This year could be a great time to start investing in ASX shares in 2023 for beginners for a few different reasons.

I think investing in ASX shares can be a great way to build wealth over the long term.

Historically, the ASX share market has returned an average of between 9% to 10% per annum. That includes dividends being re-invested, but not any relevant franking credits.

One of the advantages is that investors can begin with as little as $500. Buying a property can take a deposit of tens of thousands of dollars.

If $500 were to compound at 10% per annum for a decade, it would grow to around $1,300. But, we don’t know what future returns are going to be. It could grow to an even bigger amount or less than that.

Though, over any given year, share prices can seem quite volatile. But that’s normal.

Just look at how Commonwealth Bank of Australia (ASX: CBA) shares have moved over the past 12 months.

What would be a good place to invest $500?

There are a few different ways to invest for beginners.

Starting by investing in a business that we see in everyday life could be a good place to begin with. It might be more tangible for an investor to see their business in real life.

Examples of blue chips that might be interesting include Telstra Group Ltd (ASX: TLS), Coles Group Ltd (ASX: COL), Westpac Banking Corp (ASX: WBC), Wesfarmers Ltd (ASX: WES) (which owns Bunnings and Kmart), REA Group Limited (ASX: REA) (which owns realestate.com.au) and Qantas Airways Limited (ASX: QAN).

But, if it’s hard to make a choice, there are ASX share investments that enable people to invest in a whole group of businesses in one investment. Investors can buy a whole basket of shares in one go. One of the most popular ways to do it is called an exchange-traded fund (ETF).

There are ETFs that investors can pick that give access to the global share market or the Australian stock market.

For example, the iShares S&P 500 ETF (ASX: IVV) is invested in 500 of the biggest US businesses. While they are listed in the US, most of them are global companies such as Apple, Microsoft, Amazon.com, Berkshire Hathaway and Alphabet (Google). ETFs can provide great diversification.

ETFs are administered by a fund manager, and that fund manager charges an annual fee. The iShares S&P 500 ETF has a very low fee of just 0.04% per annum, while there are others that can charge 1% or even more. The higher the fee, the more the long-term value of the portfolio is reduced. The effect of fees compound as well.

But, I don’t think beginners should go for a small, or risky, ASX share to start with. It’s good to start with an investment that has a good chance of working out well.

However, The Motley Fool website is a great place to find resources on researching ASX shares and industries.

Foolish takeaway

I think ASX shares can be a really good way to grow $500 into a larger amount over the long term. But, whatever an investor goes for, it’s important to be patient. A good investment can take a while to play out into a positive outcome. Share market volatility can be painful in the short-term, but can provide opportunities to buy shares at cheaper levels.

The post How I’d invest my very first $500 in ASX shares in 2023 appeared first on The Motley Fool Australia.

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• Which ASX 200 bank shares are the ones to buy in 2023?
• Buy Telstra and this ASX 200 dividend share: Morgans
• Why I think these 3 ASX 200 dividend shares are top buys for retirement
• Dividend stocks: Why I’m buying now for supercharged and long-lasting passive income
• 5 ASX 200 shares smashing new, 52-week highs on Thursday

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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, Amazon.com, Apple, Berkshire Hathaway, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway, short January 2023 $265 calls on Berkshire Hathaway, and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended Coles Group, Telstra Group, and Wesfarmers. The Motley Fool Australia has recommended Alphabet, Amazon.com, Apple, Berkshire Hathaway, REA Group, Westpac Banking, and iShares S&p 500 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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The Life360 Inc (ASX: 360) share price is roaring higher on Friday morning.

In early trade, the location technology company’s shares were up 14% to $5.57.

The ASX All Ords tech share has pulled back a touch since then but remains up 7% to $5.23.

Why is the Life360 share price charging higher?

As well as getting a boost from a rebound in the tech sector, investors have been bidding the Life360 share price higher today after the company released a trading update.

According to the release, the company’s strong performance continued in the fourth quarter of 2022. This saw core Life360 subscription revenue (excluding Tile and Jiobit) growth exceeding 54%, which was in line with guidance.

In addition, the company confirmed that its year end cash position met guidance, with cash balance of $90 million, adjusted for $32 million of net placement proceeds.

Also meeting guidance was its full year revenue and adjusted EBITDA. It is expected to come in at the lower end of its guidance range of US$225 million to US$240 million in revenue and an EBITDA loss of US$37 million to US$41 million.

Pleasingly, Life360 revealed that it has experienced a resumption of normalised growth and churn patterns since the completion of iOS price changes in mid-December.

Restructure

Another positive that could be boosting the Life360 share price is the announcement of a restructure that will reduce its workforce by 14% and generate cost savings of US$15 million.

This restructure enables the streamlining of operations to drive lower operating expenses, and a sharpened focus on the company‘s key strategic product initiatives to enhance its leadership in family safety and security.

Together with continuing strong subscription revenues, the restructure is expected to deliver positive operating cash flow and adjusted EBITDA from the second quarter of 2023. This is a quarter earlier than previously announced. Management also then expects to report positive operating cash flow and adjusted EBITDA for the full year.

Life 360 CEO, Chris Hulls, appears confident on the year ahead. He said:

We are moving into 2023 in a very strong position to pursue our global growth agenda, with significant upside opportunity from the launch of the bundled hardware subscription in Q1, a strong balance sheet and an accelerated trajectory to profitability.

The post Why this ASX All Ords tech share is rocketing 14% today appeared first on The Motley Fool Australia.

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• Can ASX tech shares rise from the ashes in 2023?
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• 23 ASX shares to buy in 2023 – brokers
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Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. 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 S&P/ASX 200 Index (ASX: XJO) bank share sector has a number of potential ideas to think about.

I think that the big four names of Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) and ANZ Group Holdings Ltd (ASX: ANZ) have scale advantages that others in the sector don’t have.

Before considering the big four ASX bank shares, I’ll point out that my preferred name in the financial share sector is Macquarie Group Ltd (ASX: MQG) because of its global earnings base, long-term growth focus and revenue diversification across different sectors.

The current environment of rising interest rates is seen as a positive for banks because they are able to pass on the interest rate rises faster to borrowers than savers. It’s enabling them to increase their net interest margin (NIM).

A NIM measures the overall lending rate of a bank compared to the cost of that funding.

For example, if a bank has lent $200,000 with an interest rate of 4.5%, and there is also a saver with $200,000 in a savings account with an interest rate of 2.5%, this translates into a NIM of 2%.

Which ASX 200 bank shares could make good investments?

The CBA share price has seen plenty of volatility over the past year. But, it has managed a gain over the past 12 months.

However, one of the main downsides to the bank as an investment at the moment is the valuation. The share price by itself doesn’t give much context to whether it’s expensive. We can look at the price/earnings (P/E) ratio which shows us what multiple of the earnings the share price is currently valued at. The higher the number, the more expensive it seems.

When comparing similar businesses, such as big banks, a significantly higher P/E ratio can make it stick out.

According to (independent, third party) estimates on Commsec, the CBA share price is valued at more than 17 times FY23’s estimated earnings.

CBA is a great bank. However, its business activities are very similar to the other big banks, and I’m not sure it deserves to trade on an earnings valuation that’s around a third more expensive.

I think the job that NAB’s management is doing at cranking up the performance is very good. The focus on the basics seems to be working as it’s leading to profit growth. I believe NAB is in good hands with the CEO and chair. Commsec numbers put the NAB share price at just over 12 times FY23’s estimated earnings.

In my opinion, NAB is the leading domestic ASX 200 bank share to choose from.

The other two large banks are also interesting investment considerations. The Westpac share price is valued at just 11 times FY23’s estimated earnings. Westpac’s cost reduction plan and rising NIM will hopefully be enough for the business to achieve good profit growth, combined with a good dividend yield.

ANZ also trades on a cheap valuation, and the bank’s retail division has been improving – its loan processing times are now on the same level as competitors. However, the proposed acquisition of the banking division of Suncorp Group Ltd (ASX: SUN) could be a major distraction for management. Even so, it’s only valued at 10 times FY23’s estimated earnings.

Expert views

Looking at the analyst ratings on Commsec, seven rate ANZ as a buy, none rate CBA as a buy, six rate NAB as a buy and nine rate Westpac as a buy.

The post Which ASX 200 bank shares are the ones to buy in 2023? appeared first on The Motley Fool Australia.

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• 3 reasons to buy NAB shares right now: Goldman Sachs
• Here’s why 2023 will be a huge year for passive income
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• Top brokers name 3 ASX shares to buy 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 recommended Macquarie Group and Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Core Lithium Ltd (ASX: CXO) share price has started 2023 in a positive fashion.

As you can see below, the lithium developer’s shares have rebounded strongly from significant weakness in December.

This leaves Core Lithium’s shares trading almost 17% higher year to date at $1.19.

Where next for the Core Lithium share price?

Unfortunately, the team at Goldman Sachs believes the company’s shares are heading lower again from here.

According to a note from this morning, the broker has reiterated its sell rating and 95 cents price target.

Based on the current Core Lithium share price, this suggests that the ASX 200 lithium share could tumble 20% over the next 12 months.

What did the broker say?

The main reason for Goldman’s bearish sentiment is the company’s valuation. The broker explained:

CXO looks relatively expensive vs. peers trading at 1.4x NAV (peer average ~1.0x; on GSe LT US$1,000/t spodumene), pricing in ~US$2,050/t (peer average ~US$1,100/t) or implying current pricing persists for ~1.5 years (peer average <1 year), while also having the lowest average operating FCF/t LCE — essentially embedding significant resource upside and capacity expansion/life extension ahead of fundamentals, in our view.

Goldman also believes production risks are not appreciated by the market. It adds:

We see production risk as the Finniss project moves through ramp up on project complexity (moving between different open pits and underground configurations), and the required exploration/resource upside to support capacity expansion/life extension currently priced into the stock looks significant.

Overall, the broker feels investors should be skipping Core Lithium and buying rival Allkem Ltd (ASX: AKE) right now. As covered here, Goldman Sachs has a buy rating and $15.20 price target on the latter.

The post Here’s what Goldman Sachs is saying about the Core Lithium share price now appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Which ASX lithium shares are producing and which are not in 2023?
• Why has the Core Lithium share price already surged 18% this year?
• Will Core Lithium turn a profit in 2023?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday

Motley Fool contributor James Mickleboro has positions in Allkem. 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 last five years have been good for the Vanguard Australian Shares ETF (ASX: VAS).

The exchange-traded fund (ETF) tracking the S&P/ASX 300 Index (ASX: XKO) has seen its unit price shoot 16.5% higher in that time.

The VAS ETF was trading at $77.28 in January 2018. At that price, $1,000 would have bought 12 units, leaving an investor with around $73 in change.

Today, its units are swapping hands for $90 apiece. That means our figurative parcel would now be worth $1,080.

For comparison, the ASX 300 has gained 20.3% in that time.

But how much has the VAS ETF returned when we also factor in the dividends it’s handed out in that time? Let’s take a look.

How much has the VAS ETF paid in dividends in 5 years?

Here are all the dividends offered by the Vanguard Australian Shares ETF over the last half-decade, rounded to the nearest cent:

VAS dividends’ pay date	Dividend value
October 2022	$1.45
July 2022	$2.16
April 2022	$2
January 2022	70 cents
October 2021	$1.41
July 2021	56 cents
April 2021	77 cents
January 2021	43 cents
October 2020	57 cents
July 2020	21 cents
April 2020	67 cents
January 2020	72 cents
October 2019	$1.07
July 2019	82 cents
April 2019	92 cents
January 2019	71 cents
October 2018	$1.12
July 2018	$1.02
April 2018	67 cents
January 2018	68 cents
Total:	$18.66

As the chart above shows, each Vanguard Australian Shares ETF unit has provided $18.66 in dividends over the last five years.

That means our 12-unit-strong parcel likely yielded $223.92 in that time – or around 24% of its purchase price.

Further, the ETF has returned 40.6% since January 2018 when we tally both dividends and share price gains. That’s certainly nothing to scoff at.

And those returns might have been bolstered if our imagined investor had reinvested their dividends, thereby compounding their holding.

Right now, the Vanguard Australian Shares ETF is trading with a 7% dividend yield.

The post Invested $1,000 in the Vanguard Australian Shares ETF (VAS) 5 years ago? Here’s how much dividend income you’ve received appeared first on The Motley Fool Australia.

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More reading

• Here’s why 2023 will be a huge year for passive income
• Generations of Aussie investors own this ASX ETF. Do you?
• How different is the Vanguard Australian Shares Index ETF (VAS) now compared to a year ago?
• The Vanguard Australian Shares Index ETF (VAS) sank 9% in 2022. What’s the outlook for 2023?
• Chasing the latest Vanguard Australian Shares (VAS) ETF payout? Don’t miss the cut-off

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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The Allkem Ltd (ASX: AKE) share price could be a top option for investors in the lithium industry right now.

That’s the view of analysts at Goldman Sachs, which have reiterated their bullish view on the lithium miner this morning.

What is Goldman saying about the Allkem share price?

According to the note, the broker continues to expect lithium prices to remain relatively solid for the first half of 2023 before weakening materially over the next 18 months. Goldman explained:

Our commodity team expect lithium prices through 1H23 to reflect the near-term tightness and lagging spodumene contract price pass-through (highlighted by PLS’ recent offtake repricing) before declining over 2H23, where we note 2024 futures have continued to pull back. While we see earnings support for the Australian stocks over 12-18 months on price lags, we expect lithium stock prices to reflect lithium commodity price movements as prices decline from record peaks.

However, due to its production growth plans, Goldman sees Allkem as well-positioned to navigate what lies ahead. It said:

Allkem has one of the best production outlooks in our lithium coverage, with broad-based growth optionality, second only to Mineral Resources on an LCE basis when including downstream hydroxide production on an equity basis. This drives our forecast for the company’s equity LCE production growth of >4x by FY27E, supporting earnings rebounding to near current record levels despite the declining lithium price environment.

Attractive valuation

In light of above and its attractive valuation at just 0.9x net asset value, the broker revealed that “Allkem is our preferred lithium exposure.”

As a result, this morning it has reiterated its buy rating and $15.20 price target on its shares.

Based on the current Allkem share price of $12.70, this implies potential upside of approximately 20% for investors over the next 12 months.

The post Broker says Allkem share price can rise 20% even if lithium prices fall appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Which ASX lithium shares are producing and which are not in 2023?
• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• 3 ASX 200 lithium shares brokers just upgraded to ‘buy’

Motley Fool contributor James Mickleboro has positions in Allkem. 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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Looking at Magellan Financial Group Ltd (ASX: MFG) shares, it appears to have a very high dividend yield.

In FY22, the funds management business paid an annual dividend per share of $1.79. Including the franking credits, that’s a grossed-up dividend yield of around 25%.

It would be a huge yield if it were repeated in FY23. But, what are the chances of that?

Profitability is reducing

Magellan manages many billions of dollars of investors’ money. However, it manages a lot less than it used to.

In November 2021, it was managing around $116 billion of funds under management (FUM). By December 2022, this had dropped to just $45.3 billion.

Magellan has seen an enormous amount of money flow out of the door. The fund manager said that it experienced net outflows of $2.6 billion during the month of December 2022, which included net retail outflows of $0.6 billion and net institutional outflows of $2 billion.

The company also recently admitted that performance fees for the six months ended 31 December 2022 “are not meaningful”.

Magellan informed the market that the average FUM for the six months ended 31 December 2022 was $53.8 billion, compared to $112.7 billion in the prior corresponding FUM.

On 29 July 2022, the run rate of average base management fees based on its closing FUM of $60.2 billion was 65 basis points. With the huge fall of FUM over the past year, this means that Magellan’s ongoing revenue and net profit after tax (NPAT) have dropped a lot.

While a company’s board decides the dividend, it is heavily influenced by a company’s current earnings generation ability.

Magellan’s dividend expectations

The funds management business’ dividend policy for its interim and final dividends is to pay 90% to 95% of net profit of its funds management business.

According to Commsec, Magellan is expected to generate earnings per share (EPS) of $1.02 and pay an annual dividend per share of 87 cents which would equate to a grossed-up dividend yield of around 12%.

The problem is, with the shrinking FUM, Magellan’s earnings are expected to fall in FY24 as well. The FY24 grossed-up dividend yield could be 9.1%.

So, not only is the 25% yield an illusion, the FY23 dividend yield of above 10% may not be sustainable either.

Can it turn things around?

The new leadership of Magellan believes that through the growth of its existing strategies as well as new products, it can get back to $100 billion of FUM after five years. The growth is aimed to be “more diversified” and be less dependent on global shares.

It’s going to take signals from clients on how to position. Magellan wants to grow its allocations with clients’ portfolios, and supported by industry tailwinds.

Magellan said it’s looking to invest to ensure it can bring its more diverse offerings to global institutions and “create value-added partnerships that sustain in a competitive environment.”

The post Is the 25% dividend yield from Magellan shares a trap or a gold mine? appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today
• Why Magellan, Pointsbet, Star, and Zip shares are dropping today
• Magellan share price crashes 9% amid major funds under management decline
• Flying start: Magellan share price surges 11% in 2023
• Here are the top 10 ASX 200 shares 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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The Fortescue Metals Group Limited (ASX: FMG) share price has been in fine form in recent months.

As you can see below, since dropping to a 52-week low of $14.50 in late October, the mining giant’s shares have raced 58% higher.

This means the Fortescue share price is now trading within a whisker of a 52-week high.

Where next for the Fortescue share price?

Unfortunately for investors, one leading broker believes the Fortescue share price could give back all these gains and some more.

According to a note out of Goldman Sachs, its analysts have reiterated their sell rating with a trimmed price target of $13.40.

Based on where the miner’s shares are currently trading, this implies potential downside of approximately 42% over the next 12 months.

Why so bearish?

Goldman believes that the Fortescue share price is vastly overvalued, particularly in comparison to peers. It also feels that its dividends will come under significant pressure in the coming years as it spends big on decarbonisation.

Commenting on sector valuations, Goldman said:

The Australian bulk miner and steel sectors performed strongly in 4Q23 on the expectation of a China reopening and we now see the sector as more fairly valued trading on (simple averages) ~6x NTM EBITDA and ~1.05x NAV [net asset value].

However, the broker highlights that Fortescue trades at a lofty 1.62x NAV, making it the most expensive ASX 200 bulk mining share under coverage.

In respect to its decarbonisation spending, the broker adds:

We continue to think FMG is at an inflection point on capital allocation, and to fund the ambitious strategy, we assume the company raises ~US$5bn of new debt, reduces the dividend payout ratio from the current ~75% in FY22 to ~50% from FY24 onwards, and increases gross gearing to 30-35% by FY26 (in line with the company’s target of 30-40%).

Goldman appears to believe investors should buy Rio Tinto Ltd (ASX: RIO) instead. It has a buy rating and $130.00 price target on the miner’s shares.

The post Goldman tips Fortescue share price to crash 42% appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• Fortescue’s Twiggy Forrest is in the wars this week. Here’s why
• Here’s why 2023 will be a huge year for passive income
• Will 2023 be a golden year for ASX 200 mining 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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If you’re looking for dividend shares to buy, then you may want to look at the two shares listed below that have been rated as buys by Morgans.

Here’s why the broker rates these ASX 200 dividend shares highly right now:

QBE Insurance Group Ltd (ASX: QBE)

The first ASX 200 dividend share that has been named as a buy is insurance giant QBE.

Morgans is positive on the company and believe it is well-placed to benefit from rising premiums and cost-outs. The broker also highlights that QBE’s shares trade on lower than average multiples. It said:

With strong rate increases still flowing through QBE’s insurance book, and further cost-out benefits to come, we expect QBE’s earnings profile to improve strongly over the next few years. The stock also has a robust balance sheet and remains relatively inexpensive overall trading on ~9.1x FY23F PE

As for dividends, Morgans expects QBE to pay a 41.5 cents per share dividend in FY 2022 and then a 76.5 cents per share dividend in FY 2023. Based on the latest QBE share price of $12.93, this equates to yields of 3.2% and 5.9%, respectively.

Morgans has an add rating and $14.93 price target on QBE’s shares.

Telstra Corporation Ltd (ASX: TLS)

Another ASX 200 share that has been named as a buy is telco giant Telstra.

Morgans likes the company due to its successful turnaround via the T22 strategy and its recently approved restructure. The broker believes the latter could unlock value through asset sales. It explained:

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.

In respect to dividends, the broker is expecting Telstra to continue to pay fully franked 16.5 cents per share dividends in both FY 2023 and FY 2024. Based on the current Telstra share price of $4.01 this equates to yields of 4.1%.

Morgans has as an add rating and $4.60 price target on the company’s shares.

The post Buy Telstra and this ASX 200 dividend share: Morgans appeared first on The Motley Fool Australia.

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More reading

• Why I think these 3 ASX 200 dividend shares are top buys for retirement
• Morgans names 2 ASX 200 dividend shares to buy now
• Can Telstra shares deliver 16% upside AND a healthy dividend this year?
• How different is the Vanguard Australian Shares Index ETF (VAS) now compared to a year ago?
• Buy Telstra and this ASX 200 dividend share for income in 2023: brokers

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

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The Bank of Queensland Ltd (ASX: BOQ) is expected to deliver the biggest dividend yield among the ASX 200 bank shares in FY24.

That’s according to data from Commsec on consensus estimates for FY24 dividends among bank shares.

Bank of Queensland is expected to deliver a 52-cent dividend for FY24, which equates to a 7.5% yield.

In FY22, the regional bank paid 44 cents per share, fully franked. This was a 9% bump on FY21.

Here are the consensus estimates for the other ASX 200 bank shares.

ANZ 200 bank share	FY24 forecast dividend	FY24 forecast dividend yield
Bank of Queensland Ltd (ASX: BOQ)	52 cents	7.5%
ANZ Group Holdings Ltd (ASX: ANZ)	$1.60	6.6%
Westpac Banking Corp (ASX: WBC)	$1.473	6.3%
Bendigo and Adelaide Bank Ltd (ASX: BEN)	60 cents	6%
National Australia Bank Ltd (ASX: NAB)	$1.77	5.7%
Virgin Money UK CDI (ASX: VUK)	$1.79	5.2%
Commonwealth Bank of Australia (ASX: CBA)	$4.55	4.3%
AMP Ltd (ASX: AMP)	5.2 cents	3.9%
Macquarie Group Ltd (ASX: MQG)	$6.775	3.8%

What will drive dividends in 2023 for ASX 200 bank shares?

Rising interest rates are leading to improved net interest margins (NIMs) for the ASX 200 bank shares.

This is a big factor in a bank’s profitability, so there is an obvious impact on dividends because they are funded by profits.

A bank’s NIM represents the difference between the income it receives from interest on home and business loans and the interest it pays out on deposits or savings accounts.

In October, the Bank of Queensland was among the first of the ASX 200 banks to report an improved NIM in its full-year FY22 results.

The market had been waiting to find out whether consecutive official cash rate rises since May had flowed through to the banks’ bottom lines positively or negatively. Positively in terms of improved NIMs, or negatively in terms of higher bad debts as mortgages became more expensive for homeowners.

It turned out to be positive, with Bank of Queensland reporting an exiting net interest margin for FY22 of 1.81%.

Broker Goldman Sachs noted that was well ahead of the 1.75% 2H FY22 average and above their forecast for FY23 of 1.78%.

Investors loved the news and pushed the Bank of Queensland share price 11.3% higher on the day of the release of the full-year results. The share prices of many ASX 200 bank shares rose in the following days.

Banks return to wholesale international markets for lending

One threat to expanding NIMs is that Australian banks now have to return to the overseas wholesale market to at least partly fund ongoing mortgage lending.

This follows the closure of the Term Funding Facility (TFF), which was set up by the Reserve Bank in 2022. The TFF allowed Australian lenders to borrow at exceptionally low rates to keep mortgage lending going through the COVID-19 crisis.

However, the banks now have to pay that money back and return to wholesale markets for funds. The TFF was closed for drawdowns on 30 June 2021, and the last possible maturity date is 30 June 2024.

Wholesale funding is more expensive than using money from savings accounts, so the banks are starting to raise term deposit rates to attract more local fixed-term savings to use for lending.

As most Australian savers know, the banks were quick to pass on rate hikes to home loan customers but slow to pass them on to savings account holders. This helped protect NIMs in the second half of 2022.

Now, it is becoming cheaper to offer higher term deposit rates to attract local money for lending.

The post Which ASX 200 bank share is forecast to pay the highest dividend yield in FY24? appeared first on The Motley Fool Australia.

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More reading

• My $15 a day plan to build passive income this year
• Can ASX bank shares deliver in 2023 after higher interest rates?
• Should I buy Bank of Queensland shares for passive income?
• Why Bank of Queensland, Block, Fletcher Building, and Newcrest are dropping today
• 3 ASX 200 value shares I think could soar in 2023

Motley Fool contributor Bronwyn Allen has positions in Anz Group, Commonwealth Bank Of Australia, Macquarie Group, and Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Bendigo And Adelaide Bank. The Motley Fool Australia has recommended Macquarie Group and Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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