ASX lithium shares are just all the rage on the share market right now. And why wouldn’t they be? The world is going crazy for electric vehicles (EVs) and lithium is the stuff that makes EV battery engines work.

In a recent investor presentation, Argo Investments Limited (ASX: ARG) demonstrated that global EV sales are expected to climb dramatically from about six million in 2022 to 30 million in 2030.

Consequently, global demand for lithium — while already big now — has a long runway ahead.

The lithium carbonate price has already hit yet another record high this month at US$78,384.93 per tonne.

The consensus among analysts is the long-term price will fall back to US$36,000 per tonne.

Some experts say that’s “far too low” but regardless, it would still be historically high. Two years ago, lithium was going for US$5,435 per tonne.

As a resource-rich nation that is already the world’s biggest lithium exporter, Australia is extremely well-positioned to capitalise on this trend.

Over the next year alone, the federal government forecasts the value of our lithium exports to rise to $13.8 billion in 2022-23, up from $4.9 billion in 2021-22.

Which ASX lithium shares should you buy?

The fun part of this lithium investing craze is that there are many ASX shares for investors to choose from.

On our own stock market, we’ve got pure-play lithium explorers, lithium mining and refining companies, and major miners that have recently diversified into lithium.

Here we pit two of the most popular options against each other. Core Lithium Ltd (ASX: CXO) shares vs. Allkem Ltd (ASX: AKE) shares.

Let’s review some of the key metrics and differences to try and determine which might be the better buy.

Should you buy Core Lithium shares?

Core Lithium shares are the best-performing ASX lithium shares in 2022, up 119% year to date.

In fact, Core Lithium is the fourth fastest-growing share out of the 500 shares that comprise the S&P/ASX All Ordinaries Index (ASX: XAO).

At the time of writing, the Core Lithium share price is $1.38, up 2.2% for the day so far.

The company has a market capitalisation of $2.55 billion.

Core Lithium is a lithium explorer. It is reportedly only months away from first production at its Finniss Lithium Project in the Northern Territory. The mine was officially opened last month.

Core Lithium recently increased its mineral resources and ore reserve estimate for Finniss.

About 80% of planned production from Finniss over its first four years of operations is currently covered by offtake agreements. That’s a great headstart on sales in anyone’s language.

The company’s latest report to the ASX covered the three months to 30 September. Bear in mind that Core Lithium is not yet producing any lithium, so it’s not making any money.

As my Fool colleague Brooke reported:

• Used $3.75 million of cash in operating activities
• Used $35.8 million in investing activities, including exploration and the purchase of equipment
• Ended the quarter with $95.5 million in cash and equivalents

Core Lithium announced a fully underwritten $100 million institutional placement on 30 September. The funds will be used to expand ramp up progress at Finniss.

Should you buy Allkem shares?

Allkem shares are up 32% in the year to date.

The Allkem share price is currently $14.75, up 4.65% for the day so far.

The company has a market capitalisation of $9.21 billion.

One of the biggest differences between Allkem and Core Lithium is that Allkem is producing lithium now.

As my Fool colleague Bernd recently covered, Allkem’s projects are primarily located in Argentina. It supplies lithium carbonate to a variety of industrial and technical sectors.

The miner is among the lowest-cost lithium producers in the world. It aims to triple its production by 2026. Management is aiming for a 10% share of global lithium production over the long term.

Another key difference between Core Lithium and Allkem is that Allkem is making money.

Here are the company’s FY22 results in summary:

• Revenue up 800% yoy to US$770 million
• EBITDAIX of US$513.1 million
• Consolidated net profit after tax (NPAT) of US$337 million, up from a loss of US$89.5 million in FY21

In its September quarter results, Allkem reported group revenue of US$298 million and a cash margin of approximately US$244 million. It reported group net cash of US$447 million, up US$28.9 million on the June quarter. The company revealed some cost pressures, as my Fool colleague James reported.

What do the experts think?

As amateur investors, it’s always a good idea for us to read the experts’ opinions on the ASX shares we’re looking to invest in. The experts can sometimes disagree, but what’s important is learning the information that led to them forming their views. They’re professionals and they’re likely to know more about each company than we do, and they’re likely to have considered factors we might not have thought about.

The Fool routinely reports on ratings changes and buy, sell, or hold recommendations from the top brokerage firms. As my Fool colleague James wrote yesterday, Macquarie is very positive on the outlook for Allkem. It has a 12-month share price target of $21 on Allkem, implying a 42% upside from here.

Last month, another Fool colleague Zach wrote that Refinitive Eikon data shows three out of three brokers covering Core Lithium rate it a buy. The consensus price target among them is $1.60. That implies a potential upside of 16% from here.

Who wins?

It’s impossible to give you all the information you need to make this important decision in one article.

Today, we’ve given you a snapshot of some key metrics and differences between the two companies.

From here, we suggest you read the Core Lithium annual report and the Allkem annual report.

You may find our article ‘How to choose which shares to buy‘ useful.

We also have a report ‘Investing in ASX lithium shares‘ where you can read about other companies in the lithium space.

The post Which is the better ASX buy, Allkem or Core Lithium shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has positions in Allkem Limited and Macquarie 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 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 Pointsbet Holdings Ltd (ASX: PBH) share price is once again in the red, falling another 2.4% on Friday. That brings its fall for the last two days to a whopping 8.6% despite no news having been released by the company in that time.

However, AUSTRAC has put the corporate bookmaking sector on notice as it launched an investigation into industry giants.

That same day, the Pointsbet share price plunged 6.4%. Today, it’s back in the red.

The Pointsbet share price is currently down 2.4%, trading at $2.01.

For comparison, the All Ordinaries Index (ASX: XAO) is lifting 0.3% right now.

Let’s take a closer look at the warning the watchdog has issued the industry.

Could this be weighing on the ASX bookmaker share?

The Pointsbet share price has tumbled over the last two sessions alongside some of its ASX-listed peers.

The share price of gambling and entertainment services provider Tabcorp Holdings Limited (ASX: TAH) slipped 1% yesterday, and is down 2.4% right now. And while that of Bluebet Holdings Ltd (ASX: BBT) went nowhere yesterday, it’s falling 6.8% today.

The gaming stocks’ falls come amid news AUSTRAC is intent on cracking down on suspected breaches of anti-money laundering and counter-terrorism financing among their peers.

AUSTRAC CEO Nicole Rose commented on the regulator’s latest probe, saying:

Sportsbet and Bet365 are amongst the largest operators in the corporate bookmaking sector. AUSTRAC is putting the whole industry on notice to lift their game.

AUSTRAC has appointed an external auditor to assess Sportbet’s and Bet365’s compliance with anti-money laundering and counter-terrorism financing legislation.

The watchdog will decide the extent of the probe and the bookmakers will pick up the bill. The outcome will form the regulator on whether action is required.

It comes just months after the watchdog commenced an enforcement investigation into Ladbrokes operator Entain Group following “an extensive supervisory campaign that assessed entities within the corporate bookmakers sector”.

Pointsbet, nor any other ASX-listed entity, were named in either of AUSTRAC’s releases. Though, it’s yesterday’s news that likely put focus on some of the stocks.

Pointsbet share price snapshot

This week’s falls are just the latest faced by the Pointsbet share price this year.

The stock has tumbled 70% since the start of 2022. It has also dumped 75% since this time last year.

Comparatively, the All Ordinaries Index has fallen 11% year to date and 9% over the last 12 months.

The post Why has the Pointsbet share price dumped 9% in 2 days? appeared first on The Motley Fool Australia.

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• Why is the PointsBet share price dropping today?
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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 positions in and has recommended Pointsbet Holdings Ltd. The Motley Fool Australia has recommended BlueBet Holdings Ltd and Pointsbet Holdings 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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Finding a future ASX 200 dividend heavyweight can be a very rewarding activity indeed. Even if a company is readily increasing its dividends over time, its share price will follow suit.

As such, getting in early before these share price rises can make for a very happy ASX share portfolio indeed. But of course, like any successful investment strategy, this is easier said than done.

So let’s look at an ASX 200 share today that one ASX expert reckons might fit this mould.

Alistair MacLeod of Wheelhouse Partners recently sat down with Livewire. When asked to name a sustainable dividend payer, MacLeod names Lottery Corporation Ltd (ASX: TLC). Lottery Corp was spun out of Tabcorp Holdings Ltd (ASX: TAH) earlier this year, so it’s a relative newcomer to the S&P/ASX 200 Index (ASX: XJO).

MacLeod doesn’t like the look of Lottery Corp’s old parent company Tabcorp right now, calling it a “sell” and noting its “flat” dividend growth prospects. however, it was a different story when it comes to Lottery Corp.

Why this expert thinks Lottery Corp shares are a winning ticket

Here’s what MacLeod had to say on why he chose Lottery Corp shares as a future dividend winner:

It’s actually a stock that hasn’t paid a dividend yet and is not likely to in the next six months because a lot of the profits are still going back to Tabcorp. But looking forward, this is a regulated monopoly. It’s expected to have around a 4% yield. If you think about the lottery business, most people know when you’re buying a lottery ticket, it’s a bit of a mug’s game.

So the same logic goes, selling lottery tickets is a great business. If you look at the cash flows of this company, depreciation’s higher than CapEx. So cash flows are bigger than earnings. So from an income investor’s perspective, your cash flows can be 130% of what your profits are. I think there’s a lot of runway for this stock from a dividend growth perspective in a very economically defensive environment or position.

MacLeod is asked whether a 4% dividend yield is attractive in these times of high inflation.

Here’s what he said:

Well, it’s a 4% yield that’s also growing at 10%. And then you’ve got the capital base growing as well. So yes, I think it’s a good place to be, even in an inflationary environment.

A future dividend heavyweight?

So Lottery Corp is a definite dividend winner in the eyes of this ASX expert. But MacLeod isn’t the only one eyeing off Lottery Corp right now.

My Fool colleague Tony recently covered the views of fund manager Firetrail. Lottery Corp shares are currently held by Firetrail’s Australian High Conviction Fund.

The fund manager likens Lottery Corp’s cash flow stability to that of an infrastructure asset. “More importantly, revenues have shown resilience through periods of softer economic growth,” the fundie said in a recent report.

So it seems this future ASX dividend share is getting a lot of love from investors right now.

The post The ASX 200 fledgling that’s a dividend heavyweight in the making: expert appeared first on The Motley Fool Australia.

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• 2 under-the-radar ASX shares Firetrail loves right now
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Arafura Rare Earths Ltd (ASX: ARU) share price is on hold today.

Arafura shares were put on ice before market open today and are worth 30.5 cents a piece. In today’s trade, the S&P/ASX 200 Index (ASX: XJO) is down 0.17%.

Let’s take a look at what this ASX rare earths explorer reported to the market this morning.

Trading halt

Arafura is exploring the neodymium and praseodymium (NdPr) rare earths project in the Northern Territory.

In today’s news, Arafura has requested a trading halt pending an announcement.

While the details of this announcement are not certain, Arafura has provided a potential clue in its announcement to the ASX today.

Arafura said the news relates to an “offtake agreement”. The company has requested the trading halt remains until this announcement or the start of trading on 8 November.

Arafura said:

The company is seeking a trading halt pending an announcement to the market regarding execution of a binding offtake agreement (MoU).

Arafura recently presented at a rare earths conference at the Australian National University.

The company said Nolans is the only NdPR project in Australia that plans to “mine and process ore to oxide at a single site”.

The wind turbine and electric vehicle (EV) markets are “competing for NdPR”, according to Arafura.

The company already has MOU’s with Hyundai Motor Corporation and GE Renewable Energy.

Arafura share price snapshot

The Arafura share price has surged almost 36% in the past year, while it has leapt 45% year to date.

In the past month, Arafura shares slipped 1.61%.

This ASX 300 rare earths has a market capitalisation of about $526.9 million based on the current share price.

The post Why have shares in ASX 300 rare earths miner Arafura just been halted? appeared first on The Motley Fool Australia.

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• Could this news be helping the Sayona share price light up today?
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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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Woodside Energy Group Ltd (ASX: WDS) shares could be looking cheap right now, according to experts.

Part of this reason is due to its annual dividend yield of 8.22%, which is one of the highest on the ASX, as well as a healthy fully franked dividend of $1.60 per share which was paid in October.

Shares of the global energy company are currently up 3.32% today, trading at $37.96 apiece.

The energy sector as a whole is in the green, too. In fact, the S&P/ASX 200 Energy Index (ASX: XEJ) is today’s best-performing sector index by a wide margin, currently up 2.82%.

Zooming out, the S&P/ASX 200 Index (ASX: XJO) is up 0.27% at the time of writing.

So let’s look at why a fund manager believes the Woodside share price could be heading higher.

What did the fund manager say?

Plato Investment Management managing director Don Hamson made some bullish comments about Woodside shares via Livewire today.

Hamson was asked to name a long-term sustainable dividend payer for 2023, with the requirement of also having a high dividend yield.

Hamson rated Woodside as a buy and said:

Well, we like the energy stocks, and we like that outlook. And longer term, we think Woodside’s a great stock. It’s got some quality assets. I know it’s in fossil fuels, but gas and LNG are on the pathway to lower emissions. It’ll help us get there. Obviously, it is benefiting from the Ukrainian crisis, but we think it’s got a great dividend outlook for a number of years.

Other experts also believe Woodside is a buy

Hamson was not the only one with a positive assessment of Woodside shares during October.

ThinkMarkets market analyst Carl Capolingua said he was bullish on Woodside’s positioning in the natural gas market. Capolingua believes there will be a natural gas shortage in the future and likes that 80% of Woodside’s business comes from this resource.

Earlier in the month, The Motley Fool’s Bruce Jackson picked Woodside as a buy due to its “dirt cheap” valuation and strong business fundamentals.

Jackson said:

Woodside is a beneficiary of the high oil and gas prices, and the lower Aussie dollar. It’s hard to imagine a better macroeconomic environment, yet at the same time, it’s equally hard to imagine what could derail the Woodside juggernaut.

Jackson also outlined other reasons to be bullish on Woodside shares, including the fact it is one of the highest-yielding ASX 200 stocks.

Woodside share price snapshot

The Woodside share price is up 72% year to date. At the same time, the ASX 200 is down 8% over the same period.

The company’s market capitalisation is around $69.76 billion.

The post With 8% yield, are Woodside shares a dividend no-brainer buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor Matthew Farley 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 team at Morgans has been busy running the rule over a number of S&P/ASX 200 Index (ASX: XJO) shares again this month.

Among its best ideas for November are the three ASX 200 shares listed below. Here’s what the broker is saying about them:

Macquarie Group Ltd (ASX: MQG)

This investment bank remains a top pick for Morgans. The broker believes Macquarie is well-placed for the long term thanks partly to structural drivers. 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.

Morgans has an add rating and $214.30 price target on Macquarie’s shares.

Telstra Corporation Ltd (ASX: TLS)

The broker is also very positive on this telco giant thanks to its successful turnaround. It also believes that Telstra’s recent restructure could unlock value for shareholders. It explained:

After a major turnaround, TLS has emerged in good shape with strong earnings momentum and a strong balance sheet. In late CY22 shareholders vote[d] on Telstra’s legal restructure, which opens the door for value to be released. TLS currently trades on ~7x EV/EBITDA. However some of TLS’s high quality long life assets like InfraCo are worth substantially more, in our view. We don’t think this is in the price so see it as value generating for TLS shareholders. This, free option, combined with likely reputational damage to its closest peer, following a major cybersecurity incident, means TLS looks well placed for the year ahead.

Morgans has an add rating and $4.60 price target on Telstra’s shares.

Treasury Wine Estates Ltd (ASX: TWE)

Finally, this wine giant is one of the broker’s top picks again this month. It believes Treasury Wine is well-placed to deliver strong earnings growth in the coming years. The broker commented:

TWE owns much loved iconic wine brands, the jewel in the crown being Penfolds. We rate its management team highly. The foundations are now in place for TWE to deliver strong earnings growth from the 2H22 over the next few years. Trading at a material discount to our valuation and other luxury brand owners, TWE is a key pick for us.

Morgans currently has an add rating and $15.71 price target on Treasury Wine’s shares.

The post Morgans names 3 of the best ASX 200 shares to buy in November appeared first on The Motley Fool Australia.

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• Would you like to bag the latest Macquarie dividend? Read this
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• How did the Telstra share price fare over October?

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 positions in and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended Macquarie Group Limited and Treasury Wine Estates 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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Two ASX mining shares are setting the bar high today.

While the All Ordinaries Index (ASX: XAO) remains slightly in the red during the Friday lunch hours, investors are rewarding these mining stocks after they both announced promising new discoveries.

One involves lithium, and the other platinum group elements (PGE).

So, without further ado…

ASX mining share leaps higher on lithium intersection

The first ASX mining stock that’s surging today is St George Mining Ltd (ASX: SGQ), with shares up 8.3%.

This comes after the explorer confirmed it has intersected more high-grade lithium in rock chip samples, with up to 3.25% Li2O, at its Mt Alexander Project in Western Australia.

St George said that this first drilling at the Jailbreak Prospect confirms that lithium-bearing pegmatites extend below surface.

The reverse circulation (RC) drilling is the first phase of the ASX mining share’s drill program at the Jailbreak Prospect. A diamond drill rig is scheduled to arrive within days to test for deeper extensions to the mineralised pegmatites.

Commenting on the results, St George Mining’s executive chairman, John Prineas said:

The latest assays for rock chip samples have delivered our highest-grade lithium values at Jailbreak, providing further validation of the potential for pegmatite-hosted lithium mineralisation at Mt Alexander. Significantly, the high-grade assays now extend across five pegmatites mapped across a broad area.

Which brings us to the second ASX mining share that’s flying higher today.

Palladium and platinum grab investor interest 

The Minerals 260 Ltd (ASX: MI6) share price is up 14.5% after the miner reported on the final assays from the June RC drill campaign at its Moora Project located in Western Australia.

According to the release, the results from the final RC holes confirmed the potential of the Moora Project to host palladium and platinum mineralisation.

Minerals 260 said it’s on track to commence a 10,000 to 15,000 metre drilling program by mid-November.

Commenting on PGE results sending the ASX mining share higher today, managing director David Richards said:

We have always been confident that the Moora and Koojan Projects are prospective for PGE mineralisation analogous to that discovered further south in the Julimar Mineral Province. The intersection of highly anomalous PGE and copper values coincident with a large gravity high confirms this view.

The post 2 ASX mining shares surging higher on new discoveries appeared first on The Motley Fool Australia.

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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 market may be having a subdued finish to the week but that hasn’t stopped one group of shares from racing higher.

In afternoon trade, a number of ASX lithium shares are smashing the market with solid gains. Here’s what’s happening:

Which ASX lithium shares are outperforming?

Here’s a summary of how some popular ASX lithium shares are performing:

• The Allkem Ltd (ASX: AKE) share price is up 5%
• The Liontown Resources Ltd (ASX: LTR) share price is up 2.5%
• The Mineral Resources Limited (ASX: MIN) share price is up 4%
• The Pilbara Minerals Ltd (ASX: PLS) share price is up 2.5%

Why are they rising?

Investors appear to have been buying lithium shares today after a strong night on Wall Street for US listed lithium stocks despite broad market weakness.

The likes of SQM, Livent, and Albemarle recorded gains of at least 3% after investors responded positively to the latter’s quarterly update.

According to Reuters, Albemarle, which is the world’s largest lithium producer, posted a better-than-expected quarterly profit and lifted its annual forecast thanks to surging prices and demand for the electric vehicle battery metal.

Albemarle reported third-quarter net profit of US$897.2 million or US$7.61 per share, up from a net loss of US$392.8 million or US$3.36 per share a year earlier. And excluding one-offs, the mining giant delivered earnings of US$7.50 per share, ahead of consensus estimates of US$6.99 per share.

Anything else?

Lithium shares were also given a boost locally today with news that the Federal government is being pushed to prioritise and pass the “electric car discount” election promise before parliament closes for the year.

If this promise is actioned, the ABC reports that it would reduce the cost of some of the most popular zero and low-emissions vehicles by $1000s. This would likely give electric vehicle sales a major boost in Australia.

Though, given how small the Australian market is, it wouldn’t necessarily have a material impact on lithium demand. But every bit counts!

The post Why are ASX lithium shares smashing the market today? appeared first on The Motley Fool Australia.

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• Why Amcor, Australian Strategic Materials, Goodman, and Pilbara Minerals are dropping

Motley Fool contributor James Mickleboro has positions in Allkem 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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It’s been a big year for S&P/ASX 200 Index (ASX: XJO) gambling and entertainment share Tabcorp Holdings Limited (ASX: TAH), and those holding it for its dividends.

The company spun out its lotteries and Keno businesses into the Lottery Corporation Ltd (ASX: TLC) in May and posted a $6.8 billion profit in August while management committed to growth.

Potentially making the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) share more attractive, it currently offers investors a whopping 13.75% dividend yield.

The Tabcorp share price is trading at 94.5 cents at the time of writing.

But is the ASX 200 dividend share too good to be true? Here’s what experts think.

Is this high-yielding ASX 200 dividend share a buy?

Tabcorp shares boast one of the highest yields on the ASX 200, having paid out 13 cents of dividends per share over the last 12 months. But is it a buy? Well, that depends on who you ask.

Plato Investment Management managing director Dr Don Hamson tips the stock as a buy, saying, courtesy of Livewire:

We think it’s good value, and they’re cycling some comparisons to a COVID-19 period when things were much tougher. So, they actually have recently announced some better results.

But the recent demerger has left a sour taste in the mouth of Hamson’s peer, Wheelhouse Partners managing director and portfolio manager Alastair MacLeod.

The fundie prefers the spun-off entity, noting that Tabcorp’s key management personnel went to the Lottery Corporation – a larger and “much higher-quality business”.

Therefore, in MacLeod’s books, the ASX 200 dividend great is a sell, as per the masthead.

It’s also worth mentioning another key implication of the demerger – its impact on dividends.

Is the Tabcorp dividend yield too good to be true?

Tabcorp’s yield is higher now than it was this time last year despite the company having paid out 14.5 cents of dividends per share in financial year 2021.

Indeed, exactly 12 months ago the ASX 200 share’s dividend yield was just 2.76%.

That’s because, as part of the split, the Lottery Corporation walked away with a huge chunk of Tabcorp’s valuation. However, the full impact on its dividends hasn’t quite been realised.

The latest Tabcorp dividend still included five months of earnings from the lotteries and Keno businesses. But they’re no longer contributing to its bottom line.

Thus, the ASX 200 shares’ dividend yield will likely look very different this time next year.

The post Is this ASX 200 share with a dividend yield of 14% too good to be true? appeared first on The Motley Fool Australia.

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More reading

• 3 ASX 200 dividend shares with the highest yields in Q1
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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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Your first impulse when you see an S&P/ASX 200 Index (ASX: XJO) share paying a 19% dividend yield with 80% franking credits may be to snap up some of the stock.

While that could work out handsomely for some ASX 200 dividend shares, proceed with care.

Those dividend yields you see posted are trailing. In other words, they’re derived from the past year’s payouts and based on the current share price.

The danger here is if a company’s share price takes a dive, its trailing dividend yield will rise sharply. And if the share price is falling hard, it’s often an indication that earnings and profits in the year ahead may not match those of the year gone by. Meaning any future dividend payouts could be significantly reduced. Or simply missing.

As Romano Sala Tenna, co-founder of Katana Asset Management, told us yesterday (full interview to be published next week):

I would caution inexperienced investors about taking on some of the yields that we’re seeing currently. Trailing yields count for nothing. That’s the first thing. You need to look at forecast yields.

Which brings us to the ASX 200 dividend share in question — fund manager Magellan Financial Group Ltd (ASX: MFG).

Magellan paid out an interim dividend of $1.10 on 8 March and a final dividend of 68.9 cents on 6 September. At the current share price, that works out to an 18.9% trailing yield.

But mind you, Magellan shares are also down sharply this year, along with its funds under management (FUM).

So, what’s an income investor to do?

Why this ASX 200 dividend share looks to be a trap

For some greater insight into that question, we defer to Wheelhouse Partners portfolio manager Alastair MacLeod and Dom Hamson, managing director of Plato Investment Management, courtesy of Livewire.

Macleod said it’s tempting “to think there’s an opportunity with this stock because it’s fallen so much. I mean, they’ve lost 50% of FUM”.

However, he said Magellan’s strongest assets are really its brand. As for FUM, he noted, “There’s still outflow.”

Macleod added, “You just don’t know what that base level of earnings is and therefore yield. So you just don’t need to be there.”

Hamson is also steering clear of this ASX 200 dividend share for now.

“It’s not worth the risk in our view,” he said.

According to Hamson:

We’ve been calling it a dividend trap all year because we know the fund’s management business, we’re a fund manager, and if your FUM’s going out the door very quickly, it’s very hard to turn that around.

He noted that Magellan’s growth style “is going to be tough … so as long as interest rates keep going up.”

Magellan may be a buy for its dividend yield in the future, but for now Hamson believes it’s too early.

“I think it’s going to be tough for them to turn that around. I’m sure they will eventually, but I think it’s too early to call it at the moment,” he said.

Magellan share price snapshot

The Magellan share price is down 3% today, bringing the ASX 200 dividend share’s losses to 50% in 2022. By comparison the ASX 200 is down 10% this calendar year.

The post This ASX 200 dividend share has a 19% yield right now. Why it’s a trap: experts appeared first on The Motley Fool Australia.

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More reading

• Magellan share price hits multi-year low following $2.4b horror month for outflows
• Could something big be going down at Magellan?
• How to find wealth compounders inside the ASX 200 right now
• Have ASX 200 high-yield dividend shares been a blessing or a curse in 2022?
• Magellan share price sinks again despite ‘$100 billion’ outlook

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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