Me, 15 minutes ago: “What will I write about today?”

*ding*

(That’s the sound of the news fairy arriving, just in time to solve my conundrum.)

It was in the form of an update on the Fin Review’s Markets Live live blog.

And it was right up my alley.

See, apparently the good people at the Chicago Board of Exchange (that’s CBOE, to the cool kids) have released another ‘fear index’.

There’s already one, called the ‘VIX’ which gets CBOE lots and lots of free headlines.

I’m sure you’ve heard of it.

But that’s not enough.

See the VIX measures volatility (not really ‘fear’, but that four letter word gets all the headlines) over an extraordinarily long period.

Days.

That’s just way too long.

What if you could create headlines (sorry, ‘accurately report on volatility’) during a single market day?

I’m with you… I don’t know how Warren Buffett has managed thus far, either!!!

Now, just in case my attempt at humour is lost on you (it’s not new, ask my wife), let me come clean.

Clearly, I’m kidding.

You know that quote, ‘not everything that can be counted, counts, and not everything that counts, can be counted’?

Yeah, that wasn’t written about these indices… but it could have been.

A new ‘fear index’ is great for CBOE’s branding.

It’s great for the poor journos with huge workloads and oppressive headlines.

But… not for much else.

Still, as I said, the AFR is reporting today that there’s a new index to compete for our attention:

“CBOE Global Markets, the Chicago-based exchange operator behind the VIX, has announced that a new one-day version of its flagship volatility index is poised to launch.

“The CBOE 1-Day Volatility Index (ticker VIX1D) is scheduled to start Monday, according to a notice on CBOE’s website.

“If it succeeds in capturing the sentiment embedded in 0DTE (zero days to expiration) options, it could mark a significant moment for investors and traders across the spectrum.”

Again, let me say in my most sarcastic voice: “Thank God… what on Earth have I been doing without such an index to guide my investing?”

Then, without sarcasm, let me suggest to you that Warren Buffett has, since 1965, spent something like 14,500 market days investing without it.

And… he’s done pretty well.

But it’s not just Buffett, either. The market itself has done very nicely over the same time frame.

Of course, if you make money from other people trading (if you’re an exchange or a stock broker, for example), you’re genuinely excited about this.

After all, it’s going to give some people yet another reason to trade.

But if you’re an investor… I hope you yawned and moved on.

Because, truly, measures of volatility (over an hour, a day, a week or even a year) have nothing for you.

But they are, of course, constant temptations.

If everyone is talking about them…. Maybe there’s something to them?

Maybe I should be more ‘sophisticated’?

More ‘clever’?

More ‘active’?

And you know what? Those are exactly the questions those vested interests want you to ask yourself.

Because if they can convince you to abandon sensible, long-term investing… well, then you become a meal ticket.

But it probably won’t help your results.

In fact, it’ll probably hurt your results, I reckon.

Because if you’re going to compete with highly paid traders, with supercomputers and even faster internet connections…. you’re starting off with both hands tied behind your back.

I mean hey, it’s a free world. You’re welcome to give it a go, if you don’t like money!

And I guess the law of averages mean at least one person will do well.

Maybe.

Me?

I couldn’t care less about the VIX. Or the new VIX-with-a-poor-attention-span.

It has nothing to tell me. Nothing to help me with.

And can only be a distraction from the main game – finding great businesses and paying good prices.

Investing regularly.

And letting time do the rest.

Wondering where the excitement is? The action? The cafe-by-the-beach day-trading?

Yeah, it doesn’t exist. At least not in my world. And I hope not in yours, either.

I’m kinda keen to get rich slowly, rather than going broke, fast.

Or you can tell me again about how Buffett’s past it, and long term compounding is dead.

And I’ll introduce you to a bloke named Aesop and his tortoise and hare.

And remind you that not everything that can be counted, counts.

Fool on!

The post Just when you thought it was safe to stop day-trading appeared first on The Motley Fool Australia.

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Motley Fool contributor Scott Phillips 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 JB Hi-Fi Limited (ASX: JBH) share price has been through plenty of volatility over the past year. At the time of writing, it’s down close to 20% since 1 April 2023.

JB Hi-Fi operates three different businesses – JB Hi-Fi Australia, JB Hi-Fi New Zealand, and The Good Guys. Each of these businesses has a good position in the markets in which they operate.

The last few years have been a very profitable period for the ASX retail share. But that may be about to change if households don’t buy as many consumer goods in the next couple of years. Inflation and higher interest rates are making things tougher for people’s budgets.

Earnings expected to fall

In FY22, the business made earnings per share (EPS) of $4.80, which was growth of 8.8% year over year.

Then, in the FY23 half-year result, it generated $3.02 of EPS, which was growth of 20.4% after comparing it against a locked-down six months in the prior corresponding period.

But, in FY23, the business is expected to generate EPS of $4.50 according to Commsec. This would be a reduction of 6.25% year on year. EPS could then fall to $3.45 in FY24, which would represent a fall of around 28% compared to FY22.

However, I’m not sure many investors would have said they believed EPS was going to stay elevated forever. Demand for TVs, fridges, computers, and phones can go up and down through the economic cycle. But I think it would be a mistake for investors and the market to price JB Hi-Fi shares as though conditions will be like this for a very long time.

I believe that the RBA interest rate will reduce towards 3% if/when inflation settles back close to that level.

Why JB Hi-Fi shares could outperform

I think it particularly makes sense to look at ASX retail shares at a point in the economic cycle when conditions are uncertain.

I wouldn’t just buy any retailer though. I’d make to make sure that the retailer has a strong business model and is attractive for customers.

JB Hi-Fi itself says there are a few key advantages that it has: scale, low-cost operating model, multi-channel capabilities, and its people and culture.

It says it’s the number one player in the Australian consumer electronics and home appliance market, which is useful because it gives it more relevance to local and global suppliers. Being the biggest means it can spend more on marketing, benefit from efficiencies, and get a better deal buying products.

The low-cost operating model refers to its focus on “productivity and minimising unnecessary expenditure”, with “highly productive floor space with high sales per square model”. It also means it can respond to market price activity and maintain its focus on market share while competing with older competitors and new entrants.

The multi-channel capabilities mean customers can engage easily, making a sale potentially more likely. There are online, in-store, and over-the-phone sales channels that shoppers can utilise.

Finally, it suggests that exceptional customer service is a key selling point, while having a “dynamic and flexible environment” allows the business to pivot quickly to adapt to any changing market conditions.

I believe that, over the long term, JB Hi-Fi can continue to perform. Australia’s growing population can help overall demand over time, which can support sales.  

According to Commsec, the JB Hi-Fi share price is valued at just 13x FY24’s estimated earnings, with a possible grossed-up dividend yield of 7.25% for that year. I think it’s a good price to invest, but I wouldn’t expect it to deliver enormous capital growth from here because of how large it already is. However, I do think it can outperform — though a lower share price would be even more attractive.

The post Could buying JB Hi-Fi shares at under $45 make me rich? 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 recommended JB Hi-Fi. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It looks set to be a big week for Pilbara Minerals Ltd (ASX: PLS) shares.

That’s because later this week, the lithium giant will be releasing its highly anticipated third-quarter update.

Ahead of the release on Thursday, let’s take a look to see what the market is expecting from the company.

Pilbara Minerals shares on watch ahead of quarterly update

According to a note out of Goldman Sachs, its analysts are expecting Pilbara Minerals to deliver spodumene production of 155kt during the third quarter. This would be down from 162kt during the second quarter but a touch ahead of the consensus estimate of 148kt.

Pleasingly, the broker believes that its sales volumes will be stronger quarter on quarter. It has pencilled in spodumene sales of 170kt for the three months, which is up from 149kt in the previous quarter. It is also ahead of the consensus estimate of 161kt.

And while Goldman expects Pilbara Minerals to report a slightly softer realised spodumene price of US$5,495 per tonne (Q2: US$5,668 per tonne), this is once again ahead of the consensus estimate of US$5,209 per tonne.

Finally, the broker also believes that the company’s costs will be better than expected. It is forecasting cash costs of US$623 per tonne (Q2: US$579), whereas the consensus is for a jump to US$865 per tonne.

However, despite this positive view on its performance, Goldman only currently has a neutral rating and $4.20 price target on Pilbara Minerals shares.

The post Here’s why Pilbara Minerals shares will be in the spotlight this week appeared first on The Motley Fool Australia.

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• 3 things ASX investors should watch this week
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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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The Fortescue Metals Group Limited (ASX: FMG) share price is tumbling on the back of the iron ore giant’s latest quarterly production results.

Right now, Fortescue stock is trading at $20.42 – 5% lower than its previous close.

Fortescue share price falls as iron ore production slumps

Here are the key takeaways from the S&P/ASX 200 Index (ASX: XJO) giant’s production for the March quarter:

• Ore mined fell 16% quarter-on-quarter (QoQ) and 3% year-on-year (YoY) to 50.3 million wet metric tonnes (wmt)
• Processed 46.1 million wmt of ore – down 8% QoQ but up 17% YoY
• Shipped 46.3 million wmt of ore – a 6% QoQ fall and flat YoY
• C1 cost (representing the ‘direct’ production costs of iron ore) jumped 3% QoQ and 12% YoY to US$17.73 per wmt
• Average revenue came in at US$109 per dry metric tonne (dmt) ­– a 25% QoQ improvement and 9% higher YoY

Fortescue’s shipments for the first nine months of financial year 2023 came in at a record 143.1 million tonnes – a 3% jump on the prior comparable period.

The company ended the period with US$4 billion of cash and $6.1 billion of debt.

What else happened last quarter?

Perhaps the most exciting update in today’s release concerns its majority-owned Iron Bridge Magnetite Project.

Several key milestones were achieved at the project last quarter, culminating in its maiden wet concentrate production last week. Its production will now be pumped to Port Hedland.

The project is expected to produce 22 million tonnes of high-grade 67% iron magnetite concentrate annually, while Fortescue’s share of its capital estimate is around US$3 billion.

Fortescue’s green energy leg Fortescue Future Industries (FFI), also has a busy quarter. It completed construction works at its Gladstone electrolyser manufacturing facility, advanced the Norwegian Holmaneset Project, and signed an investment support and implementation agreement with the Government of Kenya.

What did management say?

Fortescue CEO Fiona Hick commented on the update driving the company’s share price today, saying:

On the Iron Bridge Magnetite Project, I am pleased to report that the first wet concentrate was produced on Friday.

This is a significant milestone for Fortescue as Iron Bridge represents our entry into the highest grade segment of the iron ore market, providing an enhanced product range while also increasing production and shipping capacity.

Together with our strong balance sheet and focus on investing in growth, we are well placed to advance our transition to a global green metals and energy company and ensure all stakeholders continue to benefit from Fortescue’s success.

What’s next?

The ASX 200 mining giant’s full-year guidance hasn’t been changed today. It still expects to ship between 187 million tonnes and 192 million tonnes of iron ore in financial year 2023.

Fortescue’s C1 cost for hematite is tipped to come in between US$18 per wmt and US$18.75 per wmt while its capital expenditure (excluding FFI) is forecast to reach US$2.7 billion to US$3.1 billion.

Finally, FFI is anticipated to demand between US$500 million and US$600 million of operating expenditure and US$230 million of capital expenditure.

Fortescue share price snapshot

Today’s fall sees the Fortescue share price handing back much of its 2023 gains.

The stock has risen just 0.1% higher than it was at the start of this year. Meanwhile, it’s gained 3% since this time last year.

For comparison, the ASX 200 has gained 5% so far this year and is trading flat over the last 12 months.

The post Fortescue share price plummets 5% amid weaker production appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX 200 stock just upped its guidance by as much as 60%
• Are BHP shares a buy following the ASX 200 miner’s latest update?
• 5 things to watch on the ASX 200 on Monday
• Which ASX 200 share has quietly risen 11% in a month?
• Here are the 3 most heavily traded ASX 200 shares on Friday

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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If you’re looking for ASX 200 dividend shares to buy, then you may want to check out the two listed below that Citi rates as buys.

Here’s why the broker says these are top options for income investors:

Charter Hall Retail REIT (ASX: CQR)

The first ASX 200 dividend share that Citi rates as a buy is Charter Hall Retail. It is a supermarket anchored neighbourhood and sub-regional shopping centre markets-focused property company.

Citi highlights that the company has “defensive net property income growth despite rising interest rate profile.” It also like that “CQR’s convenience retail and convenience long WALE portfolio is effective at passing through higher inflation.”

The broker currently has a buy rating and $4.50 price target on its shares.

As for dividends, Citi is expecting the company to pay dividends of 26 cents per share in both FY 2023 and FY 2024. Based on the current Charter Hall Retail share price of $3.77, this will mean very generous 6.9% yields for investors.

Super Retail Group Ltd (ASX: SUL)

Another ASX 200 dividend share that Citi has tipped as a buy is Super Retail. It is the retailer behind brands such as Rebel and Super Cheap Auto.

The broker currently has a buy rating and $14.50 price target on its shares.

Citi believes that “management’s continued investment in growing (e.g. rCX) and improving the business (e.g. analytics capability) together with the net cash balance sheet put it in good shape to navigate a more difficult consumer environment.”

In respect to dividends, the broker is forecasting fully franked dividends per share of 78 cents in FY 2023 and 72 cents in FY 2024. Based on the latest Super Retail share price of $13.31, this will mean yields of 5.85% and 5.4%, respectively.

The post Why Citi says these ASX 200 dividend shares are buys 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 Super Retail Group. The Motley Fool Australia has positions in and has recommended Super Retail 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 Rio Tinto Ltd (ASX: RIO) share price dipped below $120 at the end of last week. Could this dip be an opportunity to buy the ASX mining share at a cheaper price after getting a look at the company’s most recent quarterly update?

A mining company doesn’t have much control over the resource price. However, how much production the company produces is also important. Rio Tinto is involved with several commodities, though iron ore and copper may be seen as the most important in the portfolio for the short to medium term.

Let’s remind ourselves about Rio Tinto’s operational performance in the first quarter of 2023.

Quarterly performance

I’m going to compare the figures against the first quarter of 2022 – the year-over-year comparisons.

Rio Tinto’s Pilbara iron ore shipments grew by 16% to 82.5 million tonnes (mt), while production increased by 11% to 79.3 mt.

Bauxite production fell 11% to 12.1 mt. Aluminium production rose 7% to 785 kt. Mined copper was unchanged year over year at 145 kt. Titanium dioxide slag production rose 4% to 285 kt. Iron Ore Company of Canada saw production rise 5% to 2.5 mt.

Overall, it seemed like a solid quarter – it was the highest ever first quarter shipments achieved for the Pilbara iron ore business.  

Promising progress on growth

The business can point to investments and growth where it’s developing projects. This is important to help support and hopefully grow the Rio Tinto share price.

It is ramping up production at its Gudai-Darri project, with the mine expected to reach its capacity in 2023.

During the quarter, it also formed a joint venture with China Baowu Steel Group after receiving regulatory approvals. Construction of the first co-designed mine has started.

It’s also making progress on the large copper project called Oyu Tolgoi in Mongolia. Construction of the conveyor to surface works continued to plan and is over 40% complete. It also awarded “major” contracts for upgrade works planned for the concentrator, with contractors mobilising to the site.

At the Simandou iron ore project in Guinea, negotiations towards the co-development of the project’s infrastructure progressed with the March signing of a shareholder agreement. This is another step towards securing the cost estimates, schedule, fiscal regime and regulatory authority approvals necessary to progress the co-development.

At the Rincon lithium project in Argentina, the development of the lithium carbonate starter plant is ongoing.

My view on the Rio Tinto share price

The reason why I wanted to cover all of those projects is that it shows Rio Tinto isn’t just sitting on its existing mines. It’s actively working on maintaining its strong iron ore position in the global market while expanding its exposure to green commodities like lithium and copper.

In the shorter term, Rio Tinto’s share price will likely be heavily influenced by the iron ore price. I think the current iron ore price of around US$120 per tonne is high enough for the ASX mining share to generate good earnings. But, there’s a chance the iron ore price could go higher as China’s economy recovers from the COVID lockdowns, as we’ve seen in other economies. But, it could also go lower, particularly if China exerts more pressure.

I like how the business is future-proofing itself by focusing on decarbonisation commodities, which is why I’d rank it near the top of a list of ASX mining shares I’d want to own. It’s quite possible that it could go lower from here, and its large size makes it harder to deliver strong gains, but scale also means it can make a lot of profit during the good times, with potentially good dividends flowing to shareholders.

For investors interested in Rio Tinto shares, I’d say it’s a buy for its copper and lithium exposure. But, a lower Rio Tinto share price would be more appealing.

The post Is the Rio Tinto share price a buy at under $120? appeared first on The Motley Fool Australia.

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More reading

• Why Bank of Queensland, Lithium Power, Piedmont Lithium, and Rio Tinto are falling
• Goldman Sachs says the Rio Tinto share price is ‘compelling value’ after Q1 update
• ASX 200 mining shares sink as iron ore price nears 2023 low
• Why 29Metals, Allkem, Alliance, and Rio Tinto shares are falling today
• Rio Tinto share price falls despite record iron ore exports

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 Mineral Resources Ltd (ASX: MIN) share price has spoilt investors over the last five years, gaining at nearly 15 times the rate of the S&P/ASX 200 Index (ASX: XJO).

In fact, a $3,000 investment five years ago likely would have seen one boasting 169 shares in the mining giant, paying $17.69 apiece.

Today, that parcel would be worth a whopping $13,300.30. The Mineral Resources share price last traded at $78.70.

For comparison, the ASX 200 has risen 23% since April 2018.

In the meantime, the mining services provider and producer of iron ore and lithium has been a relatively consistent dividend payer. Let’s take a look.

Dividends paid to holders of Mineral Resources shares since 2018

Here are all the dividends paid to those holding Mineral Resources shares since this time five years ago:

Mineral Resources dividends’ pay date	Type	Dividend amount
March 2023	Interim	$1.20
September 2022	Final	$1
August 2021	Final	$1.75
February 2021	Interim	$1
August 2020	Final	77 cents
March 2020	Interim	23 cents
September 2019	Final	31 cents
March 2019	Interim	13 cents
September 2018	Final	40 cents
Total:		$6.79

That’s right, each Mineral Resources share has yielded $6.79 of dividends since April 2018. That means our figurative parcel has likely provided $1,147.51 of passive income.

At that rate, the total return on investment (ROI), considering both dividends and share price gains, offered by the ASX 200 miner in that time reaches an impressive 383%.

And that’s before considering the potential compounding that might have been realised had a shareholder reinvested their dividends, using the cash to buy more stock in the company.

Not to mention, all the company’s dividends have come fully franked. Thus, they might have provided additional benefits for some investors at tax time.

Right now, Mineral Resources shares offer a 2.78% dividend yield.

The post Invested $3,000 in Mineral Resources shares in 2018? Here’s how much dividend income you’ve received appeared first on The Motley Fool Australia.

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More reading

• Why Mineral Resources shares are a ‘top pick’ for this broker
• Here are the top 10 ASX 200 shares today
• Here’s the latest forecast for ASX 200 lithium stocks from UBS
• Get big gains and huge dividends from these ASX 200 mining shares: brokers
• Why Core Lithium, Neuren, Norwest, and Pilbara Minerals shares are pushing higher

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 ASX dividend shares I’m going to write about in this article look like passive income beasts to me. I think they’d be good buys for the next decade.

There is a wide range of businesses on the ASX, but I think there are some that could demonstrate defensive earnings and therefore pay resilient dividends.

Some parts of the economy seem to be rapidly changing, while others may be fairly predictable for the long term. That’s why I like the look of these two names.

Duxton Water Ltd (ASX: D2O)

The idea behind Duxton Water is that it is building a portfolio of permanent water entitlements with the aim it can then provide “flexible water supply solutions” to Australian farmers. It offers long-term entitlement leases, forward allocation contracts, and spot allocation supply.

I think water entitlements have a promising long-term future – water is obviously key for farmers. Growth (inflation) of food prices over time can further enable higher water prices.

The business has guided that the 2023 interim dividend will be 3.5 cents per share, the 2023 final dividend will be 3.6 cents per share, and the 2024 interim dividend could be 3.7 cents per share.

The ASX dividend share has shown a desire to grow the dividend payment for shareholders, which is promising for the next ten years for potential income growth.

At 31 March 2023, the business had a pre-tax net asset value (NAV) of $2.13 per share. The Duxton Water share price is currently $1.72 a share, a 19% discount to this, which is quite hefty. The company is currently doing a share buyback, which is also helping grow shareholder value.

I think the business can keep growing the asset value and dividends for investors over time. The next two dividends to be announced are expected to total 6.9 cents per share, which would be a grossed-up dividend yield of 5.7%.

Sonic Healthcare Limited (ASX: SHL)

Sonic Healthcare is a large, global pathology business.

The ASX healthcare share has grown its annual dividend per share each year since 2013, so it has already built a dividend growth streak of around a decade and I think it can continue growing the payment to shareholders for a number of years to come.

Sonic Healthcare actually has a stated progressive dividend policy, so it wants to grow its dividend each year for investors.

Over the last few years, it has benefited from the high level of COVID-19 testing that it carried out. Even in the first half of FY23, it was still seeing millions of dollars of COVID-19 testing revenue. That result saw the FY23 half-year dividend increase by 5%.

In the long term, I think the business will benefit from the return to a normalised level of testing for its core business, while expanding into new pathology services, including through its AI partnership project.

The company continues to make acquisitions, which I think is promising for expanding the scale of its business.

The post Passive income beasts: 2 ASX dividend shares I’d buy for the next decade appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Duxton Water. 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 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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There are a number of ASX blue chip shares for investors to choose from, but two of the strongest to consider are Commonwealth Bank of Australia (ASX: CBA) shares and Telstra Group Ltd (ASX: TLS) shares.

CBA is the largest ASX bank share, while Telstra is the largest ASX telco share. Both are leaders in their respective fields in Australia with the largest market shares.

But which of these heavyweights is the best to buy for potentially more reliable returns?

Dividends

Firstly, it’s important to say that no return on the share market can be truly ‘safe’. Share prices move every trading day with different buyers and sellers. Sometimes investors become nervous and sell their shares for a discounted price.

Dividends are paid from company profits and can be a bit more consistent than the share price because it is the boards of the companies that decide the level of the payments.

Let’s look at the current expectations for the possible dividend yields for the two ASX blue chip shares.

Commsec forecasts, which are provided by independent sources, suggest that CBA shares could pay a grossed-up dividend yield of 6.3% with a possible annual dividend per share of $4.40. Telstra shares could pay a grossed-up dividend yield of 5.7% with a potential annual dividend per share of 17 cents per share.

But, there’s more to the dividend than just the current financial year for these ASX blue chip shares. Knowing where the dividend is going could be important too, considering how important the dividend return can be for shareholders.

By FY25, CBA could pay an annual dividend share of $4.57, which would be a grossed-up dividend yield of 6.5%. Telstra could pay an annual dividend per share of 19 cents per share in FY25, which would translate into a grossed-up dividend yield of 6.3%.

So, over the next couple of years, CBA might pay a larger dividend yield. However, Telstra’s dividend could grow at a faster pace and narrow the gap between the yields over time.

Which is the better ASX blue chip share?

For me, Telstra has a key sector advantage over CBA. The ASX bank share receives good cash flow from people and businesses that pay cash flow monthly.

Telstra is the leader in the telco space, it has a strong position with its 5G network. There are only a few real competitors for Telstra such as TPG Telecom Ltd (ASX: TPG) — which includes Vodafone Australia — and Singapore-owned Optus.

But with CBA, there are many competitors. On the ASX alone, there are numerous players all offering a loan just like CBA such as Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), ANZ Group Holdings Ltd (ASX: ANZ), Macquarie Group Ltd (ASX: MQG), Bank of Queensland Ltd (ASX: BOQ), Bendigo and Adelaide Bank Ltd (ASX: BEN), Suncorp Group Ltd (ASX: SUN), and MyState Limited (ASX: MYS).  

Indeed, there is so much competition in the banking sector that it seems to be pushing down the lending margins. Meanwhile, Telstra is expecting higher profit margins with its T25 strategy.

I’d choose Telstra shares as my preferred ASX blue-chip share. I think there is going to be appealing demand growth in telco services thanks to an increase in video streaming, other services, and new technologies that will need a data connection such as automated cars.

The final factor that makes me pick Telstra is that it’s diversifying its earnings, opening up new growth streams with Telstra’s digital healthcare division, and the Asian growth with its recent Digicel Pacific acquisition.

The post Better ASX blue-chip share to buy for safe returns: CBA vs. Telstra 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 Bendigo And Adelaide Bank, Macquarie Group, and Telstra Group. The Motley Fool Australia has recommended Tpg Telecom and 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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Bank of Queensland Limited (ASX: BOQ) shares fell 6% last week. That’s not exactly a huge plunge, but the bank’s share price is now down 17% from its 2023 high in February. So could the ASX bank share be worth buying?

It was a very interesting result considering everything that’s happened over the past year with strong inflation and interest rate hikes.

Despite common thinking that higher interest rates could be a boost for the bank’s profitability, the statutory net profit after tax (NPAT) took a huge hit.

Let’s have a look at some of the financial highlights that may have affected the BOQ share price.

Earnings recap

Bank of Queensland reported that its cash earnings after tax fell 4% year over year to $256 million. But its statutory NPAT sank 98% to $4 million.

The regional bank reported housing loan growth of $0.2 billion compared to the second half of FY22, while business loan growth was $0.5 billion.

The net interest margin (NIM) improved 4 basis points to 1.79%, compared to the FY22 second half.

However, the operating expenses increased by 7% year over year, which was a major factor in the fall of the cash earnings. The bank put this down to higher inflation and other costs including higher technology expenses and costs for “proactive customer contact, technology, and cybersecurity”.

It also reported a loan impairment expense of $34 million, compared to a credit of $15 million in the first half of FY22. This was because it increased its collective provision, reflecting uncertainty about future economic impacts after inflation, interest rate pressure, and house price declines.

The statutory profit took a $260 million hit with a $60 million provision for the ‘integrated risk program’ provision and a $200 million impairment of goodwill.

BOQ warned that it is possible that additional matters are identified as a result of further analysis or regulator requirements that could increase the scope and cost of the integrated risk program.

BOQ’s interim dividend payment was 20 cents per share, which represented a 9% decline compared to the prior corresponding period.

Is the BOQ share price a buy?

I think that the benefits of increased lending profitability, helping the NIM, may have peaked.

In the ASX bank share’s outlook comments, BOQ noted that it expects to see “heightened mortgage competition continuing as well as escalated deposit competition due to term funding facility refinancing, with interim margin compression anticipated”.

The bank is working on improving its technology, reducing duplication and levering the automation of processes, which should make it a more efficient bank and, hopefully, enable more lending. That should be positive.

Using the estimates on Commsec, BOQ could generate 62.9 cents of earnings per share (EPS) in FY24. That would put the current BOQ share price at under 10x FY24’s projected earnings. It could also pay a grossed-up dividend yield of 9.9% in that year. Those are appealing statistics.

This is the lowest the BOQ share price has been since 2020, so it could be a medium-term opportunity. However, it doesn’t strike me as the highest-quality ASX bank share, so I’m not sure how much long-term growth it will be able to achieve. I’m not looking to buy it for my own portfolio because of the lack of longer-term compounding potential.

The post Are Bank of Queensland shares a buy following the latest results? 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 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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