Woodside Energy Group Ltd (ASX: WDS) shares are under scrutiny as the oil and gas ASX share faces questions about why potential customers are ignoring a key project.

The business is working on a significant development called Scarborough in Western Australia although it’s not all smooth sailing.

What’s Scarborough?

Woodside describes the project as a natural gas resource 385km off the Western Australian coast. It says the project will “play a key role in helping neighbouring Asian countries take action on emissions reduction and meet increasing energy demand”.

According to the company, the cash flow generated by the project will help fund a “range of new energy opportunities and thrive through the energy transition”. For Woodside’s liquified natural gas (LNG) target markets, those countries have “committed to net zero” and are replacing coal or are firming up renewables with LNG.

The idea is that Scarborough will produce 8mt per annum of LNG at capacity with a target for the first LNG cargo in 2026.

There will be new offshore facilities connected by approximately 430km of pipeline to a second LNG train (Pluto Train 2) at the existing Pluto LNG onshore facility.

Why are Woodside shares getting attention because of Scarborough?

According to reporting by various media, including the Australian Financial Review, the largest-ever long-term LNG sales contract has been signed between China and Qatar. It covers a period of 27 years and will be supplied from Qatar’s planned North Field expansion. This will help Qatar become one of the world’s most significant LNG exporters.

But it also raises the question about why Woodside is yet to secure a partner for its Scarborough project.

The AFR reported that Woodside CEO Meg O’Neill has outlined that partnership talks are ongoing, but the company wants to do a deal for the right value. O’Neill told the newspaper:

We continue to talk to a number of players…Our goal with Scarborough is to bring in the right partner at the right price. When we look at what’s happening in the LNG market today it really reinforces the value of Scarborough. There’s not a lot of other new LNG supply coming to market that’s as close to Asian customers as Scarborough is, so it’s a very attractive opportunity and we want to make sure we get the right partner and we get that fair value.

My 2 cents

My guess is that Woodside is just waiting in a bid to get the best price. Indeed, the CEO referenced price and value multiple times in that quote.

It makes sense that the management wants to try to sell now because energy prices are so high. But potential buyers are unlikely to want to pay top dollar during this period while LNG prices are so high.

So, it might be a stalemate, depending on how motivated a buyer is. The production for Scarborough is still a while away, so the LNG price and revenue may not be as strong in the future as they could be if the project were operating today.

Despite that, Woodside shares continue to generate strong cash flow and pay dividends thanks to high energy prices.

The post Would this side of Woodside put you off buying its shares? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Friday
• Crude down, stocks up: Here’s what happened to Woodside shares the last time this occurred
• Markets are nervous. Why waiting to buy these ASX 200 shares could prove expensive
• 5 things to watch on the ASX 200 on Wednesday

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.

from The Motley Fool Australia https://ift.tt/Geju2xr

There are a handful of ASX exchange-traded funds (ETFs) that I think can deliver outperformance in 2023 because of the types of businesses that they’re invested in.

2022 has been a rough year for a number of segments of the share market. ASX growth shares and bond-like ASX shares (such as real estate investment trusts (REITs)) have had a tough time as higher interest rates bite. ‘Quality’ has also suffered.

However, I think investors have already accounted for the headwind of higher interest rates. The main problem now could be for particular businesses when investors are disappointed by earnings announcements.

From here, in the current environment, I think it will be companies ranking well on quality metrics that can do well to weather whatever happens next. That’s why I like these two ASX ETFs.

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

This ETF is one of my preferred investment ideas. The portfolio is put together by analysts at Morningstar.

The analysts focus on quality US companies that are believed to have “sustainable competitive advantages” or “wide economic moats”. That refers to things like cost advantages, brand, network effects, intellectual property, and so on.

But, these quality businesses are only purchased when they are trading at attractive prices compared to Morningstar’s estimate of fair value.

While past performance isn’t a guarantee of future results, I think the historical outperformance shows that this investing method can deliver. Over the prior five years to October 2022, the VanEck Morningstar Wide Moat ETF has delivered an average return per annum of 15.1% compared to an average return of 13.9% per year for the S&P 500.

Some of the biggest positions right now in the ASX ETF are: Biogen, Gilead Sciences, Etsy, Mercado Libre, Emerson Electric, Boeing, and Blackrock.

VanEck MSCI International Quality ETF (ASX: QUAL)

The idea behind this ETF is to “access the world’s highest quality companies based on key fundamentals”. These include a high return on equity, earnings stability, and low financial leverage.

What this suggests is that investors are getting exposure to a group of companies that make strong, stable profits for shareholders, while having low levels of debt on their balance sheets.

According to VanEck, the companies with these sorts of ‘quality’ metrics have “delivered outperformance over the long term relative to global equity benchmarks”.

However, past performance is not a guarantee of future performance. The VanEck MSCI International Quality ETF has returned an average of 12.8% per annum over the five years to 31 October 2022, compared to a 10.4% return per annum for the MSCI World excluding Australia Index.

Positions in the 300-name portfolio include Apple, Microsoft, Johnson & Johnson, UnitedHealth, and Visa.

Around three-quarters of the ASX ETF’s portfolio is invested in businesses listed in the US, while the rest come from countries like Switzerland, Japan, the UK, the Netherlands, and Denmark.

The post Could these be the best ASX ETFs to buy now for 2023? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Skin in the game: The ASX share in my portfolio I’m most excited about
• 3 fantastic ETFs for ASX investors to buy in December
• 2 top ETFs for beginner investors to buy
• 3 quality ETFs for ASX investors to buy this month
• 2 of the best ETFs for ASX investors to buy next week

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 positions in and has recommended Apple, Emerson Electric Co., Etsy, Gilead Sciences, MercadoLibre, Microsoft, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Biogen, Emerson Electric, Johnson & Johnson, and UnitedHealth Group and has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple and VanEck Vectors 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.

from The Motley Fool Australia https://ift.tt/WatZ79b

Woolworths Group Ltd (ASX: WOW) shares and Coles Group Ltd (ASX: COL) shares both pay dividends to their shareholders.

Yet, these days, the two businesses are not as similar as they used to be.

Woolworths operates the Australian Woolworths supermarkets, Countdown supermarkets in New Zealand, business-to-business suppliers, and the retailer Big W.

Meantime, Coles runs Coles supermarkets in Australia, its Coles Express business, and the company owns a number of liquor retailers like First Choice Liquor, Liquorland, and Vintage Cellars.

According to the ASX, the market capitalisation of Coles is around $23 billion while Woolworths has a market capitalisation of around $42 billion.

The big question is which one has a higher dividend yield? So let’s look at that first.

Dividend yield

Looking at the numbers from FY22, Woolworths paid an annual dividend per share of 92 cents. That equates to a grossed-up dividend yield of 3.75%.

Coles paid an annual dividend per share of 63 cents per share. That translates into a grossed-up dividend yield of 5.25%.

As we can see, in terms of the current yield, Coles is the clear winner compared to Woolworths.

Valuation difference

A key statistic that can help investors compare businesses is the price/earnings (p/e) ratio. This shows what multiple of earnings the share price is valued at.

Using the estimated earnings for FY23 is probably the better measure to use rather than the last financial year because markets are usually forward-looking. It’s the next financial year that investors are typically focused on and valuing the business at, rather than the last year.

According to Commsec, the Coles share price is valued at under 22 times FY23’s estimated earnings. The Woolworths share price is valued at under 26 times FY23’s estimated earnings. The fact is that Woolworths is measurably more expensive than Coles.

What about future dividends?

However, what happened in FY22 is only a small amount of time compared to the long-term future of these businesses.

While it’s impossible to know what the future will be, we can certainly guess what future dividends will be.

Using the estimates on Commsec, Woolworths shares are expected to pay an annual dividend per share of $1.01 in FY23. This would represent a grossed-up dividend yield of 4.1%.

Then, in FY24, it could end up paying an annual dividend per share of around $1.12. This would represent a grossed-up dividend yield of 4.6%.

Let’s compare how much Coles shares may dish out in dividends.

Commsec suggests that Coles may pay an annual dividend per share of 65 cents in FY23 and 66 cents in FY24. This would represent forward grossed-up dividend yields of 5.4% and 5.5%, respectively.

Foolish takeaway

It seems that Coles shares are going to be the better source of dividends in the next few years. But that may not necessarily mean that Woolworths shares will produce smaller total returns. Woolworths may be able to achieve stronger earnings per share (EPS) growth, leading to more attractive share price growth.

The post Battle of the dividends: Do Woolworths shares pay more than Coles? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Almost ready to retire? Here’s why I’d buy Coles shares for dividends
• Use the ASX 200 market correction to retire early. Here’s how
• If you bought $15,000 worth of Woolworths shares this year, here’s how much dividend income you’d have
• Markets are nervous. Why waiting to buy these ASX 200 shares could prove expensive
• How big will the Coles dividend be in 2023?

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

from The Motley Fool Australia https://ift.tt/LcRO1yb

Are you looking for dividend shares to boost your income portfolio? If you are, you may want to check out the two listed below that have been tipped to provide attractive yields.

Here’s what you need to know about these ASX dividend shares today:

Dicker Data Ltd (ASX: DDR)

The first 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.

Dicker Data could be a quality option for income investors thanks to its long track record of growth and its positive long-term outlook. The latter will be supported by the company’s recent capital raising which is funding a 70% increase in its warehouse capacity. This provides the company with a significant runway to capture additional growth in the coming years and is also expected to deliver cost savings.

Goldman Sachs is currently forecasting fully franked dividends per share of 43.6 cents in FY 2022 and 49.7 cents in FY 2023. Based on the current Dicker Data share price of $10.63, this equates to yields of 4.1% and 4.7%, respectively.

And while Goldman only has a neutral rating on its shares, its price target of $12.25 offers upside potential of 15%.

Westpac Banking Corp (ASX: WBC)

Another ASX dividend share that is expected to provide attractive dividend yields is Westpac.

It is of course Australia’s oldest bank and one of the big four players in the Australian market. As well as its eponymous Westpac brand, it also owns other banking brands such as Bank of Melbourne and St Georges.

Thanks to a combination of rising interest rates and its cost cutting plans, the bank has been tipped to pay big dividends in the coming years.

For example, Goldman Sachs is forecasting fully franked dividends per share of 148.4 cents in FY 2023 and 160 cents in FY 2024. Based on the current Westpac share price of $23.99, this will mean yields of 6.2% and 6.7%, respectively.

The good news is that Goldman Sachs also sees plenty of upside for the bank’s shares. It currently has a conviction buy rating and $27.60 price target on the bank’s shares.

The post These ASX dividend shares have 4%+ forecast yields appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Here’s the Westpac dividend forecast through to 2025
• Morgans names the best ASX 200 dividend shares to buy
• Are ASX 200 bank shares a buying opportunity hiding in plain sight?
• If I’d invested $1,000 in Westpac shares at the start of 2022, here’s how much I’d have now
• Brokers say these ASX 200 dividend shares are buys

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Dicker Data Limited. The Motley Fool Australia has positions in and has recommended Dicker Data Limited. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/qfwDP9V

Can you believe it? December is almost upon us.

That means that, after a crazy year in share markets, expert predictions for 2023 will start to pop up.

One of the first cabs off the rank is Switzer Financial Group founder Peter Swtizer.

“I reckon the [Australian] market goes up 10% next year,” he told Switzer TV Investing.

“Add on dividends of 4% and franking too, and there’s 15% or 16%.”

As for individual stocks, he named three that are his favourites for next year:

The stock capable of doubling in 2023

Virtual networking provider Megaport Ltd (ASX: MP1) has seen its share price tumble a hair-raising 66% year to date.

But Switzer is convinced it is poised for a turnaround.

“Megaport is one I really like,” he said.

“Analysts really like it. At least two of the seven analysts see Megaport with over 100% gain over the next year.”

The returns won’t happen overnight, he added, and will need the market’s “forgiveness of the tech sector”.

“That will come when inflation peaks out in the US — and I think it’s already already happening — and interest rates have peaked as well.”

Those two conditions might still take some time to play out, Switzer warned.

“So it might not be until the second half of 2023 [that] the tech rebound will happen.”

Great world-class company

Healthcare giant CSL Limited (ASX: CSL) seems to be a favourite among analysts at the moment, and Switzer is no exception.

“CSL is a company that’s always worth investing in,” he said.

“The share price is still below what most analysts believe it will be this year.”

Consensus price target seems to be around $320, according to Switzer, but he reckons it will end up higher than that this time next year.

“CSL — great company, world class — has been going sideways for a number of years. It tends to do that and it takes off again.”

Buy this stock while it’s still out of favour

Electronics retailer JB Hi-Fi Limited (ASX: JBH) is Switzer’s third favourite for 2023.

“These sorts of companies are out of favour at the moment because interest rates are rising,” he said.

“People who have to make their mortgages on higher repayments will have less money to spend.”

But he feels JB Hi-Fi is “a good company” that’s worth considering as a long-term investment, with a nice income stream to keep investors going in the short term.

“JB Hi-Fi pays a really reasonably good dividend and is always a company of the future,” said Switzer.

“As the old saying goes, when great companies are being beat up by the market, it’s a good time to buy.”

The post ‘Over 100% gain next year’: Expert picks 3 best ASX shares for 2023 appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 3 ASX shares to combat the next market dip: experts
• I’d aim for $1 million in retirement buying just 10 ASX 200 shares
• Here are the top 10 ASX 200 shares today
• Why did ASX 200 retail shares lead the market to fresh 25-week highs today?
• Why this could be a ‘powerful driver of sector dominance’ for CSL shares: Wilsons

Motley Fool contributor Tony Yoo has positions in CSL Ltd. and MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. and MEGAPORT FPO. The Motley Fool Australia has recommended JB Hi-Fi Limited and MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/0P247pC

On Friday, the S&P/ASX 200 Index (ASX: XJO) finished the week with a small gain. The benchmark index rose 0.25% to 7,259.5 points.

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

ASX 200 expected to fall

The Australian share market looks set to start the week in the red following a mixed session on Wall Street on Friday night. According to the latest SPI futures, the ASX 200 is expected to open the day 9 points or 0.1% lower this morning. On Wall Street, the Dow Jones was up 0.45%, the S&P 500 fell slightly, and the NASDAQ dropped 0.5%.

Oil prices drop

ASX 200 energy shares such as Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) could have a tough start to the week after oil prices tumbled on Friday night. According to Bloomberg, the WTI crude oil price was down 2.1% to US$76.28 a barrel and the Brent crude oil price fell 2% to US$83.63 a barrel. Traders were selling oil due to concerns that soaring COVID cases in China could lessen demand.

Costa shares downgraded

The Costa Group Holdings Ltd (ASX: CGC) share price is fully valued according to analysts at Bell Potter. According to the note, the broker has downgraded the horticulture company’s shares to a hold rating with an improved price target of $2.90. It commented: “We downgrade our rating from Buy to Hold following the recent recovery in the share price.”

Gold price flat

Gold miners such as Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could have a subdued start to the week after the gold price traded flat on Friday. According to CNBC, the spot gold price was steady at US$1,754.93 an ounce during the session. A stronger US dollar put pressure on the precious metal.

Fletcher Building given buy rating

The Fletcher Building Limited (ASX: FBU) share price could be great value according to Goldman Sachs. This morning the broker initiated coverage on the building products company with a buy rating and $5.90 price target. While Goldman believes that key markets are at or near cyclical peaks, it believes “the share price captures the cyclical headwind (and more).”

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

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• If you bought $20,000 worth of Fortescue shares this year, here’s how much dividend income you’d have
• Here are the top 10 ASX 200 shares today
• Why did ASX 200 retail shares lead the market to fresh 25-week highs today?
• Why is the Allkem share price diving 8% today?
• Here are the 3 most heavily traded ASX 200 shares on Friday

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

from The Motley Fool Australia https://ift.tt/IciXHak

If you’re interested in adding some ASX growth shares to your portfolio, you may want to look at the two listed below.

These growth shares have recently been named as buys by experts. Here’s what they are saying about them:

Cochlear Limited (ASX: COH)

The first ASX growth share that has been named as a buy is Cochlear. It is one of the world’s leading hearing solutions companies.

Due to its portfolio of world class products in an industry with high barriers of entry, Cochlear has been tipped to grow strongly over the long term. Particularly given how the industry is benefiting from favourable tailwinds such as ageing populations.

Goldman Sachs is bullish on Cochlear and has a buy rating and $247.00 price target on its shares. Its analysts believe the company is well-placed to hit the top end of its guidance in FY 2023. The broker said:

In our view, the backdrop for this year appears relatively more favourable, and we see clear scope for COH to deliver at the upper-end of another solid guidance (+8-13% to $290-305m, with further accretion possible from the Oticon Medical transaction, which is yet to close).

IDP Education Ltd (ASX: IEL)

Another ASX growth share that has been named as a buy is IDP Education. It is a language testing and student placement company and a co-owner of the IELTS test.

The IELTS test is the English test that is trusted by more governments, universities, and organisations than any other. This puts the company in a great position to benefit from the growing number of people learning English globally.

Goldman Sachs is also a big fan of IDP Education. Last week, the broker reiterated its buy rating and $36.00 price target on the company’s shares. Its analysts believe that IDP’s shares are trading at an attractive level based on its growth potential. It said:

IEL is trading c.10% below its 5-yr average P/E. The stock is trading at a relatively undemanding 2.2x PEG based on its historic FY22 PE of 79x and forecast 35% FY22-25E 3-yr EPS CAGR.

The post Are these the ASX growth shares to buy for 2023? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 11 ASX shares that make Abrdn’s World Cup team
• Worried about a stock market crash? I’d buy these 5 rock-solid ASX shares to ride it out
• Experts name 3 of the best ASX growth shares to buy in November
• Which are the best ASX 200 shares to buy now for 2023?
• Morgans names 2 fast-growing ASX 200 shares to buy now

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 Cochlear Ltd. and Idp Education Pty Ltd. The Motley Fool Australia has recommended Cochlear Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/VdJWizk

I think that ASX dividend shares are a great way to build a nest egg and live off the dividends. Investors that are getting ready to retire will want to know about how effective businesses can be for passive income.

In my opinion, businesses are very capable of producing dividends and growth because of what they do with their profit.

A company will hopefully generate a profit each year. It can then decide to pay some of that out as dividends and keep the rest to re-invest and grow the business. For example, it could decide to pay out perhaps half of its net profit and re-invest the other half.

While a lot of businesses do pay dividends, there are only a few that pay out all of their annual operating profit each year (such as Deterra Royalties Ltd (ASX: DRR) and Charter Hall Long WALE REIT (ASX: CLW)).

But, this financial flexibility allows investors to spend all of their dividends, if they want to, and still potentially experience a bigger payout a year later.

How dividend yields are boosted

When savers utilise a term deposit to get a safe return, the quoted interest rate is how much of a return they’ll get at the end of the period. Some savers may need to pay some tax on that interest when they do their tax returns.

However, fully franked dividends from ASX dividend shares offer investors a very interesting form of passive income.

A business like Telstra Corporation Ltd (ASX: TLS) could have a fully franked dividend yield of 4.25%. But, that dividend also comes with franking credits.

It’d be useful to read the above linked explainer about franking credits. But, it’s essentially the corporate tax paid by a company which is then ‘attached’ to the dividend for the shareholder as a refundable tax offset. This is so that the profit generated by the company isn’t doubled taxed – once at the company level and then once at the individual level.

For low tax rate individuals, (some) franking credits can be refunded when the tax return is done. Franking credits reduce the tax owed by an individual with a higher taxable income and tax rate.

The Telstra fully franked dividend yield turns from 4.25% into a grossed-up dividend yield of 6%. Franking credits make up almost a third of the total grossed-up yield, or said another way they can boost the cash yield by almost half.

But, it’s important to remember that an ASX dividend share isn’t worth buying just because it pays fully franked dividends.

Compound interest can do the heavy lifting

For investors that are a long way away from retiring, compounding can help grow a portfolio.

While it’s impossible to say what the future returns of the share market will be, historically the ASX share market has returned an average return per annum of around 10%.

Using the Moneysmart calculator, starting at $0 and investing $1,000 a month for 25 years turns into $1.18 million if it returned 10% per annum.

Generating annual dividends of $70,000

The dividend yield and the size of the portfolio determine how much annual dividend income is generated.

For example, a $1.5 million portfolio with an average dividend yield of 5% would generate $75,000 of annual dividends.

But, a $1 million portfolio with a 7% dividend yield would make $70,000 of annual dividends.

Higher dividend yields aren’t necessarily riskier than a lower dividend yield, but it could suggest the business is in a more volatile industry.

I have written a number of articles in recent weeks about potential (retirement) ASX dividend shares like this one, this one and this one.

In one of the articles, I reference Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) which has grown its dividend every year since 2000, though dividends are not guaranteed. It has a grossed-up dividend yield of 3.7%.

I also mentioned Metcash Limited (ASX: MTS), the supplier of IGAs, which has a grossed-up dividend yield of 7.3%.

By FY24, Wesfarmers Ltd (ASX: WES), the owner of Bunnings and Kmart, could pay a grossed-up dividend yield of around 6%.

Then there’s a name like BHP Group Ltd (ASX: BHP) – the ASX’s biggest company – which is projected to pay a grossed-up dividend yield of 10% in FY23 according to Commsec. But, with how resource prices change, the dividend yield could be smaller in FY24.

The post Almost ready to retire? How to generate $70k per year of passive income from ASX dividend shares appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Does an investment in Fortescue shares provide the ‘healthiest’ ASX exposure to iron ore?
• 3 reasons this fundie is still bullish on ASX mining shares
• Could buying Wesfarmers shares give you $10,000 in annual dividend income by retirement?
• BHP share price has ‘no upside’: Goldman Sachs
• ‘Rare opportunity’: Expert explains why he just added this ASX 200 share

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 Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited, Washington H. Soul Pattinson and Company Limited, and Wesfarmers Limited. The Motley Fool Australia has recommended Metcash Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/Yo1IJxj

If you’re looking to boost your income portfolio next week, then you may want to look at the shares listed below.

Here’s why these ASX dividend shares could be worth considering right now:

Baby Bunting Group Ltd (ASX: BBN)

The first ASX dividend share that has been tipped as a buy for income investors is Baby Bunting.

It is a leading baby products retailer with a growing store network across Australia and New Zealand.

Morgans remains positive on Baby Bunting despite “an unwelcome surprise” from margin weakness just two months after management “expressed an ambition to hold or increase its gross margins in FY23.”

This is because the broker believes that the significant share price weakness since its update has more than compensated for this disappointment. Especially given how some of these margin pressures are transitory and its “compelling opportunities to grow its share of a growing market.”

Morgans has an add rating and $3.60 price target on its shares. As for dividends, the broker is forecasting fully franked dividends per share of 14 cents in FY 2023 and then 16 cents in FY 2024. Based on the current Baby Bunting share price of $2.60, this will mean yields of 5.4% and 6.15%, respectively.

Transurban Group (ASX: TCL)

Another ASX dividend share that has been tipped as a buy is Transurban.

It is one of the world’s leading toll road operators with a portfolio of important roads and a lucrative pipeline of development projects. The former include CityLink in Melbourne, the Cross City Tunnel in Sydney, and AirportlinkM7 in Brisbane.

JP Morgan is a fan of the company and has a buy rating and $15.00 price target on its shares. The broker has been pleased with improving traffic trends and highlights the company’s positive exposure to inflation.

As for dividends, JP Morgan expects dividends per share of 60 cents in FY 2023 and then 63 cents in FY 2024. Based on the current Transurban share price of $14.28, this implies yields of 4.2% and 4.4%, respectively.

The post Buy these ASX shares for their dividends: analysts appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 5 ASX 200 shares Macquarie just recommended its clients buy
• 3 ultra-high-yield ASX dividend shares you might regret not buying at these prices
• Will ASX 200 shares bottom before the year is out? Here’s Macquarie’s ‘best guess’
• Experts say these ASX dividend shares are buys today
• Here’s why the Transurban share price can ‘reap the benefits’: expert

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

from The Motley Fool Australia https://ift.tt/zoHX51p

Perhaps no ASX 200 dividend share has gotten more attention in recent years than Fortescue Metals Group Limited (ASX: FMG).

Fortescue shares are notoriously volatile. This iron-ore mining company has fluctuated between $14.50 and $22.99 a share over just the past 12 months, after all.

But no one can take the fact that Fortescue has been absolutely pouring cash into shareholders’ pockets in recent years.

But exactly how much cash are we talking about for 2022? That’s what we’ll answer today.

How much income would $20,000 worth of Fortescue shares have yielded in 2022?

Let’s assume an investor bought $20,000 worth of Fortescue shares at the start of 2022. The company finished up 2021 trading at a share price of $19.21, so we’ll use that as our benchmark.

So $20,000 would have bagged our hypothetical investor 1,041 Fortescue shares at this price, with a little change left over.

Fortescue has once again funded two dividend payments for its shareholders over this year. The first was the interim dividend from March, worth 86 cents per share. The second was the September final dividend that came in at $1.21 a share. Both payments were fully franked.

These dividends equate to the second-highest annual dividend Fortescue has ever paid. The highest was in 2021, which saw an interim dividend of $1.47 per share, and a final dividend of $2.11.

So our 1,041 Fortescue shares would have granted our investor a payment of $895.26 in dividend income. The final dividend would have yielded up another $1,259.61, bringing the total for 2022 to $2,154.87.

That represents a very healthy yield on our cost base of 10.78%. Including Fortescue’s full franking, that grosses up to a pleasing 15.39%.

Fortescue has had a mildly disappointing year, share price-wise, though. Currently, the miner’s shares are down 4.58% year-to-date. Saying that, investors are still up by 10.18% over the past 12 months though. Over the past five years, Fortescue has appreciated by a whopping 316%.

The post If you bought $20,000 worth of Fortescue shares this year, here’s how much dividend income you’d have appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Skin in the game: The ASX share in my portfolio I’m most excited about
• Here are the top 10 ASX 200 shares today
• Why did ASX 200 retail shares lead the market to fresh 25-week highs today?
• Why is the Allkem share price diving 8% today?
• Here are the 3 most heavily traded ASX 200 shares on Friday

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.

from The Motley Fool Australia https://ift.tt/kB9Y31i