The last five years have been rough for AMP Ltd (ASX: AMP) investors, with the company’s share price tumbling 79% in that time.

Stock in the 174-year-old financial institution was trading at $4.99 at this point of 2018.

That was shortly before the company’s dirty laundry – of which there was plenty – was aired by the Banking Royal Commission.

Today, The AMP share price sits at just $1.06 apiece.

That means a $3,000 investment in AMP shares back then probably would have bought 601 securities. Today, that parcel would be worth just $637.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has risen around 21% over the same period.

But could AMP’s dividends have made up for its share price’s poor performance? Let’s take a look.

All dividends paid to AMP shareholders over the last 5 years

Here are all the offerings placed on the table for those invested in AMP shares over the last five years:

AMP dividends’ pay date	Type	Dividend amount
October 2020	Special	10 cents
March 2019	Final	4 cents
September 2018	Interim	10 cents
Total:		24 cents

That’s right, each AMP share provided just 24 cents to investors who bought on 29 March 2018. In fact, the ASX 200 company put a hold on its dividends in mid-2019 as it struggled to right its rocky ship.

That means our figurative parcel would have yielded around $144.24 of passive income over its life – certainly not enough to substantially soften shareholders’ losses.

Though, investors currently have the company’s upcoming 2.5 cent dividend to look forward to. Shareholders have the offering in the bag after the stock traded ex-dividend earlier this month, with the payment to hit accounts next week.

And that might be just the beginning.

AMP shares could be on track to offer a 3.96% dividend yield at its current price. That is if suggestions it could pay 4.2 cents per share of dividends this financial year prove fruitful.

The post Sunk $3,000 into AMP shares 5 years ago? Here’s how much passive income you’ve realised appeared first on The Motley Fool Australia.

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More reading

• Are AMP shares set to become a dividend machine?
• If I had bought $5,000 AMP shares a week ago, here’s how much I’d have now!
• Here are the top 10 ASX 200 shares today
• AMP share price dips despite $337m sale win
• AMP shares: Keep calm and carry on or cash out?

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

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There’s been a lot of talk of a recession coming within the next 12 months as rising interest rates stifle economic growth.

Over at exchange traded fund (ETF) provider Betashares, its chief economist, David Bassanese, believes there’s a 50% chance that the global economy will fall into a recession. He commented:

Our most likely scenario is that the lagged impact of policy tightening over the past year, along with further modest tightening in the first half of 2023, soon leads to a notable slowing in global economic growth, such that the US in particular descends into outright recession,

In light of this, Bassanese has suggested that investors take a look at defensive options that could fare better in this environment. Here’s what you need to know:

Global Healthcare ETF – Currency Hedged (ASX: DRUG)

The first ETF to look at is this global healthcare ETF. It provides investors with exposure to the largest global healthcare companies, hedged into Australian dollars. Bassanese notes that the largest global healthcare companies are predominantly pharmaceutical companies, which are often considered “defensive” by nature and can typically pass rising costs on to consumers.

Betashares Australian Quality ETF (ASX: AQLT)

Another option for investors to consider is the Betashares Australian Quality ETF. It aims to track an index that comprises 40 high-quality ASX shares. This includes companies such as CSL Limited (ASX: CSL) and Telstra Group Ltd (ASX: TLS).

Betashares Global Quality Leaders ETF (ASX: QLTY)

This is the international equivalent of the Betashares Australian Quality ETF. It gives investors exposure to a portfolio of approximately 150 global companies (excluding Australia). To be included in the ETF, a company needs to rank highly on four key metrics. These are return on equity, debt-to-capital, cash flow generation ability, and earnings stability. The ETF includes companies such as Alphabet, Microsoft, and Nvidia.

Bonds and cash

Three other ETFs that Bassanese is suggesting investors consider in the current environment have a focus on bonds and cash.

In respect to bonds, the chief economist notes that “market pricing suggests that rate cuts could be on the horizon. If markets are correct about this, and a US recession does occur, this could create favourable conditions for a rally in government bonds.”

As a result, Bassanese has named U.S. Treasury Bond 20+ Year ETF – Currency Hedged (ASX: GGOV) and Australian Government Bond ETF (ASX: AGVT).

And if cash is more to your taste, then the Australian High Interest Cash ETF (ASX: AAA) could be worth considering.

Bassanese concludes:

This year has already presented many unexpected challenges for investors. Some, such as a potential US-led global recession, are already obvious and firmly in the sights of investors. Others – such as the recent spate of US bank failures – can catch investors off guard, remaining obscured until the very last moment. For investors who have positioned their portfolios appropriately, the impact might not be quite so severe.

The post Betashares names 6 ‘defensive’ ASX ETFs to consider for a possible recession appeared first on The Motley Fool Australia.

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• 3 ‘compelling’ ASX growth shares ECP is backing (You won’t believe #2)
• How to make passive income for life with just $5 a day
• Is time running out to buy high-yield ASX dividend shares?
• Analysts name 2 ASX dividend shares to buy right now
• ‘Attractive numbers’: Expert names ASX dividend share to buy right now

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 CSL. 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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In turbulent times such as now, everyday investors could find it hard to come up with conviction on potential stock purchases.

That’s why it’s worth examining professionally operated funds to see which stocks they are proudly holding for long-term growth.

Here are three ASX shares that the team at the ECP Growth Companies Fund is loving at the moment:

‘Outlook remains compelling’

Financial services platform Hub24 Ltd (ASX: HUB) had a fantastic February, gaining more than 9%. It has since moderated a touch to be 3.75% up for the year so far.

The ECP analysts, in a memo to clients, urged investors to keep their eyes on the ultimate prize — long-term growth.

“The share price has been volatile as short-term investor sentiment has remained focused on the cadence of in-flows to wealth platforms, with advisors regaining client consolidation momentum as markets have stabilised.”

The business has kicked off 2023 in a positive vein, according to the ECP team.

“Hub24 reported a strong start to net flows in 3Q FY23 and reiterated guidance for FY24 funds under management.”

ECP sees a growth stock with alluring fundamentals in Hub24.

“With stable revenue margins and operating leverage incrementally flowing through, the outlook remains compelling for Hub24.”

Pariah turned angel?

Software maker Nuix Ltd (ASX: NXL) is as close as any stock can get to the term “pariah” on the ASX.

The company debuted on the bourse with tremendous hype in December 2020. Within a few weeks the share price exceeded the $11 mark, as investors climbed over each other for a piece of the action.

But then within just a few months in 2021, it all came crashing down.

A series of governance failures, and a realisation that it would not hit forecast numbers contained in the IPO prospectus, saw shareholders run from the burning building.

The share price has been as low as 52 cents over the past year, as Nuix became an example of how fast investors could get burnt.

But amazingly, the stock has risen 73% year to date.

The ECP team noted that the company recently won a stock ownership court case brought on by former chief executive Kervin Sheehy.

“The share price rallied significantly on the back of this, as the market was discounting around $60 million of market capitalisation from the company, expecting the company to lose the case,” read the memo.

“Nuix has already been awarded costs in the matter, and will defend the appeal.”

Pizzas don’t sell themselves

Unlike the other two stocks, Domino’s Pizza Enterprises Ltd (ASX: DMP) has been in a downward spiral this year. 

The pizza retailer has already lost over a quarter of its valuation in 2023.

ECP analysts said that the business had failed to execute an appropriate pricing strategy.

“[This] saw volumes decline toward the end of the year,” read the memo.

“The inflationary environment has been challenging, particularly in Europe and Asia.”

However, the team still has faith in the long-term capital growth opportunity for Domino’s shares.

“Going forward, the company has introduced their Flexible Voucher, which has proven to have some early success and will be key to improving its operating performance in 2H.”

The post 3 ‘compelling’ ASX growth shares ECP is backing (You won’t believe #2) appeared first on The Motley Fool Australia.

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• Time to bite into ‘cheap’ Domino’s shares: expert 
• Here are the top 10 ASX 200 shares today
• Why Domino’s, Incitec Pivot, Mincor, and New Hope shares are racing higher
• 6 ASX 200 shares with ex-dividend dates in the next week
• The one ASX share we’re holding onto for dear life: experts

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 Domino’s Pizza Enterprises and Hub24. The Motley Fool Australia has positions in and has recommended Hub24. 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 power of compounding can help turn just $5 a day into enough passive income for life.

Investors don’t need a lot of money to get started with investing in ASX shares. Many brokers allow investors to start with just a $500 investment. It can take tens of thousands of dollars to invest in property.

However, I love that it’s easy to take a backseat with ASX shares. We don’t need to worry about tenants or getting a toilet fixed.

If we can put aside $5 a day, then that’s $1,825 per year. That’s not going to make someone a millionaire in 12 months. But, long-term growth can make a massive difference.

The power of compounding

Using the excellent compound interest calculator from Moneysmart, we can calculate that saving $5 a day for the portfolio for 40 years at an average return per annum of 10% would turn into $808,000.

A 5% dividend yield for that portfolio would make an annual passive income of $40,400.

But, I think there are a few ways that we can try to deliver returns of stronger than 10% per annum.

How to invest for passive income

One way could be to go for ASX dividend shares that could deliver good total returns over the long term so investors can receive passive income whilst the business builds. But, re-investing the dividend can enable even stronger compounding.

For example, Wesfarmers Ltd (ASX: WES) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) have both delivered solid long-term returns for decades.

In the recent FY23 half-year result, Soul Pattinson said that its total shareholder return was an average of 12.3% per annum. But remember, past performance is not a reliable indicator of future returns. If the $5 per day compounded at 12% per year over 40 years, it would grow to $1.4 million. A 5% dividend yield would make an annual passive income of $70,000. Or, we could live off the dividend income sooner than 40 years.

But, another tactic for building dividend income could be to try to find the ASX shares that could deliver a large amount of capital growth and then investors could sell those shares and then buy ASX dividend shares to deliver the passive income.

My crystal ball isn’t working at the moment, so it can’t tell me which ASX shares could deliver the most capital growth. I think globally expanding businesses could deliver a lot of growth like Lovisa Holdings Ltd (ASX: LOV), Frontier Digital Ventures Ltd (ASX: FDV) and Volpara Health Technologies Ltd (ASX: VHT).

But, as a diversified option, I’d choose Vaneck Morningstar Wide Moat ETF (ASX: MOAT) to try to deliver long-term compounding outperformance.

However investors choose to do it, I think that investing in ASX shares is the best way to deliver long-term growth and unlock passive income.

Of course, putting more money into ASX shares could unlock a lot more dividend income. Saving $10 per day or $20 per day could dramatically reduce how long it takes to deliver life-changing passive income. Investing in the right ASX shares can also make a big difference to the portfolio size after a number of years.

The post How to make passive income for life with just $5 a day appeared first on The Motley Fool Australia.

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• Passive income beasts: 3 ASX dividend shares I’d buy for retirement

Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Frontier Digital Ventures, Lovisa, Volpara Health Technologies, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Volpara Health Technologies, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has recommended Frontier Digital Ventures, Lovisa, 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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Is time running out to buy high-yield ASX dividend shares? Potentially.

The ASX is full of dividend-paying shares. Some offer high dividend yields, and some offer low dividend yields. Some don’t even pay dividends at all, but let’s not bother with those today.

So to understand the ins and outs of a dividend yield, we have to keep one thing in mind. A company’s dividend yield is a product of two things. The first is the dividends per share it pays out every year. Without any dividends, we can’t get a yield after all.

But the second thing is a company’s share price. A dividend yield will only be high if it stacks up favourably against its own company’s share price. To illustrate, let’s look at a real-life example.

Lower prices mean higher yields

Commonwealth Bank of Australia (ASX: CBA) is one of the most popular ASX dividend shares on the market. Over the past 12 months (as of Thursday this week), this ASX 200 bank has paid out two dividends. There was the August final dividend of $2.10 per share, fully franked.

Following that, we’re about to see CBA’s interim dividend for 2023 hit bank accounts on 30 March this week. That dividend will also be worth $2.10 per share. That’s an annual total of $4.20 per share.

Now, Commonwealth Bank last traded at a share price of $96.06. If we divide CBA’s dividends per share ($4.20) by its share price ($96.06), we get a percentage figure of 4.37% – CBA’s current dividend yield.

But if CBA were to shoot up to $200 a share tomorrow (not a prediction), its dividend yield would fall to 2.1%, despite the dividends themselves remaining constant.

Conversely, if CBA cratered to $50 a share tomorrow, its dividend yield would balloon to 8.4%.

Thus, a company’s share price is just as important as the raw dividends it pays when it comes to the dividend yield.

Is it too late to buy high-yield ASX dividend shares today?

So that brings us to the question of time running out to secure high-yield dividend shares.

To kick things off, no one knows what the share market might do tomorrow, next month, or next year. ASX shares could crater over the rest of 2023, making ASX dividend shares even more appealing. Or else, today could be the lowest point the share market reaches for the rest of the year. Either scenario is possible, as is something in the middle.

But I don’t worry about that. I look for what the market is serving up right now and assume that a dollar today is worth more than a dollar tomorrow.

So I’m buying dividend shares right now, with some of my favourite choices including Washington H. Soul Pattinson and Co Ltd (ASX: SOL) and Wesfarmers Ltd (ASX: WES).

If the market falls over the rest of the year, I’ll buy more. If it keeps going up, I’ll still buy more. The market tends to go up more often than it goes down. So it’s probably just better to buy today, if you can.

The post Is time running out to buy high-yield ASX dividend shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has positions in Wesfarmers and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited and Wesfarmers. 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 searching for ASX dividend shares to buy? If you are, then the two named below could be worth checking out.

Both have been named as buys by analysts and tipped to provide attractive yields. Here’s what you need to know about them:

Dicker Data Ltd (ASX: DDR)

The first ASX dividend share to look at is Dicker Data. It is one of the largest technology hardware, software, cloud, cybersecurity, access control and surveillance distributors in Australia and New Zealand.

It could be a top option for income investors thanks to its long track record of earnings and dividend growth and its positive long-term outlook.

The latter is being underpinned by the digital transformation megatrend, recent acquisitions, and the expansion of its warehouse.

Morgan Stanley remains positive on the company and recently retained its outperform rating and $10.00 price target on its shares.

As for dividends, its analysts are forecasting fully franked dividends per share of 43.8 cents in FY 2022 and 48.8 cents in FY 2023. Based on the latest Dicker Data share price of $8.19, this will mean yields of 5.3% and 6%, respectively.

Telstra Group Ltd (ASX: TLS)

Another ASX dividend share to buy could be telco giant Telstra.

The team at Morgans is positive on the company due to its successful turnaround, positive outlook, and attractive valuation. In respect to the latter, the broker feels Telstra’s “high quality long life assets like InfraCo are worth substantially more” than the market is valuing them.

And with management considering divestments, this value could soon be unlocked.

It is partly for this reason that Morgans has an add rating and $4.70 price target on its shares.

As for dividends, the broker is forecasting fully franked dividends per share of 17 cents in both FY 2023 and FY 2024. Based on the current Telstra share price of $4.19, this will mean yields of 4.05%.

The post Analysts name 2 ASX dividend shares to buy right now appeared first on The Motley Fool Australia.

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• Here are the 3 most heavily traded ASX 200 shares on Monday
• Telstra shares: Bull vs. Bear
• ‘Safer than houses’: 2 ASX 200 shares that are pumping out the dividends
• Buy these ASX 200 dividend shares for income: Goldman Sachs
• Why Goldman Sachs is bullish on the Telstra share price

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

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One ASX company that was a huge “COVID beneficiary” is holding onto those customers as Australia moves past the pandemic.

That’s the opinion of Shaw and Partners portfolio manager James Gerrish, who revealed that consumer goods conglomerate Metcash Limited (ASX: MTS) is sitting comfortably in his income portfolio.

“Metcash definitely dominates in the rural market place but it also performed strongly in the major cities during COVID as people shifted from large supermarkets to the more convenient community supermarkets of IGA,” he said in a Market Matters Q&A.

But the post-pandemic slowdown is much slower and shallower than expected.

“This transition is slowly being reversed as COVID takes a backseat to almost all news stories,” said Gerrish.

“However, the original transition to Metcash has been pretty resilient despite the economic reopening over the last 24 months, highlighting the stickiness of the consumer.”

Cheap with big dividend payouts

This stickiness is reflected in the Metcash share price, with it remaining almost flat over the past 6 months, even as recession fears buffet other consumer goods stocks.

This is all while paying out a chunky 5.7% dividend yield.

Both the stock price and income are genuine lures for investors, according to Gerrish.

“Current expectations have the stock trading on a 12.1x FY23 valuation while it [is] estimated to pay a dividend yield of around 6.7% fully franked over the next 12-months,” he said.

“These attractive numbers are why it resides in our Market Matters Income Portfolio.”

The Motley Fool’s Tristan Harrison is also a fan of Metcash shares as a cheaper alternative to its giant supermarket rivals.

“Metcash can benefit from ongoing store rollouts, improvements in its logistics and online offerings, and scale advantages,” he said earlier this month.

“I think that Metcash’s earnings — like food and liquor — can be resilient even in a downturn, so I think it could be a smart pick at today’s price.”

The broader professional investment community is somewhat divided on Metcash shares.

According to CMC Markets, three out of six analysts currently rate the stock as a buy.

The post ‘Attractive numbers’: Expert names ASX dividend share to buy right now appeared first on The Motley Fool Australia.

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• I think value investors would love to buy these 2 cheap ASX shares

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Metcash. 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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Looking for dazzling dividend shares on the ASX without stepping into a yield trap can be a challenge, but there are some companies out there that offer high yields and strong growth potential.

One such company that I believe could be flying under the radar is Motorcycle Holdings Ltd (ASX: MTO).

Sitting at a market capitalisation of roughly $115 million, the motorcycle dealership operator rarely features in headlines. However, I’d rather invest based on performance metrics than attention metrics. After all, it’s the profits that will determine long-term returns, not the number of mentions.

The company’s shares have experienced a landslide over the past year, falling 46% amid crimped spending due to higher interest rates.

Now at $1.59 apiece, touting a tantalising dividend yield of more than 10%, and a solid history of top-line growth, could Motorcycle Holdings be one the best-kept secrets among ASX dividend shares?

Understanding the business

Motorcycle Holdings started its life as a single dealership in 1989. Today, the company owns and operates more than 40 locations across Australia and New Zealand — capturing nearly 14% of the national market.

The company is taking a roll-up approach to a heavily fragmented industry. According to its 2022 annual report, Motorcycle Holdings estimates there to be around 700 dealerships across Australia. Aside from itself, there are only three operators that own more than four locations.

A prime example of this approach to growth is the most recent acquisition of Mojo Motorcycles, completed in October last year. The deal brings several new brands under the Motorcycle Holdings umbrella, increasing its exposure to agriculture and scooter markets.

On 27 February, the company posted revenue of $277.5 million for the first half of FY23 — up 17% on a statutory basis. Growth was aided by a $27.7 million contribution from the Mojo acquisition with only two months of being on the company’s books.

However, net profit after tax (NPAT) sank 17% to $10.5 million and shareholders raised concerns as national unit sales declined.

Could it be a cheap ASX dividend share?

I like to look at an investment from several different angles when assessing whether or not a company is ‘cheap’. Firstly, how does it compare to its peers on trailing fundamental metrics?

While there may not be other listed motorcycle dealers, car dealership operators are a close match.

As noted below, Motorcycle Holdings currently commands the highest gross margins, lowest earnings multiple, and highest dividend yield.

ASX-listed company	Gross margins	Price-to-earnings (P/E) ratio	Price-to-book (P/B) ratio	Dividend yield
Motorcycle Holdings	27%	5	0.6	10.1%
Eagers Automotive Ltd (ASX: APE)	19%	11	2.8	5.3%
Peter Warren Automotive Holdings Ltd (ASX: PWR)	19%	7	0.9	9.4%
Autosports Group Ltd (ASX: ASG)	21%	6.4	1.0	8.3%

Secondly, I want to explore the future potential of this ASX dividend share. This due diligence can help avoid stumbling into a dividend trap.

Ultimately, I want to gain an understanding of the company’s potential future earnings profile. If earnings suddenly fall away, there is a greater risk of dividends getting slashed — turning that generous yield into a piddly payout.

Based on my assumptions, I think Motorcycle Holdings will be able to grow its NPAT to approximately $27 million by FY28 and generate more than $680 million in revenue (shown above).

I personally believe these estimates are conservative. Though, as a base case, it gives me confidence in future dividends.

Furthermore, if the company can achieve this and trade on a P/E ratio of roughly eight times, its future valuation could be 75% higher.

Where there could be flaws

No sound investment is made without considering how it could come apart at the seams. While my above projections may look rosy, there are risks that could turn those numbers into mush.

The most obvious risk to Motorcycle Holdings and its ASX dividend share status is a weak economic environment. The Harley-Davidson quickly moves down the priority list if Aussies need to hunker down for some tough financial times — hurting the company’s sales in the process.

Another risk factor is the razor-thin margins associated with the dealership industry.

The projections above assume 4.5% profit margins in FY23 and 4% for each year after. Even a small variation of 1% can drastically change earnings, leaving the company susceptible to dividend cuts.

Would I buy this ASX share for the dividends?

I must admit, the tight margins are not akin to what I would normally look for in a long-term, marketing-beating investment. It tends to indicate a lack of pricing power and/or a highly competitive industry.

In saying that, Motorcycle Holdings’ management holds a lengthy track record of successful growth through consolidation. The co-founder and CEO, David Ahmet, has substantial skin in the game with a 16% stake and comes across as an extremely passionate and intelligent operator.

Personally, I do like the prospects of this ASX dividend share given the headroom for growth.

The post Could this high-yielding dividend share be the best-kept secret on the ASX? appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler 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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Many S&P/ASX 200 Index (ASX: XJO) dividend stocks have paid very large dividend yields for investors. But, are some just yield traps, or will they be dividend machines?

A dividend yield is simply the last year of dividends compared to the share price, expressed in percentage terms.

It’s rare to find dividend yields of more than 10%. Remember, the ultra-long-term average return of the share market is 10% per annum. Getting a 10% return with just dividends could be attractive, if the dividends continue at that level and earnings can sustain that payment.

However, some high yields could be dividend traps. This term implies that the next 12 months of dividends may not be as good as the last 12 months. With that in mind, here are three of the largest yields from ASX 200 dividend stocks. 

New Hope Corporation Limited (ASX: NHC)

New Hope is one of the largest coal ASX shares in Australia. It has capitalised on the higher price for thermal coal in the wake of the Russian invasion of Ukraine as nations looked for alternative sources of energy away from Russia.

The business has generated an enormous amount of profit over the past 12 months. In the FY23 half-year result, it generated $669 million of net profit after tax (NPAT), up 103%, and paid a total dividend per share of 40 cents. The last two dividends amount to a grossed-up dividend yield of 24%.

According to Commsec, the ASX 200 dividend stock is expected to pay a dividend of $1 in FY23, which will give a grossed-up dividend yield of 25%.

However, the dividend could fall in FY24 and FY25. The FY25 grossed-up dividend yield could be 17.7%. The dividend income could continue to be market-beating, but the dividend may not be as strong in the coming years.

So, is the New Hope share price a buy? I think it depends what the coal price is going to do, but that’s hard to predict. It’s certainly not a prediction that I’d want to make to base an investment decision on.

Latitude Group Holdings Ltd (ASX: LFS)

Latitude is an ASX financial share that offers a number of products including credit cards, personal lending, white label capabilities for retailers, and so on.

The Latitude share price is down around 35% since June 2022. While volumes have increased, the business is also dealing with much higher funding costs. That’s partly why the FY22 second half continuing cash net profit after tax sank 37% to $60.5 million.

Latitude is now also dealing with a cybercrime incident that has led to the details of millions of customers being stolen.

The company’s trailing grossed-up dividend yield is 14.6%. However, the FY23 grossed-up dividend yield is only meant to be 10%, according to Commsec. But, if the company can get through this difficult period, the dividend could then bounce back to 11 cents per share in FY24, which would represent a grossed-up dividend yield of 13.5%.

Such times of difficulty could be a good time to consider an ASX 200 dividend stock like this. The company could grow over the longer term. But, it’s not the sort of business I’d buy for my own passive income-focused portfolio.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is a fund manager, but poor investment performance has meant that many investors have pulled out funds. This has resulted in lower funds under management (FUM), revenue, and earnings.

The last 12 months of dividends amount to a grossed-up dividend yield of around 18%. However, those payments were based on higher FUM. Magellan’s FUM had dropped to $45.4 billion at 28 February 2023, with $0.8 billion of FUM outflows over the month.

Commsec estimates currently suggest the FY23 grossed-up dividend yield could be 12.7% and in FY24, it could be 9.4%.

In other words, at the moment, Magellan’s dividend is expected to keep falling over the next few financial years.

If the ASX 200 dividend stock can turn its investment performance around for investors, then this could stop outflows and lead to growth of FUM, earnings, and dividends.

At this stage, I don’t think Magellan is worth buying because outflows keep chipping away at the FUM.

The post 3 dividend stocks with the biggest ASX 200 yields. Time to buy? 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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ASX 200 lithium shares had an amazing day in the sun yesterday on the back of a takeover offer from global lithium giant Albemarle (NYSE: ALB) for Liontown Resources Ltd (ASX: LTR).

The Liontown share price roared an astonishing 68.5% higher to close at an all-time record of $2.57.

Fellow ASX 200 lithium shares benefitted from the market’s excitement.

Other top-performing ASX 200 lithium shares yesterday included Core Lithium Ltd (ASX: CXO), which went 21% higher to hit its intraday peak of 94.5 cents per share.

The Allkem Ltd (ASX: AKE) share price peaked at $11.65, up 15%; while the Pilbara Minerals Ltd (ASX: PLS) share price went as high as $3.99, up 16%.

Liontown rejected Albemarle‘s $2.50 per share offer, which was the third offer within six months. Albemarle offered $2.20 in October 2022 and $2.35 per share earlier this month.

4 ASX 200 lithium shares with a ‘very favourable’ outlook

Yesterday, Westpac Banking Corp (ASX: WBC) hosted a webinar discussing the future of lithium investing.

Among the presenters was Matthew Frydman, a senior research analyst specialising in metals and mining at MST Financial.

Frydman noted that lithium prices have been volatile and falling of late, but said “the medium-term outlook is still very favourable for Australia’s established producers”.

Frydman singled out four “globally significant” lithium producers and shares listed on the ASX 200.

They are Mineral Resources Ltd (ASX: MIN), IGO Ltd (ASX: IGO), Pilbara Minerals, and Allkem.

Frydman said Australia has forged a “very strong position” on the global lithium stage at a time of rapidly rising demand and scarce supply.

He estimates the world needs between 50 and 70 new lithium mines to meet projected demand in 2030. The problem is, mines tend to take longer than that to get established.

This means incumbent producers like these four ASX 200 lithium shares have a significant advantage.

Mineral Resources boss Chris Ellison has made the same point. In 2022, Ellison said: “If we’ve got seven years in the sun, we’re gonna have a lot of fun.”

Frydman said all four lithium miners are at the bottom end of the global cost curve.

All have high-quality assets and “good growth optionality”, and should enjoy very attractive margins.

He said all of them are investing in their downstream processing capabilities. This will enable them to have two bites of the lithium cherry — digging it up and processing it.

Why this expert backs these lithium producers

ASX 200 lithium shares Mineral Resources, IGO, and Pilbara Minerals are based in Australia. In contrast, most of Allkem’s assets are in the lithium-rich South American continent, particularly Argentina.

This presents a degree of sovereign risk. However, Allkem has the advantage of being a brine producer. Frydman points out that brine operations are easier to expand than hard-rock lithium operations.

He said all four companies were expanding their production and increasing their higher-margin processing operations.

He added that these four ASX 200 lithium shares have management teams that have proven themselves.

This is an important advantage, as it can take years for newer companies to garner the same level of investor confidence as established companies.

The post Why the outlook for these ASX 200 lithium shares could be ‘very favourable’ appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Wednesday
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• Why Chalice Mining, Core Lithium, Liontown, and United Malt shares are racing higher

Motley Fool contributor Bronwyn Allen has positions in Allkem, Core Lithium, and 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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