

BHP is a major iron ore producer on the ASX 200 that also explores copper, nickel, potash, and metallurgical coal.

Shaw and Partners senior investment advisor Jed Richards is recommending investors sell BHP shares.

Commenting on BHP in The Bull, Richards highlighted the impact of commodity prices on investor sentiment in the next year. He said:

The company’s most recent result delivered a strong cash dividend above expectations. Investors will be closely monitoring iron ore, copper and coal prices during the next 12 months.

The macro backdrop is still fragile given global growth is slowing. Iron ore prices are now softer than in previous years. Costs continue to increase and port facilities are operating at maximum capacity.

On the flip side, Macqaurie analysts placed an “outperform” rating on BHP shares with a $50 price target on the company’s shares in January. The broker is predicting the company to deliver a fully franked dividend of $2.88 per share.

BHP delivered a 3.3% lift in iron ore production to 66.9 Mt in the December quarter. The company produced 424.3 kt of copper, also a 3% boost on the previous quarter.

Meanwhile, BHP is planning to acquire copper miner Oz Minerals Limited (ASX: OZL) in 2023. Oz Minerals shareholders will vote on this proposal in late March or early April. This could also weigh on the company’s share price in the future.

BHP share price snapshot

BHP shares have climbed about 8% in the year to date. However, in the past week, BHP shares have slid more than 1%.

BHP has a market capitalisation of about $249 billion based on the current share price.

The post Up 18% in a year, is it time to cash in the chips on BHP shares? appeared first on The Motley Fool Australia.

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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 recommended Macquarie 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 Fortescue Metals Group Limited (ASX: FMG) share price has been in sensational form over the last six months.

As you can see on the chart below, the iron ore miner’s shares have risen a sizeable 22% since the start of August.

Can the run continue or is the Fortescue share price heading lower?

While the Fortescue share price has been defying gravity for some time, a growing number of analysts are warning that it could fall heavily in the near future.

One of those is Goldman Sachs, which this morning has reiterated its sell rating with a $13.60 price target. Based on where its shares are trading now, this implies potential downside of 39% over the next 12 months.

Goldman’s bearish view is driven by its valuation, decarbonisation, and dividend concerns. In respect to the former, the broker highlights that Fortescue’s shares trade at a significant premium to rivals BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO). It said:

Relative valuation: the stock is trading at a premium to RIO & BHP on our estimates; 1.7x NAV vs. BHP at c. 1.15x NAV and RIO at 0.95x NAV, c. 7.5x NTM EV/EBITDA (vs. BHP/RIO on c. 6x/5x), and c. 3% FCF vs. BHP/RIO on c. 5%/7%.

Goldman has also warned investors that there’s no guarantee that Fortescue will be able to continue paying big dividends in the near future because of its decarbonisation spend. It explained:

Our recent FMG site trip to the Pilbara highlighted ongoing elevated spend to maintain hematite group shipments at ~190Mtpa going forward. Combined with the ~US$7bn decarb program, we forecast FMG’s capex to increase from ~US$3.2bn in FY23 to ~US$4.6bn by FY26. We continue to think FMG is at an inflection point on capital allocation, and to fund the ambitious strategy, we assume the company raises ~US$5bn of new debt, reduces the dividend payout ratio from the current ~75% in FY22 to ~50% from FY24 onwards, and increases gross gearing to 30-35% by FY26 (in-line with the company’s target of 30-40%).

This sentiment is echoed by analysts at Morgans. Its analysts have retained their reduce rating with a $15.60 price target. It warned:

Significant capex is still to come from FMG’s decarbonisation spend and various projects targeting FID in CY23. FMG expects to fund this spending through its iron ore cash flow, which sees its FCF yield reducing significantly over the next few years, and increasing its sensitivity to any unexpected market volatility.

Morgans thinks it will get so bad that Fortescue’s shares will provide a yield of just 1.4% in FY 2025.

All in all, the broker community appears to believe the good times are coming to an end for this mining giant.

The post Broker warns that the Fortescue share price could crash 39% from current levels 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 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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Most retirees have spent a lifetime working and building up a nest egg. But life happens, and some people will find that they haven’t built up enough income for a comfortable retirement.

I think that ASX dividend shares could be the answer.

The dream of living out the golden years with ample money is one that plenty of people aspire to.

A recent article on CNBC suggested that to “maintain your standard of living in retirement, the rule of thumb is you need to be able to replace at least 70% of the income you had while you were working.”

However, of a survey of 1,566 participants in the United States by Goldman Sachs Asset Management, just 25% of retirees generated that 70% level of former income. The research showed that 51% of retirees made less than 50% of their pre-retirement income.

What can Aussies do about this?

While Australia isn’t the same as the US, there are a few things to consider for how much is needed to retire in Australia.

For example, the age that people can access a pension and their superannuation can play a part. For those born on or after 1 January 1957, the retirement age (being the age pension entitlement age) will move to 67 years as of 1 July 2023.

The Motley Fool’s article on retirement planning outlines an example of how long a nest egg may need to last:

So, theoretically, an Australian woman who retires at 67 and lives until the average age of 85 will need her retirement savings, investments, and superannuation to fund her living expenses for 18 years.

Households will need to determine how much they want/need to spend in retirement as well.

For a comfortable retirement, the Association of Superannuation Funds of Australia’s Retirement Standard suggests a couple that owns their home will need an income of $67,000, while a single person will need an annual income of more than $47,000, according to Motley Fool research.

I think that ASX dividend shares can play a very helpful role in boosting retirement income and supplementing other forms of income, such as a pension or a part-time job.

Strong yields from ASX dividend shares

The US market isn’t particularly known for paying good dividends. As an example, the Vanguard US Total Market Shares Index ETF (ASX: VTS) has a dividend yield of 1.7%, according to Vanguard.

Meanwhile, franking credits give Aussie investors the ability to significantly boost their after-tax dividend income.

Some businesses are building a record of consecutive years of dividend growth, such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Sonic Healthcare Ltd (ASX: SHL), APA Group (ASX: APA) and Brickworks Limited (ASX: BKW).

Some of these businesses are seeing rising share prices.

There are also some names that have higher dividend yields and, in most years, tend to increase their payouts. These include Wesfarmers Ltd (ASX: WES), Charter Hall Long WALE REIT (ASX: CLW) and Rural Funds Group (ASX: RFF)

While ASX dividend shares aren’t a magic cure, they can allow retirees to generate more investment income from their nest egg than many other types of assets.

The post Why ASX dividend share income could be so important for 75% of retirees appeared first on The Motley Fool Australia.

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More reading

• Broker warns that the Fortescue share price could crash 39% from current levels
• Buy these ASX dividend shares for income: broker
• Core Lithium shares led the charge on this trading platform in 2022. Can you guess the other top stocks?
• 3 ASX lithium shares to buy right now: experts
• Forget bonds, I’d much rather buy this ASX 200 stock for its 4% dividend yield

Motley Fool contributor Tristan Harrison has positions in Brickworks, Rural Funds Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, Goldman Sachs Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Apa Group, Brickworks, Rural Funds Group, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has recommended Sonic Healthcare. 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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