Most ASX shares in the discretionary retail sector have understandably plunged over in recent months, due to the ever-increasing interest rates.

With Australians facing increased mortgage repayments for ten consecutive months, it’s logical that consumers have less money to spend on products that are considered non-essential.

After all, that’s what the Reserve Bank ultimately wants, to bring inflation down.

So it is that the S&P/ASX 200 Cons Disc (ASX: XDJ) is more than 4.8% lower than it was 12 months ago. It’s a whopping 17.7% dive if you go back to November 2021.

Let’s sift through the bargain bin

However, putting all businesses in the same sector into one basket is a fool’s game when choosing stocks to buy.

The team at Morgans therefore undertook an analysis of consumer discretionary ASX shares to pick out the best buy candidates.

The analysts did this in two steps. First was to identify the most heavily discounted.

“We identify 11 consumer discretionary stocks that are currently trading within 10% of their 12-month lows,” Morgans senior analyst Alexander Mees said in a blog post.

“History suggests many of these stocks could rebound.”

Mees cited how the same cohort picked out 12 months ago would have seen 67% of them outperform the benchmark over the past year.

But of course, just because a stock has plummeted doesn’t make it a good investment.

That’s where the second filter comes in.

Not surprisingly, most of the 11 stocks reported a deterioration in sales in last month’s half-yearly updates.

“Others are undergoing strategic shifts that don’t yet appear to have broad investor support,” said Mees.

“A few of them have recently parted ways with their CEO, adding more uncertainty to what is already an uncertain outlook.”

So what’s left? Are there any that aren’t suffering from any of these problems? They must be the genuine bargains that have a great chance of rebounding this year.

Here are three ASX shares that the Morgans report identified:

The 3 standout ASX retailer shares right now

Lighting retailer Beacon Lighting Group Ltd (ASX: BLX) is the first “anomaly” in the bargain bin.

“The business reported record sales in 1H23 and indicated sales were ‘holding up well’ so far in 2H23,” said Mees.

“Investors are almost certainly concerned about the risk of a cyclical downturn in the months ahead, but we believe the strategy to expand into the $2 billion trade market will allow it to offset the effect of weaker consumer demand.”

The Beacon share price has plunged more than 38% over the past year. The stock does pay out a handy 5.4% dividend yield.

Adore Beauty Group Ltd (ASX: ABY) and Baby Bunting Group Ltd (ASX: BBN) have both provided bright forecasts.

“We note that Adore Beauty, which has seen its growth stall post-COVID (along with most pure play e-commerce companies), has guided to a recovery in both sales and margins in FY24.”

“Similarly, Baby Bunting expects, and has guided to, an improving trend over the balance of 2H23, but has seen its share price continue to trend down.”

Adore Beauty and Baby Bunting shares are both heavily discounted, each falling around 60% over the past 12 months.

Baby Bunting does pay out a 5.8% dividend yield though.

The post Bargain hunting: 3 retailer ASX shares that shouldn’t be this cheap appeared first on The Motley Fool Australia.

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More reading

• I think these 2 ASX growth shares have been heavily oversold. I’d buy them in April
• Bargain buys? 3 ASX All Ords shares trading at 52-week lows right now
• Morgans warns that these ASX shares could disappoint in FY23

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Baby Bunting Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group. The Motley Fool Australia has recommended Adore Beauty Group and Baby Bunting 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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On Friday, the S&P/ASX 200 Index (ASX: XJO) finished a solid week on a positive note. The benchmark index rose 0.8% to 7,177.8 points.

Will the market be able to bounce back from this on Monday? Here are five things to watch:

ASX 200 expected to climb

The Australian share market looks set to continue its positive run on Monday thanks to a strong finish on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 45 points or 0.6% higher this morning. On Wall Street, the Dow Jones was up 1.25%, the S&P 500 rose 1.45%, and the NASDAQ climbed 1.75%.

Oil prices rise

ASX 200 energy shares such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could have a good start to the week after oil prices rose on Friday. According to Bloomberg, the WTI crude oil price was up 1.75% to US$75.67 a barrel and the Brent crude oil price rose 1.6% to US$79.89 a barrel. The announcement of surprise production cuts from OPEC has given oil prices a boost.

ALS named as a buy

The ALS Ltd (ASX: ALQ) share price could be great value according to analysts at Goldman Sachs. This morning, the broker has initiated coverage on the testing services company’s shares with a buy rating and $14.60 price target. This implies potential upside of 21%. It said: “ALQ is positioned to benefit from short-term mining exploration and long-term green metals trends.”

Gold price pulls back

ASX 200 gold shares including Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a subdued start to the week after the gold price pulled back on Friday night. According to CNBC, the spot gold price fell 0.6% to $1,986.20 per ounce. Improving investor sentiment reduced the appeal of the safe haven asset.

Dividends being paid

A few ASX 200 shares will be paying their latest dividends on Monday. This includes financial services companies AMP Ltd (ASX: AMP) and  Insignia Financial Ltd (ASX: IFL), as well as private health insurer NIB Holdings Limited (ASX: NHF). The former is rewarding its shareholders with its first dividend in years today, It will be paying a fully franked 2.5 cents per share final dividend.

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

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• These were the best performing ASX 200 shares in March
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Friday
• AMP share price slips amid expected first strike on remuneration
• Don’t stress! The stock market is ‘a long way from a crisis’

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One of the great things about ASX dividend shares is that, even during stock market downturns, it’s still possible to grow your wealth.

Whilst your portfolio might not be increasing in value from share price rises, it may still be growing from dividend payments or reinvestment allocations.

In fact, many young investors who once viewed ASX dividend shares as the exclusive domain of boomers or those approaching retirement are now eyeing these types of stocks in a completely new light.

So, if you’re looking to pounce on some new passive-income investments this month, read on!  Because we asked our Foolish writers which ASX dividend stocks they reckon could be worth ‘paw-ring’ over in April.

Here is what the team came up with:

7 best ASX dividend shares for April 2023 (smallest to largest)

• Nick Scali Limited (ASX: NCK), $757.35 million
• Rural Funds Group (ASX: RFF), $768.50 million
• National Storage REIT (ASX: NSR), $3.36 billion
• Domino’s Pizza Enterprises Ltd (ASX: DMP), $4.44 billion
• Harvey Norman Holdings Limited (ASX: HVN), $4.46 billion
• Rio Tinto Ltd (ASX: RIO), $44.60 billion
• Commonwealth Bank of Australia (ASX: CBA) $166.00 billion

(Market capitalisations as of 31 March 2023).

Why our Foolish writers love these ASX passive-income stocks

Nick Scali Limited

What it does: Quality furniture in Australia has almost become synonymous with the Nick Scali brand, I believe. Founded in 1962, the furniture retailer has grown to 107 stores (including Plush), making it one of the largest operators in the sector within the country.

By Mitchell Lawler: Looking at how this ASX 300 dividend share has been performing lately, you’d almost think business for Nick Scali was heading the way of the dinosaurs. 

Between November 2021 and today, the Nick Scali share price has tumbled by around 42%. Yet, the latest numbers from the retailer paint a different story. Revenue surged 57% year on year to $283.9 million, and net after-tax earnings leapt 70%. 

The disconnect has culminated in a current dividend yield of 8.5% on a payout ratio of 60%. It’s probable the market is expecting weakness in sales from here as consumer spending slows – which might be the case. 

But even still, at an earnings multiple of 7.3 times, I think there is a fair bit of wiggle room there for Nick Scali to surprise the market.

Motley Fool contributor Mitchell Lawler does not own shares in Nick Scali Limited.

Rural Funds Group

What it does: Rural Funds is a real estate investment trust (REIT) that owns a variety of different types of farms, including those producing almonds, macadamias, sugar, cotton, wine, and cattle.

By Tristan Harrison: The Rural Funds share price has dropped by around 37% since the start of 2022. That has opened up the opportunity to buy a piece of these quality farms for a much cheaper price and, at the same time, get a much higher distribution yield.

The forecast total FY23 distribution yield is now more than 6%. If Rural Funds can keep growing its distribution by 4% or more per annum – which it has done since FY16 thanks to organic rental income growth and productivity investments – then I think the business can deliver a good total return from here.

Farmland has been a valuable asset for many centuries, and I think this will continue to be the case for a long time to come as the global population grows.

Motley Fool contributor Tristan Harrison owns shares in Rural Funds Group.

National Storage REIT

What it does: Another REIT, National Storage does pretty much what it says on the tin: It operates self-storage centres and garages, as well as providing other related services.

By Sebastian Bowen: I think this ASX 200 REIT is well worth a look for income investors right now.

I like companies that provide goods and services customers will utilise in all economic seasons, not just when times are good. National Storage fits this mould well, in my view. 

Self-storage is a highly fragmented industry, but National Storage has proven it is adept at acquiring market share and expanding further and further. In February, the REIT announced a capital-raising program to continue this expansion. 

National Storage’s dividend distributions have kept up though, with the REIT paying out a total of 10.9 cents per unit in 2022, a good 11.2% above what it paid out in 2019.

Considering this REIT’s dividend yield of more than 4% right now, I think National Storage could be a great addition to a diversified ASX income portfolio this April. 

Motley Fool contributor Sebastian Bowen does not own units of National Storage REIT.

Domino’s Pizza Enterprises Ltd

What it does: Domino’s operates a chain of fast-food pizza outlets. The company controls the Domino’s network in Australia, New Zealand, Japan, Taiwan, Germany, France, Denmark, Belgium, Luxembourg, and the Netherlands. It also has a growing footprint in Southeast Asia.

By Bernd Struben: The Domino’s share price is down 41% over the past 12 months. The company has struggled with the effects of inflation, particularly in Europe. In its half-year results, Domino’s reported rising costs drove a 21.5% decline in underlying net profit after tax (NPAT) to $71.7 million.

This also saw a 23.8% cut in Domino’s partially franked interim dividend, which dipped to 67.4 cents per share.

But I believe the medium-term outlook is better. On the back of a $165 million capital-raising announced in December, Domino’s is well-positioned for growth. It plans to use those funds to help acquire the portion of its German joint venture partner it doesn’t already own.

Based on the Domino’s share price of $49.84 at Friday’s close, the company pays a partly-franked trailing yield of 2.7%.

Broker Morgans has an add rating on Domino’s shares with a target price of $70. That’s around 40% above the current share price.

Motley Fool contributor Bernd Struben does not own shares in Domino’s Pizza Enterprises Ltd.

Harvey Norman Holdings Limited

What it does: Harvey Norman operates its namesake furniture and technology retail franchise and also boasts a notable property portfolio.

By Brooke Cooper: The Harvey Norman share price has tumbled 9% year to date. I think the selloff might represent a buying opportunity for ASX dividend investors.

The company currently boasts a $4.5 billion market capitalisation. However, its property portfolio carries a $3.9 billion valuation, while its retail business brought in $4.98 billion of sales in the first half.

That – as well as the stock’s price-to-earnings (P/E) ratio of 8.15  – suggests the company might be a value buy. And Goldman Sachs appears to agree, slapping Harvey Norman shares with a buy rating and a $4.70 price target.

Did I mention Harvey Norman shares currently offer an 8.5% dividend yield?

Motley Fool contributor Brooke Cooper does not own shares in Harvey Norman Holdings Limited.

Rio Tinto Ltd

What it does: Rio Tinto is one of the world’s largest miners, with a diverse collection of world-class operations across many locations and commodities.

By James Mickleboro: I think Rio Tinto shares could be a great option for ASX dividend investors in April.

I believe the mining giant is well-placed to generate strong free cash flow for the foreseeable future thanks to strong, ongoing demand for its commodities.

The company highlights that its aluminium is used in lightweight cars, its copper ends up in renewables, and its lithium will power electric vehicles and battery storage.

In addition, Rio’s high-grade iron ore looks likely to be in demand as China recovers from the pandemic, and its borates will be used to help crops grow and feed the world’s growing population.

Goldman Sachs is positive on Rio Tinto shares and has a buy rating and $140.40 price target on the company. The broker also forecasts fully-franked dividend yields of approximately 6.6% in FY2023 and 7.4% in FY2024.

Motley Fool contributor James Mickleboro does not own shares in Rio Tinto Ltd.

Commonwealth Bank of Australia

What it does: Commonwealth Bank is Australia’s largest bank, offering a variety of services to business and retail customers. It’s also the second-largest company in the S&P/ASX 200 Index (ASX: XJO) by market cap.

By Bronwyn Allen: All the drama with banks in the United States and Europe led to share price dips of 5% to 10% for the big four ASX bank shares during March.

But, arguably, there was no reason for it.

Australia has one of the strongest banking systems in the world, so I believe the collapse of a tech lender and a crypto lender in the US and a Swiss bank plagued with problems is no reason to sell your ASX bank stocks.

I say buy the dip and buy the best: Commonwealth Bank.

CBA has just paid out its biggest interim dividend on record at $2.10 per share, and Goldman Sachs is tipping a bigger final dividend to follow at $2.58 per share. All up, that will be $4.68 per share in total.

Based on today’s CBA share price of just over $98, that’s a 4.8% fully-franked dividend yield, which is very good for an ASX blue chip company of this size. Especially one like CBA, which is typically bought for its long-term growth potential, not necessarily its dividends. 

Motley Fool contributor Bronwyn Allen owns shares in Commonwealth Bank of Australia.

The post Top ASX dividend shares to buy in April 2023 appeared first on The Motley Fool Australia.

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• Why Appen, Harvey Norman, Healthco, and Lake shares are dropping today
• Why did the CBA share price tumble in March?
• Rio Tinto share price lifts on copper project news
• Why is the Harvey Norman share price diving on Friday?
• 7 ASX dividend shares you can buy for under $10

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Domino’s Pizza Enterprises and Harvey Norman. The Motley Fool Australia has positions in and has recommended Harvey Norman and Rural Funds Group. 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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When it comes to investing in ASX shares, you could do a lot worse than listen to the advice of the Oracle of Omaha, Warren Buffett.

Over almost six decades now, the legendary investor’s Berkshire Hathaway (NYSE: BRK.B) business has smashed the market with some mind-boggling returns.

In fact, Buffett’s most recent letter to shareholders reveals that the conglomerate’s book value per share has grown by an average of double the stock market return since 1965.

And that’s not because the stock market has delivered pitiful returns. Far from it! The S&P 500 index has generated an average return of 9.9% per annum since 1965. It’s just that Buffett has found a way to achieve a return of 19.8% per annum over the same period.

So, what’s the secret to Buffett’s success? Well, the good news is that there isn’t a secret and anyone can follow his investment style.

Investing like Buffett with ASX shares

While Buffett is well-known for loving a bargain, his focus is more on quality than how cheap something looks. He once explained:

It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

But what makes a company wonderful and how can we find ASX shares with these qualities?

Buffett believes sustainable competitive advantages, or moats, are of the utmost importance when investing. In his 2007 letter to shareholders, he explained:

A truly great business must have an enduring ‘moat’ that protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business ‘castle’ that is earning high returns.

Therefore a formidable barrier such as a company’s being the low-cost producer (GEICO, Costco) or possessing a powerful world-wide brand (Coca-Cola, Gillette, American Express) is essential for sustained success. Business history is filled with ‘roman candles’, companies whose moats proved illusory and were soon crossed.

Where to find moats on the ASX?

There are a number of ASX shares that have moats. These include toll road operator Transurban Group (ASX: TCL), realestate.com.au owner REA Group Limited (ASX: REA), and biotherapeutics giant CSL Limited (ASX: CSL).

There’s also the Buffett-inspired VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT) to consider, which only invests in companies with moats.

And if you need any more proof that following Buffett’s advice could be the smart thing to do, you only need to look at this ETF’s returns. Over the last decade, the index it tracks has generated an average return of 18.64% per annum.

That would have turned a $10,000 investment into approximately $55,000 over the 10 years.

The post I’d listen to Warren Buffett to grow my wealth with ASX shares appeared first on The Motley Fool Australia.

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• I’m listening to Warren Buffett and loading up on cheap ASX shares
• Forget day trading! I’d use Warren Buffett’s ‘secret sauce’ to build wealth

Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway and CSL. The Motley Fool Australia has recommended Berkshire Hathaway, REA Group, and VanEck Morningstar Wide Moat 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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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that investors might want to be aware of are summarised below.

Here’s why brokers think investors ought to buy them next week:

Aristocrat Leisure Limited (ASX: ALL)

According to a note out of Morgans, its analysts have retained their add rating and $43.00 price target on this gaming technology company’s shares. The broker was pleased with the company’s investor round table event and came away from the event as bullish as ever. It highlights Aristocrat’s superior capitalisation and strong ability to invest in the development of its land-based and digital gaming businesses. The Aristocrat share price ended the week at $37.20.

Liontown Resources Ltd (ASX: LTR)

A note out of Bell Potter reveals that its analysts have retained their speculative buy rating on this lithium developer’s shares with an improved price target of $3.35. Its analysts believe that Albemarle’s takeover approach speaks to the quality of Kathleen Valley and the scarcity of growth opportunities in the sector. And while the broker feels the offer was reasonable, it doesn’t believe it was full. The Liontown share price was fetching $2.58 at Friday’s close.

Premier Investments Limited (ASX: PMV)

Analysts at Macquarie have retained their outperform rating on the retail conglomerate’s shares with an improved price target of $30.50. Macquarie was impressed with Premier Investments’ half-year results, noting that its earnings came in well-ahead of its expectations. In light of this strong performance, the broker has bumped its earnings estimates higher and lifted its valuation accordingly. The Premier Investments share price ended the week at $26.09.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

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• These ASX 200 lithium shares could be takeover targets: Morgans
• These were the best performing ASX 200 shares in March
• Liontown share price climbs as Albemarle continues loading up
• Attention lithium investors: This ASX 200 mining billionaire says Australia could become a battery chemical manufacturing powerhouse
• Best ASX lithium share to buy: Liontown Resources vs. Pilbara Minerals

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

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Are you looking for dividend shares to buy for passive income? If you are, then it could be a good idea to check out the two listed below that Morgans rates highly.

Here’s what the broker is saying about them:

Aurizon Holdings Ltd (ASX: AZJ)

The first ASX dividend share that Morgans is tipping as a buy is Aurizon.

It is Australia’s largest rail freight operator, connecting miners, primary producers, and industry with international and domestic markets via its extensive national rail and road network.

With its shares trading within touching distance of their 52-week low, Morgans sees a lot of value in them at present. The broker commented:

We are not yet convinced that the capital AZJ is deploying into the lower quality Bulk business (both One Rail Bulk acquisition and growth capex) to diversify its operations away from coal exports and tap into new growth avenues will deliver appropriate risk-adjusted returns over time. Nonetheless, we see value in the stock at current prices, supported by the far higher quality Network and Coal haulage businesses. ADD retained.

As for dividends, it has pencilled in partially franked dividends of 17 cents per share in FY 2023 and then 19 cents per share in FY 2024. Based on the latest Aurizon share price of $3.36, this will mean yields of 5% and 5.65%, respectively.

Morgans currently has an add rating and $3.81 price target on its shares.

HomeCo Daily Needs REIT (ASX: HDN)

Another ASX dividend share that Morgans has named as a buy is HomeCo Daily Needs.

It is a property investment company with a focus on properties that serve daily needs. These are metro-located, convenience-based assets across neighbourhood retail, large format retail, and health and services. basis.

The broker believes the company is well-placed for the future thanks to its development pipeline. It commented:

HDN offers investors exposure to a portfolio of daily needs assets with its large development pipeline to provide both near-term and future growth opportunities. FY23 guidance was reiterated; metrics stable across the $4.7bn portfolio; and cap rate expansion was offset by property income growth. Looking ahead, the focus also remains on recycling assets and the development pipeline which has been boosted to +$600m from +$500m.

As for dividends, the broker is forecasting dividends per share of 8.3 cents in FY 2023 and 8.4 cents in FY 2024. Based on the current HomeCo Daily Needs share price of $1.16, this will mean dividend yields of 7.15% and 7.25%, respectively.

Morgans has an add rating and $1.50 price target on HomeCo Daily Needs’ shares.

The post Buy these ASX dividend shares next week for passive income: broker appeared first on The Motley Fool Australia.

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• Get a passive income boost with these ASX dividend shares: experts
• 2 ASX 200 directors buying up their company shares this week
• Buy these ASX dividend shares right now for income: analysts
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• Buy NAB and this ASX passive income share: analysts

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 Aurizon. 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 Westpac Banking Corp (ASX: WBC) share price was out of form in March.

Australia’s oldest bank’s shares lost almost 4% of their value during the month.

Why was the Westpac share price sold off last month?

The Westpac share price was caught up in a broad selloff in the banking sector last month after rising interest rates inadvertently caused the sudden collapse of a number of international banks.

Among the casualties were Silicon Valley Bank and Signature Bank in the United States and Credit Suisse in Europe.

And while the crisis has not spread to Australia, that didn’t stop investors from reducing their exposure to the big four banks and regional players.

But every cloud has a silver lining. That silver lining is that investors will be able to buy Westpac shares in April at a meaningful discount to what they would have paid a month earlier.

This is something that analysts at Goldman Sachs are recommending investors do.

Goldman says buy Westpac shares

In response to the banking crisis, Goldman has done a health check on the Australian banking sector and given it the all-clear. The broker commented:

We remain confident in the health of the banking sector in Australia given: i) a single, national regulator, with most of the Australian listed banks subject to the Liquidity Coverage Ratio (LCR), ii) balance sheet mix, which sees only a relatively small part of their balance sheets in a marked-to-market environment, iii) Australian bank regulatory capital positions are MTM for the impact of rate rises, and iv) strong capital positions, with fully-loaded CET1 ratios at close to 18%.

In light of this, the broker has reiterated its conviction buy rating and $27.74 price target on the bank’s shares. Based on the latest Westpac share price of $21.66, this implies potential upside of 28% over the next 12 months.

The post Why was the Westpac share price sold off in March? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Westpac Banking. 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 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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It certainly was a massive week for ASX 200 lithium shares. Investors were piling back into the industry after Liontown Resources Ltd (ASX: LTR) revealed that it had received and rejected a takeover proposal from lithium giant Albemarle at a huge premium.

The good news for lithium investors is that one leading broker believes the mergers and acquisitions (M&A) activity may not be over.

According to a note out of Morgans, its analysts have picked out two more lithium miners that it believes could soon become takeover targets along with Liontown.

Which ASX 200 lithium shares could be takeover targets?

Morgans believes that Allkem Ltd (ASX: AKE) and Pilbara Minerals Ltd (ASX: PLS) could be takeover candidates. It explained:

We see potential for both PLS and AKE to also be considered attractive targets. PLS offers exposure to high quality hard rock while AKE is much cheaper on a resource multiple.

And while the broker also sees Mineral Resources Ltd (ASX: MIN) as an attractive option, it feels a takeover is less likely “given its existing relationships with ALB and Jiangxi.”

It is a similar story for fellow ASX 200 lithium share Core Lithium Ltd (ASX: CXO), which the broker believes is less likely to become a target due to “the smaller resource size, higher EV / resource and likely higher cost operations.”

Why Allkem and Pilbara Minerals?

Morgans sees Pilbara Minerals as a top option due to its globally significant resource and ability to provide an acquirer with immediate exposure to spodumene and hydroxide. It commented:

We’d flagged LTR as a potential target but it’s not the only one. PLS remains one of the few independent lithium producers with a globally significant resource. With assets in operation it would offer an acquirer immediate exposure to spodumene and hydroxide.

As for Allkem, Morgans believes it would be a good target due to its large resource base. However, it concedes that the company is unlikely to be seen as a target for a miner that already has exposure to Argentina. It explained:

AKE is also potentially a target and holds a much larger resource base than PLS. However, the majority of its resource is in Argentina in lithium brines which are typically used for carbonate rather than hydroxide. We think both chemicals will be important over the long run but potential acquirers with pre-existing South American brine exposure may see fewer diversification benefits.

Time will tell what happens, but it certainly is an interesting time for ASX 200 lithium shares.

The post These ASX 200 lithium shares could be takeover targets: Morgans appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Allkem. 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) stock Telstra Group Ltd (ASX: TLS) could be a smart choice for dividend investors looking for passive income.

Telstra has long been regarded as an ASX dividend share by some investors.

Whilst it has paid a high dividend yield for a long time, I’ve been cautious about businesses that aren’t growing their earnings because it could mean that a dividend cut occurs. Telstra ended up cutting its dividend in FY18 and FY19.

But, pleasingly, dividend growth has returned to the telco, and it appears likely to continue.

With that positive outlook for passive income, I think the business could be a good one to consider for a contender to generate $400 in monthly passive income.

Telstra’s potential to pay good passive dividend income

The ASX telco share doesn’t pay a dividend each month, it actually pays one every six months. So, for our purposes, we’re going to calculate an annual amount which can then be divided into 12 equal parts.

Receiving $400 per month would translate into $4,800 of annual passive dividend income.

That’s quite a lot of dividends.

But, it helps that Telstra has a pretty high projected dividend yield for FY23 and beyond.

According to Commsec, Telstra shares are expected to pay an annual dividend per share of 17 cents. At the current Telstra share price, that represents a grossed-up dividend yield of 5.75%.

Based on trying to receive of $4,800 of annual income, investors would need to buy 28,236 Telstra shares.

The telco is then expected to grow its dividend to 18 cents per share in FY24 and then another increase to 19 cents per share in FY25.

If Telstra does keep increasing its dividend to FY25, then investors would need to own 25,264 shares to gain $4,800 of annual passive dividend income in FY25.

Will these payments happen?

Dividends are not guaranteed. Forecasts are just estimates, so the dividend payments could be smaller, or bigger, than expected.

Telstra is working on a number of initiatives to grow its profit in the coming years with its T25 strategy. It wants to reduce its costs, have the best 5G network and grow its margins for investors.

If the company is able to achieve these things, then I think the dividend can keep steadily climbing.

The post For $400 in monthly passive income, buy 28,236 shares of this ASX 200 stock 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 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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It certainly was a tough month for the ANZ Group Holdings Ltd (ASX: ANZ) share price.

During the period, the banking giant’s shares lost 7% of their value to end at $22.93.

This was notably worse than the performance of the ASX 200 index, which dropped 1.1% in March.

What happened to the ANZ share price?

The weakness in the ANZ share price was driven by the sudden collapse of a number of international banks. This includes Silicon Valley Bank and Signature Bank in the United States and Credit Suisse in Europe.

Investors appeared concerned that the crisis could spread to Australia and quickly reduced their exposure to the banks. That’s despite the big four banks being some of the safest in the world based on their capital positions and liquidity.

Is this a buying opportunity?

One broker that is likely to see this pullback as a buying opportunity is Citi.

That’s because its analysts recently named ANZ as their top pick in the banking sector. The broker commented:

ANZ’s 1Q23 disclosures exhibited strong trends in both lending growth and asset quality. No earnings disclosure was provided, but we think that after backing out RWA movements from capital, it comfortably implies above market earnings, although subject to movements in deductions/reserves.

Despite fears of deteriorating asset quality, impaired assets declined again in the quarter, although this could be the bottom as seasonally mortgages and personal credit arrears tick higher in the March quarter. Institutional lending momentum continued and accelerated in the Dec qtr, which we expect was driven by more available liquidity and pricing vs debt markets.

ANZ remains our top pick in the sector, and we expect the lending momentum, particularly in institutional, to continue to differentiate vs peers.

Citi has a buy rating and $29.25 price target on the bank’s shares. Based on the current ANZ share price, this implies potential upside of almost 28% for investors over the next 12 months.

In addition, it is expecting a fully franked 7.3% dividend yield this year, sweetening the deal even further!

The post Why did the ANZ share price crash 7% in March? appeared first on The Motley Fool Australia.

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• Guess which ASX 200 bank stock UBS says is the most over-priced right now
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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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