Some of the ASX’s leading exchange-traded funds (ETFs) look like buying opportunities to me. After all of the volatility, valuations have dropped and the value on offer has increased, in my opinion.

Sometimes there are problems for individual companies or a particular industry. But, when almost the whole market drops, I think it can mean the investment opportunity is more attractive.

However, while investors are trying to get to grips with what higher interest rates mean for valuations, there’s also the potential impact of what may happen with the United States, Australian and global economies.

With that in mind, I think these two ASX ETFs look like good options to buy for growth, particularly amid current uncertainty.

VanEck MSCI International Quality ETF (ASX: QUAL)

The idea behind this investment is that it represents a portfolio of global shares that rank well on multiple quality metrics. It’s invested in a portfolio of around 300 businesses across a range of geographies, sectors and economies.

To make it into the portfolio, companies have to rank highly on return on equity (ROE), earnings stability, and low financial leverage.

Its investments include recognisable names like Apple, Microsoft, Johnson & Johnson, UnitedHealth, Alphabet, Visa and Nvidia. While all of the biggest holdings may be from the US, there are other countries with sizeable weightings. Such countries include Switzerland, Japan, the United Kingdom, the Netherlands and Denmark.

Over the five years to 30 September 2022, the ETF had returned an average return per annum of 12.5%. This compares to an average return per annum of the MSCI World ex Australia Index. But, past performance is not a guarantee of future outperformance.

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

This is another quality-based ASX ETF from VanEck.

This one is about finding companies in the US that have strong competitive advantages that it expects will endure for at least a decade and probably two decades. Advantages can come in many different forms including costs, intellectual property, brand power, and so on.

However, Morningstar analysts will only add an investment to the portfolio if the business is trading at an “attractive price” relative to Morningstar’s estimate of fair value.

On 1 November it had 48 holdings. Only one position had a weighting of less than 1%, which was 0.95%, so the position sizes are reasonably similar. Nonetheless, these were the biggest weightings: Biogen, Gilead Sciences, MercadoLibre, Wells Fargo, and Emerson Electric.

In terms of performance, the VanEck Morningstar Wide Moat ETF had returned an average of 14% per annum over the five years to 30 September 2022. That compares to a 13.2% per annum return for the S&P 500 Index (SP: .INX). Again, past performance is not a guarantee of future returns.

The post I think these 2 ASX ETFs are unmissable buys in this sell-off appeared first on The Motley Fool Australia.

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• Here are 3 ASX ETFs for smart investors
• 3 excellent ETFs for ASX investors to buy today
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• Of all my ASX ETFs, this is my favourite. Here’s why

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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 Alphabet (A shares), Alphabet (C shares), Apple, Emerson Electric Co., 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 Alphabet (A shares), Alphabet (C shares), 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.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Amazon‘s (NASDAQ: AMZN) third-quarter report sent its stock tumbling on Thursday, October 27,  after the company posted weak fourth-quarter guidance. The quarter itself was not too bad. Revenue increased 15% year over year, a strong showing in this economy, and smack in the middle of its guidance for 13% to 17%. Operating income of $2.5 billion came in on the high side of expectations, which were $0 to $3.5 billion. Amazon Web Services’ (AWS) growth began to decelerate after many quarters of steady growth, which is a natural outgrowth of clients decreasing spending.

Management is guiding for revenue to increase by 2% to 8% in the fourth quarter. The fourth quarter includes the all-important holiday spending season, and analysts were expecting more, so this was disappointing. 

But management isn’t sweating. It has many plans in place to drive sales this season, and it’s focused on the customer experience. Let’s see why this is a Buffett stock and how that’s playing out right now.

What makes Amazon a Buffett company?

Warren Buffett has given many, many sage pieces of advice over the years about how to invest wisely. There is no magic formula that he uses to buy stocks or acquire companies for his holding company Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), but we can get a picture of what he thinks are key features of an investment-worthy candidate.

One of those features is its moat. A moat is a competitive advantage, or basically anything about the business that allows it to stand out from its competitors and protect its business. He qualifies that with an extra detail: “Long-term competitive advantage in a stable industry is what we seek in a business.” 

With a whopping 38% of all e-commerce sales, a number that has mostly held steady over the past few years despite an onslaught of new companies with an e-commerce presence, Amazon dominates e-commerce. Its more than 200 million Prime members, who pay $139 annually, rely on it for a massive amount of needs, and other companies that have tried to challenge it have so far come nowhere near real competition. Walmart, for example, has launched its own annual service and makes up 6.3% of the e-commerce market share. Buffett, or likely one of his investment managers, bought Amazon shares in 2019. Since the “stable business” is part of the equation, Buffett may not have considered Amazon a buy before e-commerce proved its business value.

Amazon continued to plow investments into the customer experience in the third quarter, and while it may struggle in the coming months, these investments are what help its moat stay wide. As CFO Brian Olsavsky put it on the third-quarter conference call, “We remain heads-down focused on driving a fantastic customer experience, and we believe putting customers first is the only reliable way to create lasting value for shareholders.”

But there’s more.

New ways to make even more money

Buffett has expanded his own company for decades. Investors talk about what stocks he buys for Berkshire Hathaway, but what Buffett really likes to do is acquire whole businesses if he thinks they’re great. Did you know that Berkshire Hathaway owns 65 companies? That’s more than the stocks it owns, which are around 40. Some of the companies you might recognize are the Duracell battery company and Benjamin Moore paints.

This is what Buffett says about expanding a business:

There’s no rule that you have to invest money where you’ve earned it. Indeed, it’s often a mistake to do so. Truly great businesses, earning huge returns on tangible assets, can’t, for any extended period, reinvest a large portion of their earnings internally at high rates of return.

Amazon follows this model very closely. It uses its huge e-commerce business to fund other businesses, which are often more profitable than its core business. AWS is the most obvious example. AWS has been providing most of the company’s operating income for a while. 

The company has also made many whole acquisitions, such as the pending purchase of iRobot. Some of these acquisitions are integrated into the Amazon platform, such as MGM studios, whose film library has been added to the Prime library. iRobot is an example of a whole company Amazon will leave to run on its own.

Can Amazon keep growing?

Buffett invests in companies that he believes offer high potential for long-term gains. He has said that his favorite holding period is “forever.” Amazon’s moat and ability to expand into new areas can give investors confidence that it has plans to grow for the foreseeable future. Amazon stock is down 44% this year, and investors can see the drop as an opportunity to buy shares. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Amazon is proving why it’s a Buffett stock appeared first on The Motley Fool Australia.

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• Is Amazon stock a buy now?
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Jennifer Saibil has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Walmart Inc. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Things have gone from bad to worse for the Bravura Solutions Ltd (ASX: BVS) share price on Thursday. Prior to today, the struggling financial technology company’s shares were down 53% over the last 12 months.

Today, the Bravura share price has gone one better, losing more than half of its value again shortly after the open. In early trade, the company’s shares are down 59% to a record low of 54 cents.

Why is the Bravura share price crashing again?

Investors have been hitting the sell button in a panic today after the company released a very disappointing update after the market close on Wednesday.

Following a strategic review, Bravura revealed that the company needed to be “reconfigured.” It explained:

The review has indicated that whilst Bravura has solid foundations, the business will be required to be reconfigured to scale our products across customers. This will require enhancing the existing technology stack to unlock the existing microservices strategy, drive higher resale multiples on technology development and reduce single customer efforts.

The pace of change from a traditional services model to a more scalable technology solutions provider will accelerate but requires a realignment of the organisation and resources to create greater product discipline. This will deliver efficiencies and support a greater focus on spend, project execution and key account management. Several key appointments to drive technology, project delivery and go-to-market capability are in progress.

Guidance misses by a mile

Unsurprisingly, given the above, the company’s guidance for FY 2023 has fallen well short of expectations.

This is due to its customers adopting a cautious approach to spending, the winding down of three legacy contracts, and a sizeable 16% to 20% increase in operating costs.

The sum of the above, is as follows:

The cumulative impact of the factors discussed above, and allowing for additional costs associated with one off initiatives from the Strategic Review, is that Bravura is expecting its FY23 earnings to differ materially from analysts’ consensus forecasts.

With modest revenue growth of between $270 to $275 million, and increase in the FY23 cost base, Bravura now expects to deliver EBITDA of between $10 and $15 million and NPAT to be within the range of ($5M) to $0. The H1 result is expected to reflect lower run rate revenue which is expected to build into the second half, however, costs are expected to remain broadly consistent across the year.

Broker ‘surprise’

The team at Goldman Sachs was taken by surprise by this update. It commented:

We had previously flagged ongoing risk to Bravura’s earnings outlook (here and here) from 1) wage inflation; 2) higher cost investment to execute on strategic priorities; and 3) pressure on the dividend due to softer cash flow. That said, Bravura’s update came as a surprise given the extent of cost investment, both from organisational change and BAU wage pressures, and in the context of commentary at the FY22 result suggesting 1H23 EBITDA would be consistent with the 2H22 run-rate (anchoring consensus to mid-40’s EBITDA).

Unfortunately, the broker believes it could take some time until the company is back to its best. It concludes:

[I]n our view this is likely to take several years of heightened investment (with significant execution risk) and we look to further clarity on timing for a resumption in earnings growth, particularly given commentary regarding competing forces in FY24 from expected cost efficiencies on one hand and revenue headwinds in EMEA on the other.

The post Why is the Bravura share price crashing 59% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bravura Solutions Ltd. The Motley Fool Australia has positions in and has recommended Bravura Solutions 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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Despite the central banks in Australia and the US raising interest rates this week, more than one expert is predicting share markets will rise heading into the new year.

Shaw and Partners portfolio manager James Gerrish noted that the S&P/ASX 200 Index (ASX: XJO) is now within striking distance of the psychological 7,000-point barrier.

“The ‘risk on’ theme is slowly gathering momentum courtesy of fund managers holding their highest cash position in more than 20 years,” he said in the Market Matters newsletter.

“There’s nobody left to sell, and a degree of ‘fear of missing out’ (FOMO) feels inevitable if stocks remain firm.”

Gerrish’s team is aiming for a Santa rally to push the index up to 7,200 by Christmas.

“That is now only 3% away, hence I remind subscribers of our caveat that surprises are likely to be on the upside.”

So considering this bullish outlook, what are the best stocks to take advantage?

Gerrish named one example each from his growth, income, and emerging companies portfolios:

All-time high share price within reach

Funnily enough, National Australia Bank Ltd (ASX: NAB) is the pick from Gerrish’s growth stable.

The team believes NAB and its big bank mates will all rally through November with three of the four expected to pay massive fully franked dividends.

“NAB is set to report in a week’s time and we believe it will perform strongly,” he said.

“Even though they are experiencing below-sector growth in total mortgage and business lending, this is a time to be prudent. It’s forecasted to pay an 82c fully franked dividend on the 16th.”

Believe it or not, NAB’s all-time high was 15 years ago, when the share price breached the $40 mark.

Gerrish’s team is targeting the bank stock to set a new all-time high.

“However we do caution that we are only looking for a 5% to 10% move plus a dividend making it a very active play from here.”

Not just a boring infrastructure stock

Among the income producers, Gerrish likes toll operator Transurban Group (ASX: TCL).

“On face value, the toll road operator is a solid defensive stock, offering a reasonable ~4%, largely unfranked yield while their high levels of debt are seen as a risk in this sort of interest rate environment,” he said.

“However, there is more to this story which underpins our positive view on the stock.”

New assets like Sydney’s WestConnex stage 2 and NorthConnex will drive 8.5% annual growth in earnings and dividends over the coming five years, according to Gerrish.

“This is also supported by revenue linked to CPI, which as we all know is running hot, along with expected capital releases, which will also support dividend growth over the coming years.”

He forecasts that, by financial year 2024, the dividend yield will be above pre-COVID levels, then “rise steadily from there”.

The Market Matters team is bullish on Transurban shares for the long run.

One door closes, 60 more open

Carbon capture technology provider Calix Ltd (ASX: CXL) is the favoured pick from Gerrish’s emerging companies portfolio.

Horrifyingly, the stock has halved in value since Easter.

Just in the past week, Calix shares lost more than 22% after the federal government withdrew $41 million of funding for its projects with Boral Limited (ASX: BLD) and Adbri Ltd (ASX: ABC).

“The company was hugely disappointed with the news… particularly given it came just a few days after a federal budget which promised spending on green initiatives with an explicit focus on cement,” said Gerrish.

“Despite the news, Calix noted that both Boral and Adbri had firm commitments to reduce carbon emissions by 2030, and will need to act now to hit their targets, with the company confident it remains part of this plan.”

Calix has stated its services have considerable global interest, with more than 60 projects underway that are in total worth far more than the lost government funding.

Calix shares closed Wednesday at $4.27. Gerrish’s team remains bullish about the stock if it can be purchased around that price.

The post 3 ‘bullish’ ASX shares to buy as FOMO grips the market: expert appeared first on The Motley Fool Australia.

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• If you invested $1,000 in NAB shares 5 years ago, here’s how much you’d have today
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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has 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 Incannex Healthcare Ltd (ASX: IHL) share price went up in smoke in October, underperforming the S&P/ASX 300 Index (ASX: XKO) by 15% over the course of the month.

That was despite plenty of seemingly positive news being released by the healthcare stock.

The company works to develop medicinal cannabinoid pharmaceutical products.

 After closing September at 27.5 cents, the Incannex share price closed October at its lowest point of the month ­– 25 cents – marking a 9.1% fall. Meanwhile, the ASX 300 lifted 5.9%.

 So, what went wrong for the cannabinoid favourite? Let’s take a look.

What went wrong for Incannex stock in October?

The Incannex share price stumbled through October despite three seemingly positive announcements being released by the ASX 300 newbie in that time.

The first detailed a meeting with the United States’ Food and Drug Administration (FDA) regarding its drug IHL-216A.

Incannex chief scientific officer Dr Mark Bleackley commented on the regulator’s feedback, saying:

The FDA … indicated that the agency is highly interested in the development of IHL-216A for treatment of traumatic brain injury … The FDA has provided essential advice on inhaled drug development that will guide the most efficient development of IHL-216A.

Sadly, the news appeared to disappoint the market. It bid the Incannex share price 8.6% lower on the release. Fortunately, the next announcement from the company inspired its stock to lift by 3.5%.

Days later, Incannex declared dosing in a phase one clinical trial assessing another drug – IHL-675A – was completed successfully. It will now get started on phase two trials of the drug.

But such gains weren’t to last. The Incannex share price handed back 3.8% on the release of the company’s quarterly report.

It posted a $4 million cash outflow for the three months ended 30 September, $2.26 million of which was related to research and development.

It closed the period with $33.4 million of cash in the bank – enough to fund an estimated eight future quarters.

Incannex share price snapshot

The Incannex share price has struggled this year after posting a near-300% gain in 2021.

As of this morning, it has fallen 61% since the start of 2022. It’s also currently 43% lower than it was this time last year.

For comparison, the ASX 300 has fallen 8% year to date and 6% over the last 12 months.

The post Why did the Incannex share price go up in smoke in October? appeared first on The Motley Fool Australia.

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• Why is everyone talking about ASX cannabis shares all of a sudden?
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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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Australian Foundation Investment Co Ltd (ASX: AFI) is the largest listed investment company (LIC) in Australia. It’s known for paying consistent dividends to shareholders. But, how large is the AFIC dividend yield?

For readers who don’t know, the purpose of a LIC is to invest in other shares (or assets) on behalf of shareholders.

Due to the company structure, the board of directors can decide how much of a dividend to declare each year. This gives them more control over the level of income that shareholders receive each year.

LICs have the option of using the investment profits of both dividends and capital gains to pay investors.

AFIC has built a reputation for paying a steady stream of dividends. Indeed, that’s one of its main objectives. It states:

AFIC aims to provide shareholders with attractive investment returns through access to a growing stream of fully franked dividends and enhancement of capital invested over the medium to long term.

AFIC’s current dividend yield

The listed investment company has been paying an annual ordinary dividend per share of 24 cents for a number of years.

Sometimes it has had to use its profit reserve to keep paying that dividend, whereas in other years the profit generated has been larger than the dividend payments.

But, due to its multi-decade history, AFIC has managed to build a good profit reserve that can be tapped during volatile times.

Using the current annual dividend payout of 24 cents per share, at the current AFIC share price, the AFIC dividend yield is 3.3%, or 4.7% including the franking credits attached to each payment.

What does the current portfolio look like?

As a LIC, the returns generated by the fund’s investments dictate its profits.

The investments it normally makes are done with the long-term in mind, so they don’t normally change much from month to month. But I think it’s worth knowing the sorts of businesses that investors are getting the biggest exposure to.

At 30 September 2022, these were the positions that had a weighting of at least 4%:

Commonwealth Bank of Australia (ASX: CBA) – 9.1% of the portfolio

CSL Limited (ASX: CSL) – 8.6% of the portfolio

BHP Group Ltd (ASX: BHP) – 7.8% of the portfolio

Transurban Group (ASX: TCL) – 4.5% of the portfolio

Macquarie Group Ltd (ASX: MQG) – 4.3% of the portfolio

National Australia Bank Ltd (ASX: NAB) – 4.1% of the portfolio

Westpac Banking Corp (ASX: WBC) – 4.1% of the portfolio

Wesfarmers Ltd (ASX: WES) – 4% of the portfolio

AFIC share price snapshot

Over the last six months, AFIC shares have fallen by close to 12%. This compares to a 4.5% decline for the S&P/ASX 200 Index (ASX: XJO).

The post How big is the AFIC dividend yield right now? appeared first on The Motley Fool Australia.

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• Looking to buy AFIC shares in October? Here’s what you’d be getting

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 CSL Ltd. The Motley Fool Australia has positions in and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Macquarie Group Limited and 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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IGO Ltd (ASX: IGO) shares have come under pressure with the rest of the market on Thursday.

In morning trade, the battery materials miner’s shares are down over 2% to $14.77.

IGO shares down again

This latest decline means that IGO’s shares are now down 12% since this time last week. That’s despite the company announcing its quarterly update earlier this week and revealing stellar earnings growth.

For the three months ended 30 September, IGO reported a 54% increase in underlying EBITDA to a record $398 million and a massive 136% jump in net profit after tax to $253 million.

This strong growth was underpinned by record quarterly spodumene production at Greenbushes and record sales revenue from its nickel business following the contribution from Forrestania.

Is this a buying opportunity?

According to a note out of Citi, its analysts think investors should keep their powder dry for the time being.

In response to the update, the broker downgraded IGO’s shares to a neutral rating with an improved price target of $15.20.

Its analysts believe the IGO share price is fair value at 1.1x NAV and 6x EBITDA. The broker commented:

SepQ overshadowed by the unexpected death of MD & CEO Peter Bradford. New news were: i) Kwinana (lithium hydroxide) train 1 commercial production expected end of CY23; ii) total capex at Cosmos (Ni) now expected to be double at ~A$810m. SepQ highlight was Greenbushes which more than doubled underlying earnings QoQ. Net debt reduced by A$137m to A$396m. We lift our TP by $1.20/sh to A$15.20/sh and move to Neutral. IGO is now trading on ~1.1xP/NAV and FY24 EV/EBITDA +6x. We expect nickel prices to move lower and lithium to track more or less sideways in the near-term.

Though, that hasn’t stopped one insider from topping up with a large purchase this week. A change of director’s interest notice reveals that its non-executive director, Justin Osborne, picked up 10,000 shares for a total consideration of $148,350 on 1 November.

The post Are IGO shares a buy after a huge quarter of profit growth? appeared first on The Motley Fool Australia.

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• Which ASX 200 mining shares managed to dig up gains in October?
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Tesla‘s (NASDAQ: TSLA) factory in Shanghai, China is its most productive plant. It has been upgraded to have an annual production capacity of about 1.1 million units. So it’s not a surprise to see investors moving the stock lower when there are clouds on the horizon in China. As of 1 p.m. ET, Tesla shares were near the day’s lows, down 2.6%. 

So what

That is likely because of another resurgence of COVID-19 cases and restrictions in China. Tesla generates approximately one-fourth of its sales from its China plant. So when news surfaced that Chinese electric vehicle maker Nio has temporarily suspended operations at two of its plants due to local virus-related restrictions, some investors are betting it will also impact Tesla.  

Now what

Today, Reuters reported that Nio has halted its production due to efforts to stem the virus’ spread. The company confirmed that deliveries and production have both been affected. Nio’s facilities are in Hefei, approximately 300 miles from Shanghai. But production at Tesla’s Shanghai plant was already interrupted earlier this year from COVID-19 lockdowns in China. And Tesla’s suppliers could also be impacted by lockdowns. 

Tesla doesn’t provide monthly sales data, but Nio missed expectations for deliveries in October partly due to the COVID-19-related impacts. And Reuters has also reported that Walt Disney‘s Shanghai theme park resort has closed with visitors being required to test negative for the virus to exit. 

Tesla’s Shanghai plant is an important one for the company. Until its new German factory ramps up to full capacity, the China plant has also been supplying European customers. So it makes sense for investors to be concerned if production at the Shanghai factory is limited. That helps explain today’s stock drop, but investors should know that the company’s long-term potential won’t likely be affected by these short-term issues.     

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Tesla shares dropped Wednesday appeared first on The Motley Fool Australia.

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Howard Smith has positions in Nio Inc., Tesla, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nio Inc., Tesla, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool Australia has recommended Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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When share markets go downward, I think it’s a good time to look at ASX dividend shares. Not only are valuations cheaper, but the dividend yields also get a boost.

It’s true that what interest rate investors can get from a term deposit has increased, but the dividend yields from shares are now looking even more attractive.

I wouldn’t buy a business just because it has a high dividend yield. I’m looking for businesses that can hopefully grow profit over the long term, particularly ones with plans for growth.

These are two of the high-yielding shares I think could make good buys this month.

Rio Tinto Limited (ASX: RIO)

This business is one of the ASX’s largest miners. It’s involved with a number of different commodities including iron ore, aluminium, copper, diamonds, titanium dioxide and borates. It is also building a lithium project in South America as the business looks to build its exposure to decarbonisation resources.

Iron ore has been the key profit generator for the ASX dividend share. However, the iron ore price has been falling in recent weeks and months. There have been concerns that Chinese demand for iron ore will reduce, due to an unstable property sector and COVID-19 lockdowns, leading to a subdued iron ore price.

Since 8 June, the Rio Tinto share price has fallen by over 20%. I think it’s times of commodity weakness that make the best time to buy shares in mining stocks. However, China (and its demand for iron) will essentially decide how Rio Tinto’s iron ore earnings perform in the coming years.

I like the way this ASX dividend share is increasing its exposure to copper and I’m optimistic about the lithium play as well.

According to CommSec, the FY23 grossed-up dividend yield could be 12.2%.

GQG Partners Inc (ASX: GQG)

GQG is one of the largest fund managers on the ASX with a market capitalisation of over $4 billion according to the ASX.

It offers investors a number of different investment strategies including global shares, dividend income, emerging markets, and US shares.

This business continues to experience net inflows of investor money, despite all of the volatility in the share markets. In the three months to September 2022, it experienced net inflows of US$0.8 billion. It finished the quarter with US$79.2 billion of funds under management (FUM).

The vast majority of its net revenue comes from management fees (which are a percentage of assets managed), rather than performance fees. This means its revenue can be more consistent.

This ASX dividend share aims to pay out 90% of its distributable earnings to investors.

According to CommSec, GQG is predicted to pay a dividend yield of 8.25% in FY23.

The post I think right now is the time to buy these 2 ASX dividend shares appeared first on The Motley Fool Australia.

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More reading

• Why Atlantic Lithium, Coronado Global, Lake Resources, and Rio Tinto are charging higher
• Why is the Rio Tinto share price pushing higher today?
• Which ASX 200 mining shares managed to dig up gains in October?
• Could ASX 200 iron ore shares be heading for more pain?
• Why CBA is much more upbeat on Rio Tinto shares than the government

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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The Lynas Rare Earths Ltd (ASX: LYC) share price has been among the more inspiring ASX success stories over the last few years, despite no dividends having been paid by the company.

The stock has gained more than 250% over the last three years amid soaring demand for rare earths. Right now, it’s trading for $8.68.

Like lithium and copper, which are perhaps better known, rare earths are an essential component of modern technology and, in turn, the green energy transition.

As demand for rare earths has taken off, so have the company’s earnings.

It posted $601 million of earnings before interest, tax, depreciation, and amortisation (EBITDA) and a $540 million after-tax profit for financial year 2022 – up 156% and 244% respectively year-on-year. It also closed the year with $965.6 million of cash and cash equivalents.

Why, then, is Lynas not offering those invested in its shares a dividend? And could payouts be on the cards in the future? Let’s take a look.

Could dividends be on the horizon for Lynas shares?

As the figures above suggest, Lynas appears financially able to offer shareholders a dividend.

The miner’s earnings per share (EPS) lifted to 59.95 cents last financial year. Even paying out 30 cents of that would see the stock with a healthy 3.46% dividend yield.

But I don’t think investors should be holding their breath for dividends in the very near future, for two reasons.

First, while the company is profitable in 2022, that’s a relatively new development.

It has only posted a profit for two consecutive financial years, having lost nearly $19.4 million in financial year 2020. It’s also worth noting that Lynas’ revenue slumped 44% in the September quarter.

Thus, it might be waiting until it has more stable earnings before it begins to offer dividends.

Perhaps a more compelling reason I’m sceptical about forthcoming dividends, however, is Lynas’ growth strategy.

The Lynas 2025 growth plan aims to grow the company alongside the market, diversify its industrial footprint, and increase its product range.

After announcing the plan in 2019, the company declared its accelerating and increasing its efforts in August as it revealed a $500 million expansion project at Mt Weld â€“ fully funded from cash flow.

Speaking on the company’s recent full-year earnings, CEO and managing director Amanda Lacaze said:

Further investment in capacity increases at each stage of production will ensure that Lynas is well positioned to continue to grow with the market as a supplier of choice to 2025 and beyond.

With such a focus on growth, it makes sense Lynas might forego offering dividends to those invested in its shares.

However, nothing is certain on the ASX. The company could very well be gearing up to offer a dividend as we speak.

The post Could Lynas shares pay a dividend in the future? appeared first on The Motley Fool Australia.

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More reading

• What’s boosting the Lynas share price on Wednesday?
• Which ASX 200 mining shares managed to dig up gains in October?
• Could the Lynas share price have another 15% upside from here?
• 2 ASX companies producing minerals the whole world wants: expert
• Here are the top 10 ASX 200 shares today

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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