I decided to invest in Fortescue Metals Group Limited (ASX: FMG) shares in 2021 after a sizeable fall of its share price. But, it wasn’t the easiest decision to make because there are a number of different factors to consider.

In the long term, I think companies that can grow their revenue and margins are the ones that can deliver attractive compounding returns.

Businesses that are able to scale globally have large addressable markets, which means they have more room to grow. Names like Altium Limited (ASX: ALU), WiseTech Global Ltd (ASX: WTC), Xero Limited (ASX: XRO) and Pro Medicus Ltd (ASX: PME) are examples are ASX tech shares that have done this very well.

However, ASX mining shares are not typically known for that sort of growth profile. So, I believe it’s wise for investors to go into resource businesses with their eyes wide open about how things can go up and down, sometimes like a rollercoaster.

What is the iron ore price?

One of the first things that I think it’s worth questioning is what Fortescue’s key commodity is priced at.

Most readers have probably heard of the cliched phrase ‘buy low, sell high’. I believe it’s a good idea to take that approach when waiting for the right time to buy an iron ore miner.

Supply and demand can have a significant impact on the iron ore price. The rise and fall of the amount of money that Fortescue can get for its production per tonne can have a big impact on how much net profit after tax (NPAT) and cash flow Fortescue can generate.

It may seem obvious to say, but the Fortescue share price rises when the iron ore price goes up and drops when the iron ore price goes down. A lower iron ore price can prove an opportunistic time to invest.

I’m happy to start thinking about buying Fortescue shares when the iron ore price drops below US$100 per tonne. According to Commsec, the iron ore price was sitting at US$83 per tonne on Friday, comfortably below the level I’d like to start looking at the iron ore miner.

How much could the Fortescue dividend fall?

With an expectation that Fortescue’s dividend will sometimes fall, I believe it’s wise to anticipate that the company won’t pay a big dividend every year. However, I still want to see and receive decent cash flow for owning a resource business like this.

Bear in mind when the Fortescue share price drops, it can boost the prospective dividend yield.

According to Commsec, the Fortescue annual dividend could fall to just $1.02 per share by FY24. But, at the current share price, that would still equate to a grossed-up dividend yield of 9.2%.

So, I can see from this that at the current level, investors can still be pleasingly rewarded during lean times for the iron ore price.

Is it making good progress with its green hydrogen?

The main reason why I invested in Fortescue is that it’s diversifying away from just iron ore, and the business is investing heavily in that.

It aims to become a global power in green hydrogen. It’s looking to produce millions of tonnes of it by the end of the decade. This could be very helpful for the world’s decarbonisation. Fortescue aims to make hydrogen by just using water, powering the process with renewable energy. This is being done through the subsidiary Fortescue Future Industries (FFI).

Over time, I think this segment will become increasingly important for the Fortescue share price.

The company is betting billions of dollars on creating a worldwide portfolio of green hydrogen production facilities.

It has already signed on large clients that want to buy large amounts of green hydrogen in the coming years, including European energy giant E.ON.

In its latest quarterly update, Fortescue reminded investors that it signed a deal with energy infrastructure developer Tree Energy Solutions in October, which aims to accelerate the development of a “world-leading green hydrogen and green energy import facility” in Germany.

It also announced last month that Fortescue and Incitec Pivot Ltd (ASX: IPL) had progressed with planning for the conversion of Incitec Pivot’s Gibson Island ammonia facility to run on green hydrogen to its final stages, with the start of front-end engineering design as well as executing a framework agreement to govern the project through to a final investment decision.

In summary, I think this part of the business is going well.

Foolish takeaway

After considering these things, I think that the Fortescue share price looks attractive to consider for the long term. However, I will point out that a lot of Fortescue’s revenue comes from China, so what goes on with the Asian superpower is very important – it’s a risk worth keeping in mind.

The post Looking to buy Fortescue shares? Here are the questions I asked before jumping in appeared first on The Motley Fool Australia.

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More reading

• Hotels, hurt feelings, and HR hassles, but Fortescue’s biggest shareholder still got richer this week
• What’s the forecast for the iron ore price right now?
• Which ASX 200 mining shares managed to dig up gains in October?
• Here’s the Fortescue dividend forecast through to 2027
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. 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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At the start of each week, I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Betmakers Technology Group Ltd (ASX: BET) has become the most shorted share on the Australian share market after its short interest rose to 15%. This betting technology company’s shares are down 69% this year but short sellers appear to believe they can keep falling.
• Flight Centre Travel Group Ltd (ASX: FLT) has dropped from the top spot at long last after its short interest eased to 14.85%. Some short sellers may believe the worst is over for Flight Centre. Though, there’s still an abnormally high level of shares held short.
• Block Inc (ASX: SQ2) has seen its short interest remain flat at 12.1%. Short sellers will have been disappointed to see this payments company’s shares shoot higher last week after a strong quarterly update.
• Megaport Ltd (ASX: MP1) has seen its short interest fall to 11.6%. Megaport’s shares came under pressure recently following the release of a soft quarterly update.
• Domino’s Pizza Enterprises Ltd (ASX: DMP) has seen its short interest remain at 11.1%. This pizza chain operator’s shares sank into the red last week after a very disappointing trading update at its AGM.
• Perpetual Limited (ASX: PPT) has seen its short interest rise to 11.1%. This fund manager’s shares charged higher last week after receiving a takeover approach.
• Breville Group Ltd (ASX: BRG) has seen its short interest rise to 9%. Concerns that the uncertain economic backdrop could impact consumer spending appears to be weighing on sentiment.
• Sayona Mining Ltd (ASX: SYA) has entered the top ten with short interest of 8.9%. This may be due to valuation and funding concerns for this lithium developer.
• Nanosonics Ltd (ASX: NAN) has short interest of 8.6%, which is up week on week. Short sellers continue to target this infection prevention company’s shares due to its business model change in the key US market.
• Temple & Webster Group Ltd (ASX: TPW) has short interest of 8.3%, which is down week on week. Valuation concerns may be behind this high level of short interest. Temple & Webster trades at ~70x FY 2023 earnings.

The post Here are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

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• How did Pendal shares fare today amid takeover talk and an earnings update?
• Here are the top 10 ASX 200 shares today
• Brokers name 3 ASX shares to buy today
• Why Allkem, Block, Bowen Coking Coal, and CSR shares are racing higher
• Block share price jumps 10% on Q3 beat

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 Betmakers Technology Group Ltd, Block, Inc., MEGAPORT FPO, Nanosonics Limited, and Temple & Webster Group Ltd. The Motley Fool Australia has positions in and has recommended Block, Inc. and Nanosonics Limited. The Motley Fool Australia has recommended Betmakers Technology Group Ltd, Dominos Pizza Enterprises Limited, Flight Centre Travel Group Limited, MEGAPORT FPO, and Temple & Webster Group Ltd. 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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Those invested in Wesfarmers Ltd (ASX: WES) shares, rejoice! One broker has tipped the stock to grow another 22% in the near future, while the company is expected to up its dividends.

That’s likely uplifting news for potentially downtrodden investors.

The Wesfarmers share price has suffered a major tumble in 2022, falling 24% year to date to trade at $45.44 today.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has dumped 9% so far this year.

So, why is Aussie broker Morgans bullish on Wesfarmers shares? Keep reading to find out.

Wesfarmers shares tipped to gain 22% amid rising dividends

The Wesfarmers share price could regain 22% on the back of the company’s retail businesses, management team, and balance sheet, according to Morgans.

The broker recently said Wesfarmers holds “one of the highest quality retail portfolios in Australia”. Its behind the likes of Bunnings, Kmart, Target, Catch.com.au, and Priceline.

It had a $4.3 billion net debt position at the end of financial year 2022 – down from a $109 million net cash position at the end of the prior year.

Though, the drop was largely due to a $2.3 billion capital return and the $1.9 billion of fully franked dividends handed to investors over the period.

Speaking of dividends, Wesfarmers has offered investors $1.80 per share in dividends over the last 12 months, leaving it trading with a 4% yield.

The broker tips its payouts to increase to $1.82 this financial year and to $1.89 next financial year, my Fool colleague James reports.

That would see the share trading with yields of 4% and 4.2% respectively, considering its current share price.

However, Morgans also thinks the Wesfarmers share price could lift to $55.60 – representing a potential 22.4% upside.

At that price, its forecasted dividends would see it with a 3.3% yield this financial year and a 3.4% yield next financial year.

The post Do Wesfarmers shares really offer 22% upside AND growing dividends? appeared first on The Motley Fool Australia.

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• Has this overlooked ASX 200 share really gained more than 1,200% in just 10 years?
• 5 things to watch on the ASX 200 on Monday
• Morgan Stanley tips how to pick the market bottom, but should you wait to buy ASX shares?
• Experts name 2 ASX 200 dividend shares to buy next week
• Hotels, hurt feelings, and HR hassles, but Fortescue’s biggest shareholder still got richer this week

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 positions in and has recommended Wesfarmers Limited. 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 coal shares have blasted ahead in the year to date, but could there be trouble ahead?

Coal shares include New Hope Corporation Limited (ASX: NHC) and Whitehaven Coal Ltd (ASX: WHC). For perspective, the S&P/ASX 200 Index (ASX: XJO) has slid 7% year to date.

Let’s take a look at the outlook for ASX 200 coal shares.

Could developments in China impact coal prices?

Whitehaven Coal shares have soared 284% year to date, while New Hope shares have exploded 191%.

However, moves from China to construct more coal-fired power plants could weigh on coal prices, according to analysts at ANZ.

In a research report late last week, commodity strategists Daniel Hynes and Soni Kumari said:

China is ramping up construction of coal-fired power plants amid an increased focus on energy security.

Following recent energy shortages, Beijing is looking to secure its energy system by adding 270GW of thermal capacity through 2025.

Approximately 197GW of capacity is currently under construction. The expansion could derail its plan to reach peak emissions by 2030.

On the flip side, European demand remains strong heading into winter. Commenting on the outlook overall, Hynes and Kumari said:

Coal faces upward pressure from strong European demand, though increasing domestic production in China could weigh on prices ahead of the peak heading demand season.

Whitehaven reported a record average coal price of $581 a tonne in the September quarter, up from $514 per tonne in the third quarter. However, the company’s managed run-of-mine (ROM) production fell 37% compared to the June quarter.

New Hope Corporation announced an on-market share buyback of up to $300 million last week. The company said:

The Board and Management consider that the company’s current share price does not accurately reflect the underlying value of the company’s assets and the buy-back represents an opportunity to enhance the value of the remaining shares on issue, as well as providing an opportunity to improve the liquidity of the stock.

Share price snapshot

New Hope shares have climbed 2% in the past month, while Whitehaven Coal shares have jumped 9%.

For perspective, the ASX 200 index (ASX: XJO) has climbed 1% in the last month.

The post Could China be about to rain on the ASX 200 coal share parade? appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• New Hope share price jumps on $300m buyback plans
• Why A2 Milk, New Hope, Perpetual, and Talga shares are charging higher
• Here are the top 10 ASX 200 shares today

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

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The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is having a tough start to the week.

In morning trade, the banking giant’s shares are down almost 4% to $24.54.

Why is the ANZ share price falling?

The good news for shareholders is that the weakness in the ANZ share price has nothing to do with a broker downgrade or a trading update.

Instead, today’s decline is almost entirely attributable to the bank’s shares trading ex-dividend this morning for its latest dividend.

When a share trades ex-dividend, it means that the rights to an upcoming dividend payment are now settled and will remain with shareholders that owned them at the close of play the previous trading session.

As a result, anyone buying shares today, will be buying shares without the rights to the dividend and they will remain with the seller. And given that you wouldn’t want to pay for something you won’t receive, the ANZ share price has dropped to reflect this.

The ANZ dividend

Last month, ANZ released its full year results for FY 2022. For the 12 months ended 30 September, ANZ reported a 16% increase in statutory profit after tax to $7,119 million and a 5% lift in cash profit from continuing operations to $6,515 million.

This allowed the ANZ board to declare a fully franked final dividend of 74 cents per share, bringing its full year dividend to 146 cents per share. This was up from 142 cents per share in FY 2021.

Based on the ANZ share price at Friday’s close, that final dividend equated to a yield of almost 3%. Eligible shareholders can now look forward to receiving this dividend next month on 15 December.

The post Why is the ANZ share price sinking 4% today? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Monday
• Brokers name 3 ASX shares to buy today
• 4 ASX 200 shares trading ex-dividend next week
• Hoping to bank the latest ANZ dividend? Read this
• Is Bendigo Bank the best bet for dividends out of all the ASX 200 bank shares?

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

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The Medibank Private Ltd (ASX: MPL) share price is up 1.06% in early trade following an update from the S&P/ASX 200 Index (ASX: XJO) health insurer on the October data breach.

Medibank shares were placed in a trading halt for two days at the company’s request on 13 October after news broke that customer medical data may have been hacked.

The initial fears proved founded, and the company again requested a trading halt later in October. When it resumed trading on 26 October, the Medibank share price closed down 18.1% on the day after the insurer revealed “significant amounts” of medical-related data from all of its customers may have been compromised.

Here’s what the company reported today.

What’s the latest response to the Medibank hack?

The Medibank share price is in the green after the company reiterated that it was taking “decisive action” related to the October cybercrime to protect its customers.

CEO David Koczkar also offered another “unreserved apology” to the impacted customers, saying the company understands the stress the data breach is causing them.

Medibank also reported it would not make any ransom payments to the criminal behind the hack.

Commenting on the company’s decision not to pay the ransom, Koczkar said:

Based on the extensive advice we have received from cybercrime experts, we believe there is only a limited chance paying a ransom would ensure the return of our customers’ data and prevent it from being published.

In fact, paying could have the opposite effect and encourage the criminal to directly extort our customers, and there is a strong chance that paying puts more people in harm’s way by making Australia a bigger target.

At this stage of the investigation, Medibank believes the hacker accessed the name, date of birth, address, phone number and email address of roughly 9.7 million current and former customers and some of their authorised representatives.

“We will continue to support all people who have been impacted by this crime through our Cyber Response Support Program,” Koczkar said. “This includes mental health and wellbeing support, identity protection and financial hardship measures.”

The Medibank share price may also be getting some reprieve after the insurer said it had not detected any additional “suspicious activity” in its systems since the 12 October breach. It is continuing to work closely with the Australian Cyber Security Centre and the Australian Federal Police on the matter.

Medibank advised all former and current customers to remain vigilant with any online communications and transactions.

How has the Medibank share price tracked in 2022?

The Medibank share price was in the green for the calendar year until the fallout from the cyber-attack saw investors hitting the sell button. As of this morning, Medibank shares are down 18% in 2022, compared to a 9% loss posted by the ASX 200.

The post Medibank share price lifts on cyberattack ransom update appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• ‘Close to bottom’: Expert names 3 bargain ASX shares to buy right now
• Here are the 3 most traded ASX 200 shares on Wednesday
• Could the Medibank share price be on the road to recovery?
• Why did the IAG share price just hit a new 52-week high?

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

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The Pilbara Minerals Ltd (ASX: PLS) share price has been one of the best performers in the S&P/ASX 200 Index (ASX: XJO) over the past year. It has only been the ASX coal shares that have significantly outperformed this ASX lithium share.

In just 12 months, Pilbara Minerals shares have gone up by 118%. More than doubling one’s money in a year, amid all the volatility, has been a great result for shareholders.

But, you might think that the company is now expensive after going up so much in a relatively short amount of time.

There are many different ways to value a business. But, one of the easiest ways to compare businesses is by looking at the price/earnings (P/E) ratio. This shows what multiple of the earnings the share price is currently valued at.

Not only can we use the last financial year to work out the valuation of a business, but if we can use the estimated earnings for the current/next financial year, then we can hopefully get a good insight into what the market is truly pricing a business at, including expectations.

What is the P/E ratio of the ASX lithium share?

Before I get to the valuation of the ASX lithium share, I’ll show some other P/E ratios to put it in perspective.

Businesses like ASX 200 bank shares are usually priced at a fairly low multiple of their earnings. Some sectors usually have a low P/E ratio if they are expected to grow slowly, have large balance sheets and/or if their earnings are expected to be (at best) volatile/uncertain.

I’ll use the profit projections from Commsec to demonstrate some other valuations.

National Australia Bank Ltd (ASX: NAB) shares are valued at 13 times FY23’s estimated earnings.

Commonwealth Bank of Australia (ASX: CBA) shares are valued at 18 times FY23’s estimated earnings.

Wesfarmers Ltd (ASX: WES) shares are valued at 24 times FY23’s estimated earnings.

CSL Limited (ASX: CSL) shares are valued at 34 times FY23’s estimated earnings.

WiseTech Global Ltd (ASX: WTC) shares are valued at 76 times FY23’s estimated earnings.

What about the Pilbara Minerals share price?

According to estimates on Commsec, the ASX lithium share is priced at 7.6 times FY23’s estimated earnings. In other words, it is valued at under 8 times its projected earnings for the 2023 financial year.

By using that metric, it makes it seem like the miner is the cheapest business out of all the ones that I’ve mentioned.

Is the Pilbara Minerals share price cheap?

Some, perhaps many, investors wouldn’t say it’s cheap.

At the moment, the miner is making a lot of cash flow and net profit after tax (NPAT).

But, it’s benefiting from the huge rise in the lithium price.

On 26 October 2021, just over a year ago, the first business announced the result of its third Battery Material Exchange (BMX) auction. It said it sold 10,000 dry metrics tonnes (dmt), with the highest bid being US$2,350 per dmt. This equated to a price of approximately US$2,629 per dmt after accounting for lithia content (and including freight costs).

A year later, on 24 October 2022, the business announced it had sold 5,000 dmt for US$7,255 per dmt. This equated to a price of approximately US$8,000 per dmt after adjusting for lithia content and including freight costs.

It seems almost certain that lithium demand will continue to rise in the coming years as electric vehicle production and battery usage grow.

But, will the lithium price stay elevated? How much more lithium supply is going to come onto the market?

If the lithium price were to stay at this level for a decade, then the Pilbara Minerals share price may look cheap today, particularly as it gets involved in more of the lithium value chain.

But, a low P/E ratio for FY23 alone doesn’t make it cheap. Brokers like UBS and Credit Suisse both have sell ratings on the business, with price targets that imply a drop of at least 40%. They suggest that other large lithium miners, such as Allkem Ltd (ASX: AKE) could be better value.

The post With a forward P/E ratio of 8, is the Pilbara Minerals share price actually cheap? appeared first on The Motley Fool Australia.

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• Here are the 3 most traded ASX 200 shares on Friday
• Why are ASX lithium shares smashing the market today?
• Here are the 3 most traded ASX 200 shares on Thursday
• Is Pilbara Minerals the hottest stock on the ASX 200 right now?
• Here are the 3 most traded ASX 200 shares 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.

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National Australia Bank Ltd (ASX: NAB) shares are in focus this week with the S&P/ASX 200 Index (ASX: XJO) bank share scheduled to release its full-year result for FY22. With the report being so close, would it be worthwhile to buy NAB shares?

NAB is expected to release its result on 9 November 2022.

It will tell investors about various financial measures including the (cash) net profit after tax (NPAT), its lending profitability margins, its costs, the arrears of its loan book, its bad debt provisioning, the dividend, the outlook and even more areas.

Is the NAB share price a buy?

According to reporting by The Australian, the broker Morgan Stanley thinks that NAB will report “another clean result” and generate cash profit of $7.2 billion.

The broker expects the FY22 second-half profit, before provisions, to be $5.5 billion, while the cash profit (excluding notable items) could be $3.7 billion. This compares to consensus estimates of $5.3 billion and $3.6 billion respectively.

Morgan Stanley analyst Richard Wiles said:

We expect quite a clean result, but we think investors will be disappointed if earnings don’t come in above consensus.

The outlook for the first half of FY23 should be positive, but we’ll be watching for differences versus peers in the size of mortgage headwinds, deposit tailwinds and mix impacts.

The broker rating on NAB is equal-weight, which is like a hold. Morgan Stanley’s price target on NAB, which is where it thinks the NAB share price will be in 12 months, is $29.60. That implies a possible 8% fall over the next year.

Based on Morgan Stanley estimates, NAB is valued at 15 times FY22’s estimated earnings with a FY22 grossed-up dividend yield of 6.7%.

What do other brokers think?

Morgans currently has a hold rating on the business, with a price target of $30.30. That implies a possible fall of approximately 5%. This broker thinks that the NAB share price is valued at 14 times FY23’s estimated earnings, with a possible grossed-up dividend yield of 6.9%.

Citi rates NAB shares as a buy, with a price target of $32.75. This implies a slight rise for the ASX bank share. It’s expecting an attractive increase in the lending profit margin (the net interest margin (NIM)).

On Citi’s numbers, the NAB share price is valued at 15 times FY22’s estimated earnings with a potential grossed-up dividend yield of 6.7%.

My view on whether to buy at this NAB share price

NAB shares have risen 6.5% over the past month and are up close to 12% since 3 October 2022.

I do think that NAB is now one of the best banks to own on the ASX. Short-term profitability is headed up thanks to rising interest rates. But, I’m keeping in mind that loan arrears could worsen if some households are unable to absorb the cost of the higher interest rates. Investing is a long-term activity, so I think we can’t ignore what could be happening by the start of FY24.

I’d be happy to wait to see the result before buying NAB shares.

The post Are NAB shares a buy ahead of this week’s results? appeared first on The Motley Fool Australia.

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More reading

• Brokers name 2 ASX 200 dividend shares to buy
• How much could I expect to make in a year if I bought $5,000 of NAB shares right now?
• Is Bendigo Bank the best bet for dividends out of all the ASX 200 bank shares?
• 3 ‘bullish’ ASX shares to buy as FOMO grips the market: expert
• If you invested $1,000 in NAB shares 5 years ago, here’s how much you’d have today

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

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If you’re looking for dividend shares to buy, then Morgans has you covered.

Listed below are two of the best ASX dividend shares to buy this month according to its analysts. Here’s what they are saying:

Dalrymple Bay Infrastructure Ltd (ASX: DBI)

Morgans is a fan of this coal terminal operator and is expecting some big dividend yields from its shares in the coming years. The broker currently has an add rating and $2.67 price target on the company’s shares.

It commented:

DBI holds the 99 year lease to the 85 Mtpa Dalrymple Bay Coal Terminal, of which c.80% of throughput is metallurgical coal (used in steelmaking). DBCT offers the cheapest export route-to-market for users within its Bowen Basin catchment region. DBCT is fully contracted from 2023 to 2028. In the current low interest rate environment, income-oriented investors will be attracted to DBI’s high cash yield and commitment to 1-2% [now 3% to 7%] pa DPS growth.

Its analysts are forecasting dividends per share of ~20 cents in FY 2022 and ~21 cents in FY 2023. Based on the latest Dalrymple Bay Infrastructure share price of $2.48, this will mean yields of 8% and 8.5%, respectively.

Macquarie Group Ltd (ASX: MQG)

Morgans thinks that this investment bank could be a top option for income investors. It currently has an add rating and $214.30 price target on its shares.

The broker likes Macquarie due to its exposure to long term structural growth markets. It commented:

We continue to like MQG’s exposure to long-term structural growth areas such as infrastructure and renewables. The company also stands to benefit from recent market volatility through its trading businesses, while it continues to gain market share in Australian mortgages.

In respect to dividends, the broker is expecting partially franked dividends of $7.05 per share in FY 2023 and $7.36 per share in FY 2024. Based on the current Macquarie share price of $170.37, this implies yields of 4.1% and 4.3%, respectively.

The post Top broker names 2 ASX dividend shares to buy now appeared first on The Motley Fool Australia.

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More reading

• Top brokers name 3 ASX shares to buy next week
• Morgans names 3 of the best ASX 200 shares to buy in November
• Would you like to bag the latest Macquarie dividend? Read this
• 4 ASX 200 shares trading ex-dividend next week
• Broker tips Macquarie share price to rise 25%

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 Macquarie Group Limited. 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 will be one to watch on Monday.

This follows the release of Australia’s oldest bank’s full year results for FY 2022.

Westpac share price on watch following FY 2022 results

• Statutory net profit up 4% to $5,694 million
• Cash earnings down 1% to $5,276 million
• Fully franked final dividend of 64 cents per share
• FY 2022 dividend up 6% to $1.25 per share
• Net interest margin (NIM) down 17 basis points to 1.87%
• Costs down 19% excluding notable items

What happened in FY 2022?

For the 12 months ended 30 September, Westpac reported a 1% decline in cash earnings to $5,276 million. This was driven by weakness in the consumer and business segments, which offset growth in New Zealand and the institutional business.

Westpac Consumer reported an 11% decline in cash earnings to $3,291 million due to a lower NIM and higher impairment charges. Net loans increased 3% or $11.9 billion thanks largely to owner-occupied mortgages. Deposits increased $14.2 billion or 5% and expenses were down 4% from FY 2021. Positively, over the second half, core earnings were 10% higher.

Westpac Business posted a 15% decline in cash earnings to $918 million or 7% excluding notable items. Expenses were down 15% year over year.

Westpac Institutional Bank reported a $1.2 billion increase in cash earnings. This was due to their being no notable items in FY 2022. Excluding notable items from the previous year, cash earnings were up 50% thanks to a 16% reduction in expenses, a 20% increase in net interest income, and lower impairments.

In New Zealand, Westpac posted a 15% increase in cash earnings to $1,165 million. Excluding notable items, such as the gain on sale of NZ Life Insurance, cash earnings were down 2% year over year. Core earnings rose 6% over the second half.

The Specialist Businesses segment reported a cash earnings loss of $723 million. This was driven largely by the $1.1 billion loss on the sale of the Australian Life Insurance business.

Despite posting an overall decline in cash earnings for the year, that didn’t stop the Westpac Board from declaring a fully franked full year dividend of $1.25 per share, up 6% on FY 2021.

How does this compare to expectations?

The good news for the Westpac share price today is that this result appears to have come in ahead of expectations.

According to a note out of Goldman Sachs, its analysts were expecting a 4% decline in cash earnings (before one-offs) to $5,140 million and a full year dividend of $1.23 per share.

Management commentary

Westpac CEO Peter King was pleased with the result. He said:

In 2022, we’ve delivered a solid financial result and made steady progress on our strategic priorities. We’ve built positive momentum and positioned the company for the future. I’m pleased with our overall performance. We sharpened our focus on core banking, reduced costs, and improved service to customers.

Westpac returned to growth in our key segments of Australian mortgages and business lending. In the second half, our banking divisions delivered strong growth in core earnings on the back of good cost and margin management. Our balance sheet is in good shape across capital, liquidity and asset quality and we’ve determined a final, fully franked ordinary dividend of 64 cents per share.

Outlook

Mr King appears positive on the bank’s future and is expecting further cost reductions. He explained:

After the work of the past two years, Westpac is now a simpler, stronger bank. We’re continuing to get our costs down, we’re simplifying our operations and our program of co-locating branches in similar locations is removing duplication. At the same time, we are investing in the right places, such as the launch of our digital mortgage and new personal finance management tools in the Westpac app.

Our year-on-year results are solid and over the past six months in particular we have demonstrated momentum, with core earnings (ex-notable items) up 12% and our net interest income up 7%. Margins increased 5bps in the second half to 1.90% but they remain below historical levels.

Finally, Mr King spoke about the elephant in the room – inflation. Here’s what he had to say:

In Australia, consumer spending is resilient but as higher rates bite, we expect the heat to come out of the economy and inflation pressures to ease. Small business is one sector we are watching closely as consumption slows. Housing prices have fallen in recent months and this will continue into 2023. Credit growth is expected to ease. GDP growth will slow and unemployment will rise.

These will be necessary outcomes if we are to lower inflation. The economy remains robust and Westpac is well positioned to handle the road ahead. Our own portfolio is in good shape going into 2023.

The post Westpac share price on watch following FY22 results appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Morgans names 2 more of the best ASX shares to buy in November
• Own Westpac shares? What to expect from next week’s FY22 results
• Is Bendigo Bank the best bet for dividends out of all the ASX 200 bank shares?
• The Westpac share price soared 17% in October, what’s next?

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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 Corporation. 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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