Whether to keep some cash aside as part of your ASX shares investment strategy is a contentious issue.

In recent years, it’s made less sense to do so because interest rates have been at historical lows.

During this time, some investors figured they might as well go all in on ASX shares because even if stock prices dropped, their after-tax dividend payments would exceed savings interest by a long shot.

But keeping cash as part of your ASX shares portfolio is now more appealing. This follows a 3% increase in Australia’s official cash rate in 2022.

According to ratecity.com.au today, some banks are offering savings accounts at 4.5% interest.

But there’s another reason to keep cash on the side.

Cash is my top ASX share pick, says expert

At the recent Sohn Hearts & Minds Investment Leaders Conference, cash was the ‘best idea’ brought by Hermitage Capital UK CEO Bill Browder.

Hearts & Minds conference speakers are asked to bring their best idea or top pick among ASX shares to discuss with attendees.

According to The Weekend Australian, Browder went rogue. He nominated cash as his best investment idea, for the moment at least, due to rising inflation and interest rates.

Browder said:

We’re in a world with high inflation and central banks need to do something about that … they’re going to raise interest rates and so the value of assets will go down.

We’ve seen this in the performance of ASX shares this year. The S&P/ASX 200 Index (ASX: XJO) was hit hardest in the first six months of 2022 when inflation and rates first began to rise.

The benchmark index lost 15% of its value between the first trading day of 2022 and the mid-June bottom.

Invest in cash and wait, says expert

To be clear, Browder doesn’t think you should invest in cash because it’s now offering a decent yield.

He recommends cash so investors will be ready to pounce on beaten-up ASX shares once this inflationary cycle turns the corner.

Browder continued:

Once we get to a point when rates are peaking and inflation starts to go down I think there’s going to be a great opportunity to buy assets.

Has inflation peaked?

As we reported recently, inflation growth in Australia has softened from an annual growth rate of 7.3% over the September quarter to 6.9% in the month of October.

HSBC Australia chief economist, Paul Bloxham reckons inflation has “passed its peak”.

So, the time to buy ASX shares with that cash on hand might be just around the corner.

Should cash be part of your portfolio?

Whether cash should be part of your ASX shares investment strategy is discussed by our Education Hub writer, Kate O’Brien.

As Kate reports, having some cash on hand will “enable you to top up your portfolio when suitable buying opportunities arise”.

Kate writes:

Share prices are volatile, and the ASX moves with the economic cycle. Down periods in the cycle can provide abundant buying opportunities for long-term investors seeking quality shares. This will help build your portfolio over time while allowing you to take advantage of market dips. 

Kate points out that long-term investors who buy the dip have the advantage of time to accumulate returns. 

She writes:

It can take time for the market to recover from a downturn – it took the ASX 200 14 months to return to its pre-COVID levels from its March 2020 dip. 

But investors who bought the dip would have made a return of 47% over that period. For this reason, many investors like to keep some cash on hand to take advantage of unexpected buying opportunities.

The post Should cash be part of your ASX shares portfolio? 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
• Oil price slides again. How are ASX 200 energy shares holding up?
• 2 ASX dividend shares that have raised their payouts by 20% in 5 years
• Patriot Battery Metals share price rockets again, up 26% in 2 days
• Why Core Lithium, Downer, Link, and Renascor shares are dropping today

Motley Fool contributor Bronwyn Allen 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 shaping up to be another torrid day for the S&P/ASX 200 Index (ASX: XJO) and ASX shares so far this Thursday. After falling for most of the week, the markets are keeping the ball rolling today, with the ASX 200 down another 0.6% at the time of writing to just over 7,180 points.

But rather than dwelling on all that, let’s instead take a look at the ASX 200 shares that are currently topping the share market’s trading volume charts, according to investing.com.

The 3 most traded ASX 200 shares by volume this Thursday

Pilbara Minerals Ltd (ASX: PLS)

Our first cab off the rank today is the ASX 200 lithium producer Pilbara Minerals. So far this Thursday, a notable 22.9 million Pilbara shares have found a new home. There’s been no news out of the company today that explains this high volume.

Saying that though, the Pilbara share price has been absolutely roasted this session. Pilbara shares are presently down a painful 4.03% to $4.52 a share:

This comes after a top ASX broker warned that lithium prices could start trending lower over the next few years. It’s probably these share price falls that have resulted in the high volumes we are seeing.

Downer EDI Ltd (ASX: DOW)

Our second ASX 200 share of the day is a rare guest appearance on this list. Downer EDI has had a large 23.83 million of its shares swap hands as it currently stands. Unfortunately, this elevated volume looks like a direct consequence of Downer’s painful 21.46% drop we’ve seen today, putting the company at $3.77 a share:

This comes after Downer shares fell to just $3.31 this morning, a new 52-week low. These falls come after Downer announced a guidance revision this morning, which included an accounting error that could see a $40 million hit to the company’s books. Evidently, investors have not been impressed.

Core Lithium Ltd (ASX: CXO)

Finally today we have another ASX 200 lithium share in Core Lithium. This Thursday has seen a whopping 46.3 million Core shares cross the proverbial Rubicon. This seems to be along similar lines to Pilbara, with the added distinction that Goldman Sachs has slapped a sell rating on Core Lithium shares specifically.

The broker reckons that Core Lithium’s shares are overvalued compared to its peers. The Core Lithium share price has been whacked by a depressing 9.01% down to $1.19 a share so far today:

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

• Why Core Lithium, Downer, Link, and Renascor shares are dropping today
• Why is the Pilbara Minerals share price having such a shocker on Thursday?
• Why is the Downer share price sinking 20% on Thursday?
• Core Lithium share price falls after being hit with sell rating from Goldman Sachs
• Here’s the lithium price forecast through to 2025

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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S&P/ASX 200 Index (ASX: XJO) energy shares are trailing the benchmark today.

In afternoon trade the ASX 200 is down 0.58%. But the big energy stocks are doing it far tougher, as witnessed by the 2.55% fall in the S&P/ASX 200 Energy Index (ASX: XEJ). 

Oil and gas giant Woodside Energy Group Ltd (ASX: WDS) is down 3.78%, while rival ASX 200 energy share Santos Ltd (ASX: STO) has slipped 1.12%.

This comes as crude oil prices fell again overnight.

What’s happening with the oil price?

ASX 200 energy shares are under pressure today as crude oil prices fell overnight to reach fresh lows for 2022.

International benchmark Brent crude oil is down 2.4% since this time yesterday, currently trading for US$77.44 (AU$115.50) per barrel.

Brent crude was trading for just under US$79 per barrel on 3 January this year.

Then Russia’s invasion of Ukraine saw prices spike to some US$128 per barrel in early March. This sent Santos and Woodside shares soaring, resulting in record profits and some outsized dividend payouts.

But the ASX 200 energy shares have struggled to maintain that share price momentum amid sliding oil prices in recent months.

There has been some bullish analysis on rising energy demand from China as the nation moves away from its COVID-zero policies. But that looks to be overshadowed by investor jitters over the price cap imposed on Russian oil exports by G7 nations, and the outlook for a slowing global economy in 2023 dampening overall oil and gas demand.

According to Rebecca Babin, a senior energy trader at CIBC Private Wealth Management (quoted by Bloomberg), “There is literally no risk appetite to buy the dip in crude right now. This is just snowballing into outsize moves.”

That risk aversion could continue throwing up some headwinds for the big oil and gas stocks.

How have these ASX 200 energy shares been tracking?

As you can see in the charts below, both ASX 200 energy shares have outperformed in 2022.

The Woodside share price has charged 54% higher while Santos shares have gained a more modest 7%. They both compare quite favourably to the ASX 200, with the benchmark index down 5% year to date.

The post Oil price slides again. How are ASX 200 energy shares holding up? appeared first on The Motley Fool Australia.

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More reading

• The Woodside share price is down 6% in December. What’s next?
• 5 things to watch on the ASX 200 on Thursday
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Woodside share price slides as oil sinks to 2022 low
• Santos share price falls despite some big news for shareholders

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

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Finding an ASX dividend share paying out a healthy dividend yield is one thing on the ASX. But finding a company that manages to consistently and generously raise its annual dividend payouts to investors is another.

Long-term income investors know that the best way to build generous dividend income is by finding rising dividends, not just high ones.

So with that in mind, let’s discuss two ASX dividend shares that have grown their shareholder payouts by 20% in five years.

2 dividend shares that have hiked payouts by 20% since 2017

Rural Funds Group (ASX: RFF)

Rural Funds Group is an agriculture-focused ASX real estate investment trust (REIT). It invests in a variety of farmland assets and passes on the rental income from said assets to its investors. At present, it owns interests in a variety of agricultural products, including almonds, beef, macadamias and vineyards.

Rural Funds targets a 4% growth rate for its annual dividend distributions. Back in 2017, it doled out a quarterly dividend distribution of 2.41 cents per unit. But back in October, Rural Funds paid its investors its latest quarterly distribution which was worth 11.72 cents per unit. That’s a five-year increase of 21.58%.

Rural Funds shares have dipped over 2022, as you can see below:

This has helped push up Rural Funds’ dividend distribution yield to the 4.76% we see today.

APA Group (ASX: APA)

Next up is ASX gas pipeline operator APA Group. APA has one of the steadiest dividend graphs on the ASX, helped in part by reliable rental income from the use of its gas pipeline network.

In 2017, this company doled out 43.5 cents per share in dividend income. In 2022, APA has paid its shareholders a total of 53 cents per share in dividends. That represents a five-year growth rate of 21.84%.

The APA share price is a bouncy one, as is evident below:

The current share price gives APA shares a trailing dividend yield of 4.8% right now.

The post 2 ASX dividend shares that have raised their payouts by 20% in 5 years appeared first on The Motley Fool Australia.

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More reading

• 2 safe and reliable ASX dividend shares to buy for 2023: analysts
• Here’s how I’d invest $5,000 in ASX dividend shares to earn a second income
• 3 ASX 200 dividend shares that could provide a lifetime of passive income
• Could our dividends now be too reliant on ASX 200 oil shares?
• Why I’m buying ASX shares in this once-in-a-lifetime market to try and retire early

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 positions in and has recommended Apa Group and Rural Funds Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Patriot Battery Metals Inc. CDI (ASX: PMT) share price is having another cracking day today. The brand new ASX lithium share is currently up 12.2% to $1.43.

The Canadian company began trading on the ASX yesterday. It opened at $1.135 and closed up 12.3% at $1.275.

This followed an initial public offering (IPO) that raised $4.2 million at 60 cents per share. With seven million shares on issue, this gave Patriot Metals an indicative market capitalisation of $553 million.

If we put its performance over the two days together, the Patriot Battery Metals share price is up 26%.

As my Fool colleague James reported yesterday, Patriot Battery Metals has been trading on the Canadian share market for several months. The ASX-listed CDIs are equal to 10 of those shares.

An introduction to Patriot Battery Metals

Patriot Battery Metals is a mineral exploration company that buys and develops properties containing battery metals, base metals, and precious metals.

The company’s flagship asset is the 100% owned Corvette Property in Québec.

The company reckons this property has “significant lithium potential”, according to an ASX statement.

The company has discovered a 2.2 km long CV5 spodumene pegmatite with notable drill intercepts. Patriot has also found significant gold samples at the site.

Patriot also has a property with two gold prospects in Idaho, in the United States, another lithium-gold prospect in Quebec, a lithium prospect in the US Old Northwest, and several other assets in Canada.

The task now is taking Patriot Battery Metals from being a minerals explorer to a minerals producer.

The company has an experienced management team. It includes the former CEO of Pilbara Minerals Ltd (ASX: PLS), Ken Brinsden, as non-executive chairman.

The post Patriot Battery Metals share price rockets again, up 26% in 2 days appeared first on The Motley Fool Australia.

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More reading

• Why Core Lithium, Downer, Link, and Renascor shares are dropping today
• The Newcrest share price has rocketed 35% since late September. What’s going on?
• Why Air New Zealand, Chalice, Evolution, and Origin shares are rising today
• Building a retirement income portfolio? I’d buy this unstoppable ASX dividend share
• My top wildly undervalued ASX dividend king to buy in 2023

Motley Fool contributor Bronwyn Allen 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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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a decline. At the time of writing, the benchmark index is down 0.6% to 7,185.8 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are dropping:

Core Lithium Ltd (ASX: CXO)

The Core Lithium share price is down almost 8% to $1.21. This decline appears to have been triggered by a bearish broker note out of Goldman Sachs. This morning the broker initiated coverage on the lithium developer with a sell rating and $1.00 price target. Goldman highlights that the Core Lithium share price is trading at a premium to peers and on low forecast free cash flow multiples.

Downer EDI Ltd (ASX: DOW)

The Downer share price is down a massive 22% to $3.75. Investors have been hitting the sell button after the engineering and construction company identified certain accounting irregularities in its Australian Utilities business. The irregularities are estimated to result in a historical overstatement of pre-tax earnings in the order of $30 million to $40 million at the end of November.

Link Administration Holdings Ltd (ASX: LNK)

The Link share price is down 4% to $3.25. This has been driven by an update on Dye & Durham’s proposal to acquire Link’s Corporate Markets business and all of the BCM business for $1.27 billion. Management advised that the conditional non-binding proposal has not been able to be progressed to a transaction that is certain, has committed financing, reflects appropriate value, and is on appropriate terms. As a result, talks have now ended.

Renascor Resources Ltd (ASX: RNU)

The Renascor share price is down 6% to 30 cents. This morning this battery materials developer announced the completion of a $70 million institutional placement. These funds were raised at a 14% discount of 27.5 cents per share. The proceeds from the placement will be used to progress the development of the Siviour Battery Anode Material (BAM) project.

The post Why Core Lithium, Downer, Link, and Renascor shares are dropping today appeared first on The Motley Fool Australia.

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More reading

• Why is the Downer share price sinking 20% on Thursday?
• Why is the Renascor Resources share price sinking 8% on Thursday?
• Why is the Link share price crashing 10% on Thursday?
• Core Lithium share price falls after being hit with sell rating from Goldman Sachs
• Here’s the lithium price forecast through to 2025

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 Link Administration. 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 Newcrest Mining Ltd (ASX: NCM) share price has shone 35% brighter since its September low.

After lunchtime on Thursday, the gold miner is trading for $21.35 per share, up 2.64% for the day.

Back in September, Newcrest shares fell to a 52-week low of $15.72.

Let’s canvas what’s been happening over the past few months to push the Newcrest share price higher.

Gold price up 10% since late September

In September when Newcrest shares were trading at a low, the gold price was about US$1,620 per troy ounce (t.oz). Today, it’s US$1,784 t.oz. That’s a 10% gain.

The price of gold has gone up for a few reasons.

Firstly, gold is benefitting from a weakening United States dollar because it is priced in US dollars.

The currency is weakening because there is the prospect of smaller incremental interest rate rises from here.

This is also a supportive factor for gold because the higher interest rates go, the less appealing gold bullion becomes to investors because it’s a non-yielding asset.

Shaw and Partners senior investment advisor Jed Richards explains:

Newcrest has rallied from its lows recently on the latest US inflation figures, which were lower than expected, leading to a weaker US dollar.

In addition, a report from the World Gold Council shows strong buying activity among central banks.

As my colleague Bernd reports, central banks loaded up on gold bullion at the fastest pace ever during the third quarter of 2022. They bought $20 billion worth and this demand bumped up the gold price.

Other gold mining shares have also risen as a result. The S&P/ASX All Ordinaries Gold Index (ASX: XGD) is up 42% since late September.

Northern Star Resources Ltd (ASX: NST) shares are up 57%. The Evolution Mining Ltd (ASX: EVN) share price has risen 57%.

It’s worth noting that gold is still trading well below its 2022 high of about US$2,050 t.oz back in March.

What else has pushed Newcrest shares higher?

The company held its annual general meeting (AGM) in November. Newcrest management spoke positively about its handling of inflationary pressures.

Newcrest told shareholders it expects to contain cost growth at 6% to 8% in FY23. This is because they’ve implemented a series of inflation-offsetting measures. These include long-term and fixed-price contracts for maintenance, fuel, energy, and logistic costs.

ASX investors were impressed by this inflation-busting success and the Newcrest share price rose by 1.8%.

In late October, Newcrest also released a strong 1Q FY23 update and reaffirmed its FY23 production guidance.

Newcrest share price snapshot

The Newcrest share price is down 13% in the year to date. But it’s currently on a roll, up 17% in the past month alone.

As my Fool colleague Tony reports, 10 of the 17 analysts surveyed on CMC Markets say Newcrest is a strong buy. This is despite the recently improved share price.

The seven others rate it as a hold. No one says sell.

The post The Newcrest share price has rocketed 35% since late September. What’s going on? appeared first on The Motley Fool Australia.

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More reading

• Which ASX mining shares have had their dividend yields slashed the most in 2022?
• Wine and gold: 2 ‘impressive’ ASX shares this expert’s loving right now
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Friday
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Bronwyn Allen 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 S&P/ASX 200 Index (ASX: XJO) is out of form on Thursday. In afternoon trade, the benchmark index is down 0.55% to 7,188.8 points.

Four ASX shares that aren’t letting that hold them back today are listed below. Here’s why they are charging higher:

Air New Zealand Limited (ASX: AIZ)

The Air New Zealand share price is up almost 3% to 74 cents. This morning the airline operator upgraded its half year earnings guidance. It now expects earnings before significant items and tax to be in the range of NZ$295 million to NZ$325 million for the half. This compares to its previous guidance of NZ$200 million to NZ$275 million. Continued strong travel demand across the domestic and international networks, as well as a recent decline in jet fuel prices, has accelerated the airline’s financial recovery.

Chalice Mining Ltd (ASX: CHN)

The Chalice Mining share price is up 13% to $6.32. This follows the release of promising drilling results from the Julimar Complex in Western Australia. Drilling at the greenfield Hooley Prospect, ~5km north of the current Gonneville Resource, has intersected a significant PGE-nickel-copper-cobalt-gold mineralisation.

Evolution Mining Ltd (ASX: EVN)

The Evolution Mining share price is up over 4% to $2.92. This follows a rebound in the gold price overnight after the US dollar and bond yields softened. Evolution isn’t the only gold miner rising today. The S&P/ASX All Ordinaries Gold index is up 2.8% this afternoon.

Origin Energy Ltd (ASX: ORG)

The Origin share price is up 1% to $7.85. This may have been driven by a broker note out of Credit Suisse this morning. According to the note, the broker has upgraded the energy company’s shares to an outperform rating with a $9.00 price target.

The post Why Air New Zealand, Chalice, Evolution, and Origin shares are rising today appeared first on The Motley Fool Australia.

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More reading

• It’s not all bad news on the ASX All Ordinaries today. Here are 3 big winners
• Chalice Mining share price surges 11% on new copper and nickel find
• Gold and TV: Check out the 2 ASX shares this expert just bought
• 5 things to watch on the ASX 200 on Thursday
• Which ASX mining shares have had their dividend yields slashed the most 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 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 busy constructing a retirement portfolio, then you may be on the lookout for some high quality ASX dividend shares to buy. One unstoppable ASX dividend share that I believe could act as the foundation to build a portfolio around is Domino’s Pizza Enterprises Ltd (ASX: DMP).

Domino’s Pizza Enterprises is the largest Domino’s franchisee outside of the United States. It holds the master franchise rights to the Domino’s brand and network in Australia, New Zealand, Belgium, France, the Netherlands, Japan, Germany, Luxembourg, Denmark and Taiwan. At the end of FY 2022, the company had a network of approximately 3,400 stores.

Why could it be a dividend share to buy?

Prior to FY 2022, Domino’s had increased its dividend each year for over a decade. And were it not for the pandemic and the war in Ukraine, this stellar run would likely be continuing today. However, unfortunately, inflationary pressures have hit the company hard and weighed on its performance and margins over the last 12 months.

The good news is that the headwinds the company is facing won’t be around for long. Furthermore, management recently revealed it believes the company’s sales performance will be back in line with medium-term targets by the end of the current financial year.

In light of this, I think now would be a good time for investors to consider adding this dividend share to their retirement portfolio. Especially with the Domino’s share price falling so heavily this year, as you can see below.

This decline means that the short-term dividend yields on offer with Domino’s shares are now quite reasonable. For example, Morgans is forecasting partially franked dividends per share of $1.55 in FY 2023 and $1.89 in FY 2024. Based on the current Domino’s share price, this equates to yields of 2.4% and 2.9%, respectively.

But I wouldn’t be buying Domino’s shares for its short-term yields. I would be buying and holding this ASX dividend share for the potential long-term yields.

Long term outlook

Domino’s has grown its store network materially over the last decade and is aiming to do it all over again. Over the next 10 years, it aims to more than double the size of its network, before acquisitions, to 7,250 stores.

Ceteris paribus, more than doubling your store network would more than double your existing sales. But Domino’s isn’t settling for that. It has set itself an annual same-store sales growth target of 3% to 6%.

And if it can deliver margin improvements over the next decade, I believe it is conceivable that, combined with new store openings and solid same-store sales growth, Domino’s could triple its earnings and dividend over the next decade.

Based on FY 2022’s dividend of $1.56 per share, that would mean a dividend of $4.68 per share. Which equates to a dividend yield of approximately 7.3% based on current levels.

Together with the potential share price gains over the period, I think this makes Domino’s an ASX dividend share to buy for the long term.

The post Building a retirement income portfolio? I’d buy this unstoppable ASX dividend share appeared first on The Motley Fool Australia.

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More reading

• The cheap ASX shares to buy for dividends: broker
• ASX 200 correction: A once-in-a-lifetime chance for supercharged passive income!
• 10 ASX shares to buy in 2023
• Why Domino’s, New Hope, PolyNovo, and Telstra shares are pushing higher today
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor James Mickleboro has positions in Domino’s Pizza Enterprises. 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 Domino’s Pizza Enterprises. 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 Nick Scali Limited (ASX: NCK) share price has been through a big fall in 2022. I believe that the 30% drop for the company makes it a leading ASX dividend share contender for 2023 and beyond.

One of the most useful things about a share price drop is that not only does it make the valuation cheaper, but it also means the dividend yield is boosted.

For example, if a business with an 8% dividend yield sees a 10% fall in the share price, then the yield becomes 8.8% for prospective investors.

This is one of the main reasons why I think the Nick Scali share price could represent a strong dividend opportunity for 2023 and beyond.

Big dividends expected

Only the Nick Scali board can decide what the dividend payments in 2023 are going to be. But, analysts can have a guess.

The business has increased its dividend every year since 2013. I’m not expecting dividend growth to continue forever, and possibly not in FY23, but I think the last decade has shown the company’s dividend credentials in various economic climates, as well as a commitment to paying attractive dividends.

On Commsec, the forecast is that Nick Scali will pay an annual dividend per share of around 83 cents in FY23. This would translate into a grossed-up dividend yield of 10.8%.

It’s worth noting that the dividend estimate for FY24 is around 70 cents, so a reduction could happen in the future. But, this would still result in a grossed-up dividend yield of 9.1%.

Pleasing ongoing financial numbers

One of the main reasons why the Nick Scali dividend could grow again in FY23 is because the ASX dividend share is still seeing strong financial numbers.

In the four months to the end of October, sales revenue was $194 million, reflecting “a continuation of the record deliveries achieved in the fourth quarter”. October year to date sales revenue was 74% above the same period in the prior year, which was before the Plush acquisition in November 2021.

Group written sales orders for the four months were $148 million, 55% above the prior year. Nick Scali written orders were 21.7% above the first four months of the prior year.

Based on delivery levels at the time, it is expecting net profit after tax (NPAT) for the first half of FY23 to be in the range of $56 million to $59 million, up between 57% to 66%.

In other words, despite all the commentary about an economic slowdown, Nick Scali is still seeing growth. The second half of FY23 may be different, but an annual result is made up of 12 months, not just the second half.

Long-term growth initiatives

While there may be uncertainty in the shorter term, I like the long-term plans of the business to help grow overall profitability.

The ASX dividend share had a total of 108 stores between Nick Scali and Plush at the end of FY22. That breaks down to 57 Nick Scali stores in Australia and five in New Zealand, as well as 46 Plush stores in Australia.

The long-term plan is to have 73 Nick Scali stores in Australia and 13 in New Zealand, for a total of 86. Plush could have between 85 to 90 stores in Australia, and 5 to 10 stores in New Zealand. This could mean a total of 186 stores combined, a rise of 72%. It’s expecting to open at least six stores in FY23.

The ASX dividend share is slowly buying properties around the country. For example, it spent $9 million on a multi-purpose site in Townsville. It’s going to relocate an existing Nick Scali showroom and develop a new distribution centre facility to support growth of both brands in regional Queensland.

Online continues to be a promising division. A full e-commerce offering was launched in Australia in May 2022, driving online written sales orders in June and July. In FY22, the company said that Nick Scali online written sales orders were $29.3 million, with an incremental earnings before interest and tax (EBIT) contribution from online transactions totalling $15.6 million.

More online sales could come with good profit margins.

I think that the above plans can help the ASX dividend share’s long-term profit growth and dividends.

The post My top wildly undervalued ASX dividend king to buy in 2023 appeared first on The Motley Fool Australia.

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More reading

• Why Atlas Arteria, Cleanaway, Nick Scali, and Tyro shares are pushing higher
• Why I think Warren Buffett would love this ASX dividend share
• Why Nanosonics, Nick Scali, NRW, and Tyro shares are charging higher
• Why Kogan, Nick Scali, PointsBet, and Sayona Mining shares are pushing higher
• Why is this ASX 300 retail share soaring 13% today?

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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