ASX dividend shares could be the answer to this environment where central bank interest rates remain very low.

Businesses have the capability of paying out a large amount of their annual cash flow as payments to investors. This helps boost the yield.

These two ASX dividend shares continue to grow their cash payouts for investors:

Rural Funds Group (ASX: RFF)

Rural Funds is a farm-based real estate investment trust (REIT).

It leases out its farms to large, reliable tenants. Plenty of the tenants are listed or are large private businesses. Some of the tenants include Treasury Wine Estates Ltd (ASX: TWE), Select Harvests Limited (ASX: SHV), Australian Agricultural Company Ltd (ASX: AAC), Olam and JBS.

The ASX dividend share’s property portfolio is spread across different sectors like cattle, vineyards, almonds and macadamias.

The goal of the REIT is to grow its distribution by 4% per annum for investors. This is achieved by contracted rental increases as well as investment in the farms to grow their productivity and value. An example of that could be increased water access at the farms.

At the current Rural Funds share price, it offers a FY22 yield of 4.2%.

Washington H. Soul Pattinson and Co Ltd (ASX: SOL)

This ASX dividend share is one of the oldest businesses on the ASX. It has been listed since 1903. Soul Pattinson has paid a dividend every year since it was listed.

The company has turned into a diversified investment conglomerate with its investments spread across a wide range of industries such as telecommunications, resources, agriculture, financial services, property, building products and more.

In terms of actual investments that it owns, there are plenty of ASX shares in the portfolio including Brickworks Limited (ASX: BKW), TPG Telecom Ltd (ASX: TPG), New Hope Corporation Limited (ASX: NHC), Tuas Ltd (ASX: TUA), Pengana Capital Group Ltd (ASX: PCG), Commonwealth Bank of Australia (ASX: CBA), Woolworths Group Ltd (ASX: WOW), Wesfarmers Ltd (ASX: WES), Bailador Technology Investments Ltd (ASX: BTI), Retail Food Group Limited (ASX: RFG) and Life360 Inc (ASX: 360).

Soul Pattinson’s cash flow is steadily growing over time, which is helping fund its increasing dividend. The ASX dividend share has grown its dividend every year since 2000. It pays out a majority of the regular cash flow and then re-invests the rest into more opportunities that can help grow the cash flow and dividend further.

The business is also aiming for long-term growth of the capital value of its portfolio.

It recently acquired one of the largest listed investment companies (LICs) on the ASX called Milton. This came with a portfolio of blue chip ASX shares that it can sell, then reallocate the money towards more opportunities.

Some of the areas it’s looking at include private equity and global shares. There are key themes that the business is focused on, including health and ageing, the energy transition, agriculture, financial services and education. It is building “platforms for growth”.

At the current Soul Pattinson share price, it has a grossed-up dividend yield of 3.5%.

The post These defensive ASX dividend shares keep giving investors a payrise appeared first on The Motley Fool Australia.

More reading

• Are these 2 top ASX dividend shares buys in March 2022?
• 3 reasons why Soul Pattinson (ASX:SOL) is a strong ASX dividend share idea
• The Soul Pattinson (ASX:SOL) share price has lost 17% so far this year. Is it a buy?
• 2 top ASX dividend shares with 4%+ yields
• 2 ASX shares that could keep growing the dividend every year

Motley Fool contributor Tristan Harrison owns RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Bailador Technology Investments Limited, Brickworks, Life360, Inc., and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns and has recommended Brickworks, RURALFUNDS STAPLED, Washington H. Soul Pattinson and Company Limited, and Wesfarmers Limited. The Motley Fool Australia has recommended Bailador Technology Investments Limited, TPG Telecom 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 Bruce Jackson.

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At lunch on Friday, the S&P/ASX 200 Index (ASX: XJO) has given back its morning gains and is tumbling lower. The benchmark index is currently down 0.5% to 7,094.5 points.

Here’s what is happening on the ASX 200 today:

Tech shares struggle

The tech sector is weighing heavily on the ASX 200 on Friday. The likes of Block Inc (ASX: SQ2) and Xero Limited (ASX: XRO) are deep in the red after US tech stocks pulled back on rate hike concerns. This was sparked by news that inflation in the United States has hit its highest level in 40 years. The S&P ASX All Technology index is down 2.4% at the time of writing.

Nickel Mines cancels share purchase plan

Due to the recent volatility in the Nickel Mines Ltd (ASX: NIC) share price, the nickel producer has cancelled its share purchase plan at the last minute. Nickel Mines’ share purchase plan was being undertaken at $1.37 per new share. However, yesterday the company’s shares ended the day 11% lower than this at $1.22. Shares from the plan were due to be issued next week on Tuesday.

Breville acquisition

The Breville Group Ltd (ASX: BRG) share price is dropping today after announcing an acquisition. The appliance manufacturer has agreed to acquire Italian premium prosumer home coffee equipment manufacturer Lelit for 113 million euros in cash and shares. However, no details were provided in respect to Lelit’s sales or earnings, making it impossible to know if Breville is getting value for money.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Friday has been the Nickel Mines share price with a 6% gain. It’s possible that shareholders that were taking part in its share purchase plan have decided to buy shares on-market following its cancellation. The worst performer on the index has been the Mesoblast limited (ASX: MSB) share price with a decline of over 5%. Its shares will be kicked out of the ASX 200 later this month.

The post ASX 200 (ASX:XJO) midday update: Block falls, Nickel Mines jumps appeared first on The Motley Fool Australia.

More reading

• Nickel Mines (ASX:NIC) has just withdrawn its share purchase plan. What’s going on?
• Breville (ASX:BRG) share price falls despite 113m euros coffee acquisition
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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. owns and has recommended Block, Inc. and Xero. The Motley Fool Australia owns and has recommended Block, Inc. and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Siren Gold Ltd (ASX: SNG) share price is rocketing higher this morning, up 18%.

The ASX gold share minnow closed yesterday at 25 cents and is currently trading for 29 cents.

The 18% gain comes as the All Ordinaries Index (ASX: XAO) is up less than 0.2% at time of writing and the S&P/ASX All Ordinaries Gold Index (ASX: XGD) has dipped into the red, down 0.3%.

While gold prices remained steady overnight at US$1,998 per ounce, bullion has dipped from highs of over US$2,050 per ounce earlier this week.

So, what’s driving investor interest in the tiny ASX gold share?

What’s driving investor interest in the ASX gold share?

The Siren Gold share price is heading skywards after the company reported it has intersected “significant visible gold” in the deepest hole it’s drilled so far at its Alexander River project in New Zealand.

In continuing drilling at the McVicar West location within the project, Siren extended the shoot an additional 200 metres down plunge. That brings the total drilling to 500 metres below the historic McVicar mine, which the company said produced 41,000 ounce of gold at 26 grams per tonne.

The intercept in the drill hole returning visible gold was comprised of “2-3 metres of strong acicular arsenopyrite, followed by a 0.6 metre quartz vein with significant visible gold”.

The ASX gold share minnow could also be getting a boost from potentially promising results from other drill holes.

Among those the company reported, “At Bull East AX79 intersected 9 metres of strong acicular arsenopyrite mineralisation, extending the Bull East shoot to 400 metres down plunge.

Siren Gold share price snapshot

Despite today’s big boost, the Siren Gold share price remains down 8.1% in 2022. That compares to a year-to-date loss of 6.9% posted by the All Ords.

At the current share price, the ASX gold share minnow has a market cap of approximately $21 million.

The post Why is this ASX gold share minnow rocketing 15% today? appeared first on The Motley Fool Australia.

More reading

• Why this broker says buy Origin (ASX:ORG) shares instead of AGL
• Why is the IAG (ASX:IAG) share price edging higher today?
• The Myer (ASX:MYR) dividend is back. Here’s what you need to know
• Nickel Mines (ASX:NIC) has just withdrawn its share purchase plan. What’s going on?
• Top broker tips Woolworths (ASX:WOW) share price to rise 13%

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 Bruce Jackson.

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Origin Energy Ltd (ASX: ORG) and AGL Energy Limited (ASX: AGL) are two of Australia’s largest energy companies.

But only one of them represents a good investment option right now according to the team at Morgans.

Origin shares are a buy

According to the note, the Morgans thinks investors should be buying Origin shares over AGL shares right now.

This week the broker put an add rating and $6.44 price target on the company’s shares. Which, based on the current Origin share price of $5.82, implies potential upside of almost 11% over the next 12 months.

In addition, its analysts expect a 12-month fully franked dividend yield approaching 5% to sweeten the deal even further.

As a comparison, Morgans has a hold rating and $7.24 price target on AGL’s shares. Which is a touch lower than the current AGL share price of $7.28.

Why Origin over AGL?

Morgans sees AGL as a difficult investment proposition at present.

It notes: “AGL remains a difficult investment proposition ahead of its demerger with its component parts likely to attract investors who have environmental priorities that are at polar opposites.”

As for Origin, the broker was pleased with its recent update and $250 million on-market share buyback. It also believes the company’s APLNG business is well-placed to generate robust cash flows that underpin strong dividends.

Its analysts explained: “ORG is looking to farm down interest in its Beetaloo basin tenure and has reiterated steady production targets for APLNG. It is also taking a selective approach to Energy Markets investment. We therefore see limited growth opportunities for the company but equally limited need to spend capital. Our outlook for commodity prices suggests ORG could sustain strong dividends in the medium term. We maintain our ADD rating and see 10% upside to our valuation on today’s closing price and potential dividend yield of 5% giving forecast 12-m TSR of 15%.”

The post Why this broker says buy Origin (ASX:ORG) shares instead of AGL appeared first on The Motley Fool Australia.

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• Soul Patts urges AGL (ASX:AGL) board to give ‘more thought’ to takeover bid
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• Origin (ASX:ORG) share price higher on $250m buyback and refreshed strategy
• ASX 200 (ASX:XJO) midday update: AGL rejects new takeover offer, Appen makes strategic investment

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 Bruce Jackson.

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The Insurance Australia Group Ltd (ASX: IAG) share price is moving forward mid-morning on Friday. This comes after the insurance giant provided a market release in relation to its subordinated notes.

At the time of writing, IAG shares are up 0.12% to $4.34 apiece. In comparison, the S&P/ASX 200 Index (ASX: XJO) is down 0.13% to 7,121 points.

Let’s take a closer look at what the company updated the ASX with today.

What did IAG announce?

In today’s statement, IAG advised it has registered its product disclosure statement for an offer of unsecured subordinated notes.

This will see up to NZ$400 million (A$373.33 million) of notes made available to New Zealand retail investors and certain institutional investors.

This will comprise a direct reinvestment offer for up to NZ$30 million (A$27.99 million), and a primary offer for up to NZ$370 million (A$345.24 million).

Both offers are expected to open on 21 March 2022, with the indicative margin expected to be announced via the New Zealand stock exchange (NZX) on the same date.

The offer is set to close on 25 March 2022, and the fixed rate will be revealed on or about the same day.

In addition, the notes will be issued on 5 April 2022 and quoted on the NZX Debt Market the following day.

The first interest payment date falls on 15 June 2022, with quarterly intervals thereafter.

The maturity date for the notes is 15 June 2038.

IAG management noted that the offer is part of the company’s capital management strategy. The proceeds will be used for general corporate purposes, including the refinancing of existing debt.

About the IAG share price

Over the past 12 months, IAG shares have been somewhat volatile, moving in peaks and troughs throughout the period.

The shares have lost around 6% in value since this time last year and they are still heavily down from pre-pandemic levels. In early 2020, the IAG share price was as high as $8 before plummeting to multi-year lows in the COVID crash.

IAG commands a market capitalisation of roughly $10.6 billion with more than 2.46 billion shares outstanding.

The post Why is the IAG (ASX:IAG) share price edging higher today? appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to sell today
• ‘Widespread flooding’ update: IAG (ASX:IAG) share price backtracks
• ASX 200 (ASX:XJO) midday update: Origin’s $250m buyback, Nickel Mines smashed
• The IAG (ASX:IAG) share price managed to gain 8% in February. Here’s how
• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor Aaron Teboneras 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 owns and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Myer Holdings Ltd (ASX: MYR) shares have been known for a lot of things over the past few years. But paying dividends hasn’t been one of them. This famous Australian retailer has been infamously struggling in recent years. Most of us would know the threats that a changing retail landscape has confronted department stores like Myer with. Back in 2010, Myer was a $3.71 share. Today, it’s currently going for 50 cents, down 0.98% so far this Friday. The Myer share price is also down by more than 55% over the past 5 years. 

But Myer is now up an eye-catching 20.24% over the past 5 trading days. This dramatic jump upwards was sparked by the company’s release of its half-year earnings results yesterday morning.

As we covered at the time, Myer reported total sales growth of 8.5% to $1.52 billion, along with a 55.2% increase in net profits after tax to $32.3 million. 

Myer shares break a dividend drought

But perhaps the biggest piece of news was the resumption of dividend payments. Myer shareholders haven’t received a dividend since the 2017 financial year. But that is about to change. Myer told investors that an interim dividend of 1.5 cents per share, fully franked, would be coming their way soon. 

That’s not quite as much as Myer’s last dividend of 2 cents per share that investors received back on 9 November 2017. Or the 2017 interim dividend of 3 cents per share before that. But it’s certainly better than what investors have received ever since.

Myer shares will trade ex-dividend for this payment on 23 March, with the cash arriving in shareholders’ pockets on 12 May.

At the current Myer share price of 50 cents, this dividend will be worth a yield of 3% (or 4.29% grossed-up with the full franking). If Myer repeats this dividend for its final results later in the year (which is just hypothetical at this point), it would give Myer a forward dividend yield of 6% on today’s pricing. 

So it’s perhaps no wonder that investors got so excited on this news yesterday.

At the current Myer share price, this ASX retailer has a market capitalisation of $418.85 million. 

The post The Myer (ASX:MYR) dividend is back. Here’s what you need to know appeared first on The Motley Fool Australia.

More reading

• Why Block, Myer, Paladin Energy, and Qantas shares are storming higher
• Myer (ASX:MYR) share price up 21% amid strong half-year result and first dividend since FY17

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 Bruce Jackson.

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The Nickel Mines Ltd (ASX: NIC) share price is back in focus today after the company announced it is withdrawing its share purchase plan.

In early trade, shares in the mining company are up 3.69% to $1.26. However, this is still a considerable distance away from its recent $1.60 level — a price that Nickel Mines was hovering around prior to the nickel mania.

Handing back $57 million to shareholders

To set the scene, back in February Nickel Mines revealed its intentions to raise capital to fund its stake in the Oracle Nickel Project (ONI). The plan was to raise US$225 million to put towards an initial 30% position in the project.

As part of the capital raise, a share purchase plan was launched to allow ASX shareholders to participate. Importantly, the plan outlined an issue price of A$1.37 per share. This was roughly in line with the Nickel Mines share price at the time.

Initially, around A$18 million was targeted for this portion of the funding. However, Nickel Mines has said the applications received reached A$57 million.

Since then, the nickel company has suffered a hefty blow despite nickel futures flying to record highs of more than US$100,000 per tonne. Unfortunately, one of Nickel Mines’ largest shareholders held a sizeable short position during this time.

The outcome was widespread concern among shareholders over what the implications could be for the Nickel Mines share price. As a result, the market swiftly sold off the ASX mining giant over the past two days of trading.

Now, shares are below $1.30, putting any share purchase plan participants at an immediate 7% deficit from the raising price. As such, the board has made the decision to return the A$57 million to shareholders and cancel the plan.

Nickel Mines managing director Justin Werner stated:

[…] given market volatility and the retraction in the Company’s share price in recent days the Board of Directors have agreed that it is in the best interests of shareholders to cancel the SPP effective immediately and return all applications in full. The proceeds of the SPP are not required for the acquisition of the 70% equity interest in the Oracle Nickel Project.

Nickel Mines on the ASX recap

The Nickel Mines share price gained ongoing traction in October last year as ASX investors began tuning in to rising commodity prices.

Between October 2021 and January 2022, shares in the nickel producer rallied a solid 83%. However, the recent tarnishing has taken the Nickel Mines share price into the negative on a year-to-date basis. Since the beginning of the year, it has retreated 13.5%.

The company is currently trading on a price-to-earnings (P/E) ratio of around 15 times.

The post Nickel Mines (ASX:NIC) has just withdrawn its share purchase plan. What’s going on? appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler 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 Bruce Jackson.

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The Woolworths Group Ltd (ASX: WOW) share price is currently having a subdued finish to the week.

In morning trade, the retail giant’s shares are trading flat at $35.76.

Where next for the Woolworths share price?

One leading broker that believes the Woolworths share price could be heading higher from here is Citi.

According to a recent note, the broker has a buy rating and $40.30 price target on the retailer’s shares.

Based on the current Woolworths share price, this implies potential upside of almost 13% over the next 12 months.

And with Citi forecasting a fully franked 2.7% dividend yield in FY 2022 and then 3% in FY 2023, the total potential return on offer over the next 12 months is over 15%.

What did the broker say?

Citi was pleased with Woolworths’ performance during the first half, noting that its earnings were in line with expectations.

It commented: “Woolworths reported 1H22 EBIT of $1,382 million, consistent with guidance and inline with Citi and Visible Alpha consensus. Momentum in Australian Food improved following the mid-December trading update with EBIT at the top end of guidance and total sales growth of 3.6% in December.”

In addition to this, its analysts have named three reasons to be positive on the company’s outlook.

The broker explained: “We see an improving outlook given 1) eased restrictions and declining cases enabling a reduction in COVID costs and better operational efficiency; 2) food inflation lifting with shelf prices up ~2-3% in 2H22e to date; and 3) margin benefits as some online customers return to stores. We make small upward revisions to EBIT of ~1%.“

All in all, this could make the Woolworths share price one to consider if you’re looking for blue chip options this month.

The post Top broker tips Woolworths (ASX:WOW) share price to rise 13% 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 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 Bruce Jackson.

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Amazon.com Inc (NASDAQ: AMZN) is a company most Aussies would be familiar with. The US tech giant’s flagship online marketplace has been active in Australia for years now. And Amazon’s dominating presence in cloud computing has also turned investors’ heads in recent years. Not to mention the space-hopping antics of its famous founder Jeff Bezos more recently.

But Amazon might also be famous for its stock price. Amazon shares are among the most expensive on the US markets. Just one will set an investor back US$2,936.35 on the latest pricing. And that’s after a major pullback. The company’s 52-week (and all-time) high remains at a whopping US$3,773.08. That works out to be $5,162.94 in our dollars at current exchange rates.

This aspect of Amazon’s reputation looks set to be shaken up. According to our Fool colleagues over in the US, the company has reportedly just announced a stock split, its first in more than 20 years.

Amazon to join the stock-split club

A stock split is when a company issues more shares of stock in order to lower the price of its individual shares. It has become quite a popular exercise in recent years among some of the US’s largest tech companies. Since 2020, we have seen companies ranging from Apple Inc (NASDAQ: AAPL) and Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) to NVIDIA Corporation (NASDAQ: NVDA) and Tesla Inc (NASDAQ: TSLA) announce stock-split plans of their own.

But Amazon is now the latest to join the club.

The company will reportedly be undertaking a 20-for-1 stock split later this year, subject to investor approval at the annual general meeting in May. That means that if an investor owns one share of Amazon today, they will own 20 shares instead come the split. Each will be worth approximately one-20th of what that stock will be priced at just before the split. The company also announced an expanded share buyback program, to be worth US$10 billion.

Of course, a stock split does nothing in theory to change a company’s value. It can be thought of as ‘recutting the pizza’. If Amazon is the pizza, whether it has eight slices or 16 doesn’t change the overall size of the meal.

Recutting the pizza…

But for a few possible reasons, stock splits tend to be popular with investors regardless. That might be why we saw Amazon shares gain an impressive 5.41% to US$2,936.35 last night during US trading. For one, a stock split usually increases the ownership potential for the company’s shares. In Amazon’s case, it will be a lot easier to buy Amazon shares if they are priced at US$146.82 than $2,936.35. More shares at a lower price usually boost liquidity too.

Here’s how eToro’s Josh Gilbert described the effects of a stock split for retail investors:

Stock splits change nothing about the fundamentals of a stock. The splits are simply a psychological factor for retail investors buying assets. A stock that is priced at USD$100 compared to USD$2,500 is more attractive to retail investors.

Fractional share trading is now an important part of investing, but the price of a stock can still play an important factor. Investors will often feel that a stock with a lower share price has more growth potential than one with a higher price.

At Amazon stock’s last closing price, the US tech giant has a market capitalisation of US$1.49 trillion.

The post Amazon (NASDAQ:AMZN) announces US$10b share buyback and 20-for-1 split appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen owns Alphabet (A shares), Amazon, Apple, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Alphabet (A shares), Amazon, Apple, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Alphabet (C shares) 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), Amazon, Apple, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Breville Group Ltd (ASX: BRG) share price is trading lower on Friday.

In morning trade, the appliance manufacturer’s shares are down 2% to $26.43.

This is despite Breville announcing a key acquisition this morning.

What did Breville announce?

This morning Breville announced that it has entered into an agreement to acquire 100% of the Italian-based prosumer specialty coffee group, Lelit. The transaction is expected to complete by early July 2022 following a pre-acquisition restructure of the Lelit Group.

According to the release, Lelit was founded in Castegnato, Italy in 1985. It designs, manufactures, and markets premium prosumer home coffee equipment in Europe and throughout the world.

Management believes that as a rapidly growing disruptor in the premium Italian-made espresso machine and grinder market, Lelit strategically complements Breville’s award-winning coffee portfolio. It also notes that it brings together two iconic companies in the design and distribution of preeminent home coffee equipment.

Breville Group’s CEO, Jim Clayton, commented: “The acquisition of Lelit brings together the two great coffee cultures of the world: Italy and Australia. Both companies have a shared passion for using product innovation to improve our customers’ coffee experience at home, and we look forward to working alongside LELIT and its existing partners to further accelerate its growth and product innovation, while preserving the values that underpin its Italian identity.”

What’s the cost?

The release notes that Breville will acquire 100% of Lelit from the founders and current owners on a cash and debt free basis for a total consideration of approximately 113 million euros, subject to customary settlement adjustments.

This will comprise half in cash and half by the issue of fully paid ordinary shares in Breville priced at $27.64 per share. The latter will be subject to a five-year trading lock post completion. The cash portion will be funded from existing cash reserves and debt facilities.

Strangely, no details have been provided on Lelit’s sales or profits, nor whether the deal is expected to be earnings accretive. As a result, this makes it impossible to know if this deal is good value or not.

In light of this, it isn’t a surprise to see the Breville share price trading lower on the news.

The post Breville (ASX:BRG) share price falls despite 113m euros coffee acquisition 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 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 Bruce Jackson.

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