If you’re looking for dividend shares to buy in 2023, then you may want to look at the two shares listed below that have been rated as buys.

Here’s why brokers rate these ASX 200 dividend shares highly right now:

Coles Group Ltd (ASX: COL)

The first ASX 200 dividend share that brokers rate as a buy is supermarket giant Coles.

A note out of Citi reveals that its analysts have a buy rating and $18.90 price target on its shares.

Citi was pleased with Coles’ decision to recently announce the sale of its fuel and convenience business and expects “the proceeds will be invested into the business (e.g. accelerate store renewals, lift omni-channel capability).”

As for dividends, the broker is expecting the retailer to pay a 72 cents per share dividend in FY 2023 and a 77 cents per share dividend in FY 2024. Based on the current Coles share price of $17.00, this will mean fully franked yields of 4.2% and 4.5%, respectively, for investors.

Telstra Corporation Ltd (ASX: TLS)

Another ASX 200 share to look at is telco giant Telstra.

Morgans is tipping the company as an add rating and $4.60 price target on the company’s shares. It likes the company due to its successful turnaround via the T22 strategy and its ongoing restructure.

The broker believes the latter will unlock value for shareholders. In light of this, its analysts believe the market is undervaluing Telstra as a whole.

In respect to dividends, the broker is expecting Telstra to continue to pay fully franked 16.5 cents per share dividends in both FY 2023 and FY 2024. Based on the current Telstra share price of $4.02 this equates to yields of 4.1%.

The post Buy Telstra and this ASX 200 dividend share: analysts appeared first on The Motley Fool Australia.

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More reading

• Should you buy Telstra shares for their ‘defensive qualities’?
• Why BWX, Novonix, Symbio, and TPG shares are dropping today
• Telstra share price lower after ACCC blocks TPG deal
• Bought $1,000 of Coles shares 4 years ago? Here’s how much dividend income you’ve received
• I’d buy these 3 ASX 200 shares in 2023 and hold them for a decade

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 Coles Group and Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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National Australia Bank Ltd (ASX: NAB) shares and Commonwealth Bank of Australia (ASX: CBA) shares are two of the most popular investments. But which one is better?

ASX bank shares are known for paying large dividends, but there’s more to the investment consideration when it comes to banks than just the dividend income.

There are other things to compare like the price/earnings (P/E) ratio, loan arrears and so on.

CBA may be a much bigger business than NAB, but let’s look at some of those different factors.

P/E ratio comparison

One of the easiest metrics, and perhaps one of the most important, to compare businesses is looking at the multiple of earnings. The higher the metric, the more expensive the current share price. It could suggest that a business is expected to deliver a high level of growth in the coming years, such as ASX tech shares.

But, if two businesses within the same industry are substantially differently valued, it could suggest that one is a lot better value than the other.

Let’s compare the two by using the forward profit projections for FY23 on Commsec.

The NAB share price is valued at 12 times FY23’s estimated earnings. The CBA share price is valued at 17 times FY23’s estimated earnings.

On an earnings multiple basis, CBA shares appear to be substantially more expensive than NAB shares.

Dividend yield

Dividend returns aren’t everything, but with banks they make up a large part of the return over time.

Dividends can be cut as we saw during the COVID-19 hit year of FY20.

With conditions ‘normalising’ after COVID-19, bank dividends are returning to bigger payouts. Indeed, higher interest rates could actually help the ASX bank shares earn larger profits and therefore afford bigger shareholder payouts.

According to Commsec data, CBA shares could pay a grossed-up dividend yield of 6% in FY23 and NAB shares could pay a grossed-up dividend yield of 8%.

Perhaps unsurprisingly, the CBA yield is lower than NAB’s yield at roughly the same ratio as CBA shares trade at a higher valuation than NAB shares.

Loan arrears

With interest rates going up so much, it will be interesting to see how the bank’s loan books perform.

If borrowers get into difficulties making repayments, this could lead to higher home loan arrears and then higher bad debts. This could prove troublesome at a time when house prices are falling.

In the CBA quarterly update for the three months to September 2022, its home loan arrears over 90 days overdue were just 0.46% of the loan book, down from 0.58% at 30 September 2021.

For NAB, its housing lending arrears that were over 90 days overdue was 0.73% at 30 September 2022, down from 1.24% in September 2021.

On this measure, CBA’s loan book seems to be performing better at the moment.

Conclusion

NAB shares look like they’re better value to me. I think the leadership team, headed by Ross McEwan, have done a good job at transforming the bank and it seems well-placed to get through the next period.

The post Better buy for 2023: CBA vs. NAB shares appeared first on The Motley Fool Australia.

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More reading

• 2 reasons to buy CBA shares before 2023 (and 2 reasons to sell)
• Little downside protection for popular ASX 200 shares as 2023 looms a much tougher year for blue chip stocks
• Should I buy NAB shares for 2023?
• Is the CBA share price heading higher or lower from here?
• 3 ASX 200 dividend shares with payouts that jumped more than 10% this year

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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On Thursday, the S&P/ASX 200 Index (ASX: XJO) was on form again and pushed higher. The benchmark index rose 0.5% to 7,152.5 points.

Will the market be able to build on this on Friday and end the week on a high? Here are five things to watch:

ASX 200 expected to sink

The Australian share market looks set to end the week in the red after a selloff on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open 99 points or 1.4% lower this morning. In late trade in the United States, the Dow Jones is down 1.9%, the S&P 500 has sunk 2.4%, and the Nasdaq has crashed 3.1%. Interest rate hike concerns weighed on the market after some strong economic data.

Oil prices tumble

Energy producers Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a bad finish to the week after oil prices dropped overnight. According to Bloomberg, the WTI crude oil price is down 1.15% to US$77.38 a barrel and the Brent crude oil price is down 1.55% to US$80.84 a barrel. Recession fears weighed on global markets.

Blackmores rated neutral

The Blackmores Ltd (ASX: BKL) share price could be fully valued according to analysts at Goldman Sachs. This morning, the broker has retained its neutral rating with a trimmed $75.80 price target. It said: “Despite the opportunity for longer term growth remaining significant, we believe the current share price captures the risk/reward profile of this investment.”

Gold price falls

Gold shares Newcrest Mining Ltd (ASX: NCM) and St Barbara Ltd (ASX: SBM) could have a poor finish to the week after the gold price fell overnight. According to CNBC, the spot gold price is down 1.7% to US$1,794.6 an ounce. Traders were selling gold after US economic data supported the US Federal Reserve’s rate hike plans.

TPG shares upgraded

The TPG Telecom Ltd (ASX: TPG) share price could be a buy according to analysts at Morgans. After recent weakness, its analysts believe value has emerged and that investors should be taking advantage. It said: “We think the bad news is now priced in and see value at current levels. We upgrade TPG to an Add recommendation (from Hold).” Morgans has a $5.50 price target on TPG’s shares.

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

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More reading

• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• 3 reasons to buy Wesfarmers shares before 2023
• Forget gold! Start hunting fallen ASX 200 shares to buy for an earlier retirement
• Guess which ASX 200 share turned a $10,000 investment into $40,000 in 2022

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 Blackmores and Tpg Telecom. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The past year has been a tumultuous one for investors. While the S&P/ASX 200 Index (ASX: XJO) is down by nearly 6%, many individual ASX shares have suffered an even grimmer fate.

While a deep laceration to a share price can be cause for concern, it can also present an opportunity for investors looking to pick up high-quality companies at a discounted price. From my perspective, Christmas has come early for those willing to scoop up some of the less loved corners of the market.

Right now, there are few companies that look rather tantalising at their current prices. With that being said, here are three ASX shares that have fallen by over 30% this year and why I’d consider buying them now.

I’m seeing value in these 3 ASX shares

Codan Limited (ASX: CDA)

The metal detector-making communications company has seen its share price get pummeled this year. Shockingly, shares in Codan have dropped 58% over the course of the year, after already falling sharply from a high of $19.33 in 2021.

With that level of destruction, you might assume this is an unprofitable business… or at best, experiencing a severe cratering in earnings. Instead, Codan posted record revenue and profits in FY22 despite a challenging environment.

Investors are mostly worried about the forward guidance, which projects a possible 45% fall in Minelab sales in FY23. However, I believe Codan could achieve around $390 million in revenue even with a big blow to its detecting division.

Maybe I’m missing something (@ me on Twitter if you think I am)… but the valuation on this ASX share looks too good to ignore — in my opinion — at a price-to-earnings (P/E) ratio of around 7 times.

ARB Corporation Limited (ASX: ARB)

The 4X4 accessories company might be susceptible to a weakening economic environment. As interest rates increase, car loans and mortgages are becoming more expensive, meaning less money spare to deck out the ute.

However, I can’t get over the enviable track record that ARB has built over the years. Earnings have grown at a historical rate of ~23%, management has successfully established a booming export market, and not a cent of debt on the balance sheet.

There could be a touch more downside to play out as car sales potentially decline into 2023. Though, I wouldn’t be foolish enough to try and time the market. This is one ASX share I’d happily nibble away at throughout the year.

The ARB share price is down 52% compared to where it was pre-2022.

Sonic Healthcare Limited (ASX: SHL)

Lastly, this medical diagnostic mastodon is possibly my favourite on the list for dividends. The Sonic Healthcare share price has suffered a 34% retreat during this year, which is significant considering it’s a $14.6 billion company.

The market is wary of how much of Sonic’s earnings are replicable in a post-COVID world. As such, the company now trades on a P/E ratio of around 10 times. I also suspect that Sonic’s earnings might begin to normalise. Despite this, I believe its profits will still hold above pre-COVID levels, and with a much healthier balance sheet.

Currently, Sonic offers a dividend yield of 3.3% at a payout ratio of 33%. I suspect further dividend increases are probable in the future. Discounted valuation, plus decent dividends, and a dominant market position — consider me keenly interested!

The post 3 ASX shares I’d buy after each fell by over 30% this year appeared first on The Motley Fool Australia.

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More reading

• Looking for bear market bargains? 3 ASX shares to buy before 2023
• Top ASX dividend shares to buy in December 2022
• Can a high-yield ASX dividend stock still be safe?
• Why I’d invest in these 3 ASX shares to combat this one inflationary megatrend
• 3 top ASX 200 dividend shares I think are bargain buys right now

Motley Fool contributor Mitchell Lawler has positions in Sonic Healthcare. 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 ARB Corporation and 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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Thursday was another good day on the S&P/ASX 200 Index (ASX: XJO). It closed 0.53% higher at 7,152.5 points.

In the lead today was the S&P/ASX 200 Utilities Index (ASX: XUJ). The sector soared 1.6% as all three of its constituents gained between 1.2% and 1.7%.

Next best was the S&P/ASX 200 Information Technology Index (ASX: XIJ), rising 1.3% following a strong overnight session for the tech-heavy Nasdaq Composite Index (NASDAQ: .IXIC).

The Wall Street index rose 1.5% on Wednesday’s session as United States consumer confidence reached an eight-month high.

There was only one sector trading in the red at the end of today’s session. That was the S&P/ASX 200 Materials Index (ASX: XMJ). It fell 0.2% despite BHP Group Ltd (ASX: BHP) officially entering an agreement to buy copper giant OZ Minerals Ltd (ASX: OZL).

So, with all that in mind, which ASX 200 share outperformed all others on Thursday? Keep reading to find out.

Top 10 ASX 200 shares countdown

The top-performing stock on the index today was real estate services business Domain Holdings Australia Ltd (ASX: DHG). It dived 9% on Tuesday after the company released a disappointing trading update.

Today’s biggest gains were made by these shares:

ASX-listed company	Share price	Price change
Domain Holdings Australia Ltd (ASX: DHG)	$2.70	5.47%
Champion Iron Ltd (ASX: CIA)	$7.40	4.96%
Pro Medicus Limited (ASX: PME)	$56.40	3.91%
Lake Resources N.L. (ASX: LKE)	$0.81	3.85%
Nanosonics Ltd (ASX: NAN)	$4.44	3.74%
Breville Group Ltd (ASX: BRG)	$18.66	3.61%
Seek Limited (ASX: SEK)	$21.20	3.52%
NIB Holdings Limited (ASX: NHF)	$7.70	3.49%
Lifestyle Communities Ltd (ASX: LIC)	$19.19	3.34%
Telix Pharmaceuticals Ltd (ASX: TLX)	$7.11	3.34%

Our top 10 shares countdown is a recurring end-of-day summary to let you know which companies were making big moves on the day. Check in at Fool.com.au after the weekday market closes to see which stocks make the countdown.

The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Thursday
• 3 reasons to buy Wesfarmers shares before 2023
• Why Argosy Minerals, Arafura, Deep Yellow, and Pro Medicus shares are charging higher
• Forget gold! Start hunting fallen ASX 200 shares to buy for an earlier retirement
• Guess which ASX 200 share turned a $10,000 investment into $40,000 in 2022

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 Nanosonics and Pro Medicus. The Motley Fool Australia has positions in and has recommended Nanosonics and Pro Medicus. The Motley Fool Australia has recommended NIB Holdings and Seek. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It’s been another healthy day for the S&P/ASX 200 Index (ASX: XJO) so far this Thursday. After yesterday’s pleasing gains, the ASX 200 has once again lifted, this time by 0.5% at the time of writing, putting the index at just over 7,150 points. 

Perhaps we’ll get a Santa rally after all this December (although the markets will have to pull a mighty big rabbit out of the hat tomorrow).

But time now to dive a little deeper into the pleasing gains we are seeing. So let’s take stock of the ASX 200 shares currently sitting atop the share market’s trading volume charts, according to investing.com.

The 3 most traded ASX 200 shares by volume this Thursday

South32 Ltd (ASX: S32)

The first ASX 200 share to check out today is the mining giant South32. A sizeable 9.52 million South32 shares have been traded on the share market thus far this Thursday. We haven’t heard much out of South32 recently, except for ongoing share buyback notices, which could in themselves be boosting volumes.

But it’s more likely that today’s high numbers are a result of the gyrations of the South32 share price itself. South32 initially opened strongly this morning, rising up as high as $4.18 a share. But investors seem to have cooled on the company as the day has gone on. The miner is now flat at $4.10 a share.

Origin Energy Ltd (ASX: ORG)

Next up we have ASX 200 energy utility share, Origin. So far this Thursday, a notable 19.56 million Origin Energy shares have changed owners. There’s been no major news out of Origin today either.

Saying that, yesterday saw a big jump for the company after news of a $9 per share takeover offer became public. Today, Origin shares have bumped higher again, currently up 1.32% at $7.65. It’s this combination that has probably caused the high volumes we are seeing.

Pilbara Minerals Ltd (ASX: PLS)

It will surprise no one that our last ASX 200 share today is lithium producer Pilbara Minerals. A sizeable 39.02 million Pilbara shares have been exchanged on the markets this Thursday. Similarly to South32, it looks as though this volume is a result of some bumpy share price movements on the market today.

Pilbara also opened in the green this morning, rising as high as $3.92 a share. But again, investors seem to have gotten cold feet on this one too. At present, Pilbara shares have fallen into the red, and are currently going for $3.81 each, down 0.78% for the day.

The post Here are the 3 most heavily traded ASX 200 shares on Thursday appeared first on The Motley Fool Australia.

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More reading

• 3 reasons to buy Wesfarmers shares before 2023
• Pilbara Minerals vs Core Lithium shares: Which is the better buy right now?
• Forget gold! Start hunting fallen ASX 200 shares to buy for an earlier retirement
• Here’s what Goldman Sachs is now saying about the Pilbara Minerals share price
• Guess which ASX 200 share turned a $10,000 investment into $40,000 in 2022

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

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It’s a good day to be invested in the tech sector, with many of the market’s favourite S&P/ASX 200 Index (ASX: XJO) technology shares posting notable gains.

It follows a strong overnight session on the tech-heavy Nasdaq Composite Index (NASDAQ: .IXIC) amid better-than-expected United States consumer confidence data.

Right now, the S&P/ASX 200 Information Technology Index (ASX: XIJ) is outperforming most other sectors, gaining 1.3%.

Meanwhile, the ASX 200 has lifted 0.52% to trade at 7,152.4 points.

Let’s take a closer look at the ASX 200 tech shares having a ripper day on Thursday.

What’s going right for ASX 200 tech shares on Thursday?

The ASX 200 tech sector is in the green on Thursday, with shares in Novonix Ltd (ASX: NVX), WiseTech Global Ltd (ASX: WTC), and Xero Limited (ASX: XRO) among its leaders. Here’s how they’re performing right now:

• The Novonix share price has lifted 2.2% to trade at $1.61
• WiseTech stock has gained 1.28%, trading at $53.15
• Xero shares have also climbed today, currently up 1.8% to swap hands for $71.495 apiece

Other strong performers include Block Inc (ASX: SQ2) – up 1.55% – and BrainChip Holdings Ltd (ASX: BRN) – up 1%.

Their gains come on the back of a 1.5% gain posted by the Nasdaq Composite overnight.

The tech-heavy New York indices lifted amid news consumer confidence in the US was at an eight-month high in December after posting back-to-back losses in October and November.

That’s good news for tech shares since they tend to be more growth-focused than their peers in other sectors. The better an economy’s health, the more opportunities for growth exist.

Sadly, the sector’s Thursday gains aren’t enough to pull it back into the longer-term green. The ASX 200 tech sector has tumbled 34% so far this year amid soaring inflation and consecutive rate hikes.

Meanwhile, the broader ASX 200 has dropped 6%.

The post Why are ASX 200 tech shares having such a stellar run on Thursday? appeared first on The Motley Fool Australia.

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More reading

• 10 ASX shares I think are buys for 2023
• Stock market correction: How I’m using this opportunity to build wealth with ASX shares
• Top ASX growth shares to buy for a stock market rebound
• Why BWX, Novonix, Symbio, and TPG shares are dropping today
• Novonix share price sinks on surprise production guidance downgrade

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 WiseTech Global and Xero. The Motley Fool Australia has positions in and has recommended WiseTech Global and Xero. 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 Australian share market is among the most generous in the world, with a good portion of companies on the S&P/ASX 200 Index (ASX: XJO) rewarding their shareholders with dividends each year.

One popular share that has bucked the trend is A2 Milk Company Ltd (ASX: A2M). In the seven and a half years that it has traded on the ASX boards, the infant formula company’s shares have never provided investors with a dividend.

That’s despite the company sitting on a mountain of cash. At the end of FY 2022, it had NZ$816.5 million in its bank account.

When will A2 Milk shares pay a dividend?

The good news is that there’s reason to believe that A2 Milk shares could pay a dividend in the not so distant future.

In fact, management hinted that this could be the case last year. It said:

The Board is actively reviewing capital management initiatives, including a potential share buy-back.

Since then, the company has launched a NZ$150 million on-market share buy-back. Which, as of its last update, has seen the company acquire and retire approximately 13.5 million shares. These shares currently have a market value of $90.7 million, which means there’s still plenty more buying to come.

Back to dividends, according to a recent note out of Macquarie, its analysts believe a dividend could be coming in FY 2024.

Its analysts are anticipating a maiden dividend of 12.4 cents per share that year. Based on where A2 Milk shares are currently trading, this represents a modest 1.7% dividend yield.

Though, it is worth acknowledging that Macquarie isn’t particularly positive on the company despite the prospect of a maiden dividend. It currently has an underperform rating and $4.25 price target on its shares.

All in all, 2023 might be a little too soon for a dividend, but 2024 seems entirely possible.

The post Could A2 Milk shares pay a dividend in 2023? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• What drove the A2 Milk share price 18% higher in November?
• Thank you Mr Powell! 7 ASX 200 shares cracking new 52-week highs on Thursday
• The A2 Milk share price just hit a 52-week high. What’s going on?

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 A2 Milk. 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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This year has humbled the All Ordinaries Index (ASX: XAO), but not all shares have been weighed down by the market’s struggles.

After gaining 14% in 2021, the All Ordinaries hit a snag in its upwards trajectory. The benchmark index has fallen 7% since the start of 2022.

Fortunately, some ASX All Ordinaries shares have defied its downturn to post whopping gains of as much as 133% year to date.

But the year’s not quite over yet. Let’s take a look at three stocks shaping up to be some of the market’s biggest 2022 winners.

3 ASX All Ordinaries winners in 2022

The first cab off the rank are shares in All Ordinaries lithium explorer Argosy Minerals Limited (ASX: AGY). The stock has gained 74% so far this year to trade at 57 cents today.

And there’s been plenty of news to drive it higher. Most recently, the company announced commissioning works at its Rincon Lithium Project had produced battery quality lithium carbonate product of 99.76% purity.

Ramping up of the project’s production operations is on track to begin in the first quarter of 2023.

Another All Ordinaries share having a brilliant year so far is Yancoal Australia Ltd (ASX: YAL). It’s gained 133% since the start of 2022 to swap hands for $6.53 apiece this afternoon.

The ASX coal stock has been bolstered by soaring coal prices. Associated higher earnings helped it pay off US$459 million of debt in a 15-month window. Meanwhile, the company was the subject of a short-lived takeover offer posed by its major shareholder.

Finally, is any list of top performing All Ordinaries stocks complete without mentioning the Core Lithium Ltd (ASX: CXO) share price? Not if you ask me.

The lithium developer and soon-to-be-producer has been incredibly popular among investors in 2022.

That interest, alongside the company’s efforts to progress the development of the Finniss Lithium Project, has helped bolster its shares by 61% this year. They’re trading at $1.01 right now.

The post 3 ASX All Ordinaries shares up by more than 60% in 2022 appeared first on The Motley Fool Australia.

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More reading

• Why Argosy Minerals, Arafura, Deep Yellow, and Pro Medicus shares are charging higher
• Pilbara Minerals vs Core Lithium shares: Which is the better buy right now?
• Why is the Core Lithium price rebounding today?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Core Lithium share price has 25% upside: Macquarie

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 are a number of ways to generate retirement income. ASX dividend shares could be a very effective way to produce $50,000 of passive income.

With higher interest rates, the income potential from assets has improved. Term deposits and bonds are now offering better yields. Falling property prices are giving investors a stronger rental yield.

ASX dividend shares can be high-yielding and easy to invest in. I’m looking to the ASX stock market to fulfil my future income needs.

I’m looking to build a portfolio of businesses that can deliver an attractive, resilient flow of dividends.

Step one: Build wealth

However someone does it, we need to build enough wealth to deliver the desired income.

Unless a person wins the lottery or gets an inheritance, people will need to build their finances through conscious choices. That involves earning money and then spending less than they earn and putting the difference to work.

The power of compounding can really help power our money higher over the years.

If investors use ASX shares to build wealth, then investing in quality individual ASX shares could make a lot of sense. Or, using an exchange-traded fund (ETF) like VanEck Morningstar Wide Moat ETF (ASX: MOAT) or Vanguard MSCI Index International Shares ETF (ASX: VGS) that own a strong group of businesses could also deliver solid long-term compounding growth.

Historically, the overall share market has returned an average of 10% per annum. If someone invested $1,000 per month for 30 years and it returned 10% per year, it would turn into almost $2 million ($1.97 million) according to the Moneysmart compound interest calculator.

Step two: Decide on the desired retirement strategy

If investors do decide to go with ASX dividend shares, they need to decide what type to go with.

There are some ASX dividend shares with very high dividend yields such as Fortescue Metals Group Limited (ASX: FMG), BHP Group Ltd (ASX: BHP), Best & Less Group Holdings Ltd (ASX: BST) and Shaver Shop Group Ltd (ASX: SSG). They could pay grossed-up dividend yields of 10% or higher in 2023, depending on how things go. But, those dividends may not be consistent or consistently reliable.

But, for me, if I’m relying on this dividend income for retirement income, I’d want it to be as reliable as possible. Dividends aren’t guaranteed of course, and lower yields aren’t necessarily more robust than higher ones, but they could be.

What type of ASX dividend shares are needed? If an investor has a $2 million portfolio, then the average dividend yield of the portfolio only has to be 2.5% to make $50,000 per annum.

A $1 million portfolio with an average dividend yield of 5% would make $50,000 of annual dividend income.

Step three: Invest in those ASX dividend shares

Putting money to work with ASX dividend shares can be really beneficial thanks to the annual cash flow they pay to investors. When in retirement, I think it’s a good idea to not pay attention to the day-to-day movements of share prices.

Plus, market crashes do happen occasionally – like COVID-19 in early 2020 – but historically the ASX share market and economy have gone on to recover from those bumps. So, it’s probably a good idea to just focus on the dividend cash flow during rough periods.

For me, it is investments that have already proved to be defensive and pay good dividends during difficult times that are the ones I’m focused on.

While there are a few listed investment companies (LICs) in my dividend-growth-focused portfolio, there are names like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) – which has the longest consecutive annual dividend growth record on the ASX – as well as Brickworks Limited (ASX: BKW) and Rural Funds Group (ASX: RFF) in there.

While these ASX dividend shares have yields closer to the 4% to 5% range, I think they are well suited to investors wanting retirement income because they have a good investment income record already. I think Soul Pattinson offers a good dividend yield, diversification and long-term capital growth potential.

The post Hoping to make a retirement income of $50k per annum? Here’s how to do it with ASX dividend shares appeared first on The Motley Fool Australia.

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More reading

• 3 reasons to buy Wesfarmers shares before 2023
• Should I buy CSL shares before 2023?
• This Whitehaven Coal director just sold 25% of their company shares. What’s going on?
• Arafura Rare Earths share price rebounds strongly after dumping 17% in 5 days
• Why Argosy Minerals, Arafura, Deep Yellow, and Pro Medicus shares are charging higher

Motley Fool contributor Tristan Harrison has positions in Brickworks, Fortescue Metals Group, 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, Vanguard Msci Index International Shares ETF, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks, Rural Funds Group, and Washington H. Soul Pattinson and Company Limited. 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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