ASX travel shares are taking off today amid news a decision on international borders could be “imminent”.

Qantas Airways Limited (ASX: QAN), Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) shares are climbing following rumblings tourists may soon be able to enter Australia.

Let’s look at what is at play today.

Decision on international border expected

Travel shares on the ASX could be gaining today in anticipation of an announcement on Australia’s borders.

Speculation is mounting that the Federal Government will reveal early this week when it will reopen borders to international tourists.

In an interview with ABC Insiders on Sunday, Home Affairs Minister Karen Andrews said:

The next phase is to open to tourists. We need to bring those back so as soon as we can, we will be opening to international tourists – it’s imminent.

So, that is a priority for us now. And I know that the Prime Minister and I know that I have been working over the last few weeks in particular to make sure that we are ready to open to international tourists as soon as it is safe to do so. 

Further, Prime Minister Scott Morrison said the reopening will be addressed in Parliament this week. This will come as welcome news to investors in ASX travel shares. In a press conference in Sydney on Sunday, Morrison commented:

As we go into this parliamentary week, there are many important matters that we’ll be addressing. One of those we will be addressing very early on is the issue of the opening up of our international borders to international visitors again. 

On Friday, the Qantas share price surged 4% after announcing changes to its frequent flyer program. The airline will cut the number of points required to book hotels or holiday packages. Also on Friday, Qantas CEO Alan Joyce compared the West Australian border restrictions to North Korea.

In comments reported on 7 News, Joyce said.

It’s starting to look like North Korea.

It’s going to be closed indefinitely at this stage unless we have a plan to start living with COVID and opening to up the rest of the country.

However, WA Premier Mark McGowan slightly eased restrictions on Saturday, despite the border reopening remaining on hold, the ABC reported. More compassionate exemptions for people with strong WA connections or medical reasons to travel are now in place.

Travel shares gain traction

At lunchtime on Monday, Qantas and Webjet shares are up 1.64% and 1.54%, respectively.

Meanwhile, ASX travel share Flight Centre is seeing the greatest surge on the back of the news, rising 4.5%. This continues a good run for the travel agent. Flight Centre was one of the best performers last week, gaining 10%.

As my Foolish colleague James noted, investors may be optimistic the travel market recovery is on the way.

The post Why are ASX travel shares Flight Centre (ASX:FLT), Qantas and Webjet lifting off today? appeared first on The Motley Fool Australia.

More reading

• These are the 10 most shorted ASX shares
• These were the best performing ASX 200 shares last week
• Frequent flyer: what changed for the Qantas (ASX:QAN) share price today?
• Here’s why the Webjet (ASX:WEB) share price is up 10% in a week
• ‘It’s a real blow’: Flight Centre (ASX:FLT) CEO weighs in on government’s latest vax plans

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 Flight Centre Travel Group Limited and Webjet Ltd. 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 stomach-churning volatility that hit our markets since the start of the year does not bode well for ASX initial public offering (IPO) hopefuls.

This view was echoed by several experts who spoke with The Australian, even though they remain divided on whether this is the time to be picking up bargains after the big sell-off.

The turn in sentiment towards new floats follows a boom in ASX IPOs in 2021. The Australian Financial Review reported 240 listings last year – the highest number in 14 years!

ASX IPOs coming off a high in 2022

Many fund managers seem to believe that the IPO market will be more subdued this year. This includes Tribeca Investment Partners portfolio manager Jun Bei Liu.

“IPO timelines will have to be pushed out,” she told The Australian.

“We’ve seen some very expensive tech stocks debut recently that have performed very poorly and that doesn’t bode well for the sector.”

Why new floats look vulnerable to sinking

While many ASX IPOs may not be in the tech index, the sharp drop in IT shares around the world is a big turnoff for would-be investors.

This is primarily because of valuations. IPO wannabes want to sell their shares at a good premium, but the derating in the market that is characterised by the tech collapse will make this very difficult.

From this perspective, venture capitalists will be reluctant to float their private companies now, according to Steve Johnson of Forager Funds.

“I think activity in that space will be dramatically curtailed,” said Johnson. “The other thing that I think it curtails is their ability to raise and burn a lot of cash.”

New ASX IPOs versus established shares

If many market darlings are now trading at more attractive valuations after the pull-back, why would investors want to back an ASX IPO given that the newbie doesn’t have the same track record as its listed rivals?

Further, many companies hitting the bourse for the first time are operating at a loss. Investors are less willing to bet on their future growth due to the uncertainty caused by the sputtering COVID-19 recovery and rising interest rates.

Is this time to buy the dip?

Perhaps a more important question for ASX investors now is whether they should be buying the dip. There is much less consensus among the experts on this question.

Liu sees “plenty of bargains” and highlighted Xero Limited (ASX: XRO) shares as an example. Another she finds interesting is the WiseTech Global Ltd (ASX: WTC) share price.

However, Johnson does not agree and warned the Wisetech share price still looks overvalued. He also issued a similar warning about the Megaport Ltd (ASX: MP1) share price.

“Megaport, on 20 times revenue, that’s just a very, very, very optimistic valuation,” he said.

“We could have a lot of our portfolio invested in this space, but I don’t want to do that until I see widespread distress.”

The post Are ASX IPOs in for a struggle in 2022 following the boom? appeared first on The Motley Fool Australia.

More reading

• Melbana Energy (ASX:MAY) share price rockets 24% on ‘significant’ oil find
• Are index funds all you need to retire a millionaire?
• ‘Bumper crop’: Graincorp (ASX:GNC) share price rockets 13% on guidance update
• BetaShares just launched a new ASX ETF. Here’s what’s under the hood…
• Why are ASX COVID test shares climbing today?

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended MEGAPORT FPO, WiseTech Global, and Xero. The Motley Fool Australia owns and has recommended WiseTech Global and Xero. The Motley Fool Australia has recommended MEGAPORT FPO. 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 Melbana Energy Ltd (ASX: MAY) share price is off to the races today.

Shares in the ASX junior explorer are up 24.3% at time of writing, to 4.6 cents per share.

Below we take a look at the company’s latest oil exploration update that looks to be stoking ASX investor interest.

What drilling update was announced?

Melbana Energy’s share price is surging after the company reported it had intersected a “significant oil interval” at its Alameda-1 exploration well in its Block 9 contract area onshore Cuba.

Melbana said drilling overnight reached a depth of some 3,590 metres measured depth (MD) and 3,420 metres true vertical depth (TVD). At that depth “a lithology change was detected, potentially signifying the bottom of the reservoir”.

The company decided to call total depth for its current 8.5-inch section to preserve the oil already found there. It said, “The gas behaviour in this interval was better than anticipated and there have been significant oil shows present throughout on the shale shakers and in cuttings samples.”

Melbana is now preparing to log this section for a better grasp of the encountered hydrocarbons.

Commenting on the exploration, Melbana Energy executive chairman Andrew Purcell said:

This well is not affording much chance for rest for our hard-working team here on the ground in Cuba. But no one is complaining given what this well continues to tell us. We’re all looking forward to the results of the forthcoming logging program to learn more about this extensive oil interval we’ve intersected.

Melbana Energy share price snapshot

The Melbana Energy share price has rocketed 340% over the past 12 months, compared to 3% gain posted by the All Ordinaries Index (ASX: XAO).

Buoyed by soaring energy prices, which has seen crude oil trade at 7-year highs in the New Year, Melbana Energy shares are up 120% so far in 2022.

The post Melbana Energy (ASX:MAY) share price rockets 24% on ‘significant’ oil find appeared first on The Motley Fool Australia.

More reading

• Are index funds all you need to retire a millionaire?
• ‘Bumper crop’: Graincorp (ASX:GNC) share price rockets 13% on guidance update
• BetaShares just launched a new ASX ETF. Here’s what’s under the hood…
• Why are ASX COVID test shares climbing today?
• ASX 200 (ASX:XJO) midday update: ANZ disappoints, Magellan shares crushed

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

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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.

Can you put your money in nothing but boring S&P 500 index funds and grow your retirement nest egg to seven figures? The short answer is yes.

While the performance of the S&P 500 can vary dramatically from year to year, it is surprisingly consistent over multidecade periods. Depending on the exact period you’re looking at, the total return (including dividends) of the S&P 500 has historically averaged 9%-10% per year.

For our purposes, we’ll use the middle of this range — 9.5% — to keep things simple. If you’re relatively young and buy a low-cost S&P 500 index fund like the Vanguard S&P 500 ETF (NYSEMKT: VOO), it’s reasonable to expect this type of return over time.

While a gain of 9.5% in a single year might not sound thrilling, consider this: If you were to invest $65,700 in an S&P 500 index fund and averaged a 9.5% return each year, you’d have a million-dollar investment value in 30 years.

How much should you invest to reach seven figures?

Obviously, not everybody reading this has more than $65,000 just sitting around to put into an S&P 500 index fund.

With that in mind, here’s how much you should plan to invest monthly in S&P 500 index funds to retire a millionaire at age 65. If you’re relatively young, it might be less than you think.

Your Current Age	How Much to Invest Each Month
25	$216
30	$379
35	$557
40	$913
45	$1,540
50	$2,729

Data source: Author’s own calculations, using annual 9.5% compounding. Rounded to the nearest dollar.

If $1 million isn’t your goal, you can adjust these higher or lower. For example, if your goal is a $2 million nest egg, simply double the monthly savings account.

Two big caveats

No investment that can produce wealth like this is without risk and although the S&P 500 isn’t exactly a “high-risk” investment on a long-term basis, there are a couple of things to keep in mind.

For starters, in a real-world portfolio, you probably wouldn’t just invest in an S&P 500 index fund until you retire. As you get closer to retirement, your tolerance for big swings in your portfolio declines. Over the past 50 years, the S&P 500 has gained or lost as much as 37% in a single year — if you’re 65, do you really want your savings to fluctuate that much?

So, as you get closer to retirement, you’ll probably want to gradually shift some of your savings into lower-volatility (but lower-return) investments like bonds and CDs.

It’s also important to mention inflation, especially because it’s running relatively high right now. In short, $1 million in 30 years isn’t going to be the same thing as $1 million today.

However, the point is that it is certainly possible to retire a millionaire with S&P 500 index funds if you can stomach the volatility. If not, you might want to err on the side of caution and plan to invest a little extra each month to compensate for this gradual asset shift over time.

Warren Buffett’s favorite investment

Billionaire investor Warren Buffett is widely considered one of the best stock-pickers of all time but has said that low-cost index fund investing — and an S&P 500 index fund in particular — is the best way to invest for the majority of Americans. In fact, Buffett has even advised his own wife to invest her inheritance this way after he’s gone.

In a nutshell, while we wholeheartedly believe it’s possible to beat the market with individual stocks, the reality is that many people don’t have the time, knowledge, or desire to research and select stocks properly. And that’s OK. As Buffett says, “It is not necessary to do extraordinary things to get extraordinary results.”

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

The post Are index funds all you need to retire a millionaire? appeared first on The Motley Fool Australia.

More reading

• ‘Bumper crop’: Graincorp (ASX:GNC) share price rockets 13% on guidance update
• BetaShares just launched a new ASX ETF. Here’s what’s under the hood…
• Why are ASX COVID test shares climbing today?
• ASX 200 (ASX:XJO) midday update: ANZ disappoints, Magellan shares crushed
• 2 ASX 200 shares that could make it rain dividends: experts

Matthew Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool owns and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

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

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The GrainCorp Ltd (ASX: GNC) share price is storming higher following the company’s business update to investors this morning.

At the time of writing, the grain exporter’s shares are up a sizeable 12.76% to $8.13. In comparison, the All Ordinaries (ASX: XAO) is down 0.37% to 7,391.6 points.

What did GrainCorp announce?

Investors are fighting to get a hold of GrainCorp shares after the company provided its FY22 earnings guidance.

According to its release, GrainCorp advised that it expects to report a bumper FY22 result subject to several market variables.

As such, the company is forecasting earnings before interest, tax, depreciation and amortization (EBITDA) in the range of $480 million to $540 million. This reflects a potential increase of up to 63.14% based on FY21’s EBITDA result of $331 million.

In addition, FY22 net profit after tax (NPAT) is estimated to come between $235 million and $280 million. When comparing against FY21’s NPAT of $139 million, this represents a potential gain of up to 101%.

Management noted several factors which have led GrainCorp to achieve a strong outlook for FY22. This includes its supply chain execution, continued delivery of operating initiatives, and high global demand for Australian grain and oilseeds.

The company faced numerous challenges such as flooding and a wet, interrupted harvest, whilst working under COVID-19 restrictions.

While minimal supply chain issues were experienced, over 1.5 million tonnes of additional storage capacity were provided for growers. This resulted in multiple site receival records across the network for the 21/22 harvest.

Combined grain intake across the harvest period has totalled 13.7mmt year-to-date, supplemented with a high opening grain inventory position of 4.3mmt.

GrainCorp expects to see total receivals of 16mmt to 17mmt (FY21: 16.5mmt), and exports of 8.5mmt to 9.5mmt (FY21: 7.9mmt) for FY22.

Management commentary

GrainCorp managing director and CEO Robert Spurway touched on the company’s performance, saying:

GrainCorp delivered an excellent result in FY21, and I am pleased to report that we expect this performance to be further improved in FY22.

In addition to a second consecutive bumper crop and the global demand for Australian grain, our strong start to FY22 demonstrates the efficiency of our supply chain and the resilience of our industry.

…The strong harvest, coupled with supply shortages and adverse weather conditions in the northern hemisphere, is driving excellent global demand for Australian grain and oilseeds and strong supply chain margins for grain exports.

GrainCorp share price summary

Over the past 12 months, the GrainCorp share price has increased 96%. The company’s shares are down 2% year to date but are within reach of their 52-week high of $8.70.

Based on today’s price, GrainCorp presides a market capitalisation of around $1.86 billion, with approximately 228.86 million shares outstanding.

The post ‘Bumper crop’: GrainCorp (ASX:GNC) share price rockets 13% on guidance update appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: ANZ disappoints, Magellan shares crushed
• Why BrainChip, GrainCorp, Redbubble, and Zip shares are dropping today

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 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 ASX is home to what seems like an ever-growing pile of exchange-traded funds (ETFs). From the rise of the humble index fund two decades ago, the ASX ETF sector has blossomed over the past few years. You can now find an ASX ETF that covers just about every sector or theme you can think of. Well, this trend is set to continue with the launch of a new ETF from BetaShares. Today, the ASX welcomes the BetaShares Australian Composite Bond ETF (ASX: OZBD).

This new ETF is hardly the first fund on the ASX that covers fixed-interest investments. It’s not even the first BetaShares fund that does so. But it is BetaShares’ first ETF that tracks both government and corporate bonds, hence the ‘composite’. The provider tells us that OZBD is “designed to be a core portfolio allocation for fixed income”. It will hold both government bonds as well as “high-quality Australian corporate” bonds.

Bonds are also known as ‘fixed-interest investments’ and are a popular alternative to shares. Bonds can provide a steadier stream of income than shares and are often added to an investment portfolio to improve stability and reduce volatility (although that is never guaranteed, of course).

BetaShares launches new bond ETF. What’s the deal?

So what makes the BetaShares Australian Composite Bond ETF different? This ETF reportedly takes a different approach to bond selection. It weighs bonds by using a “risk-adjusted income potential” rather than debt weighting. This, according to the provider, will aim to “provide investors with higher returns than the most commonly used Australian fixed income benchmark, the AusBond Composite Index (AusBond)”.

To kick things off, OZBD has started life with a running yield of 2.78% per annum. Its average bond maturity is 7.52 years and it has an average yield to maturity of 2.46%.

Its largest holdings are sovereign Australian government bonds, followed by corporate bonds of Ausnet Services Ltd (ASX: AST), Inter-American Development Bank, Asian Development Bank, Lloyds Banking Group, and Vodafone.

The index that this fund tracks has returned an average of 3.71% per annum over the past 5 years. It will charge a management fee of 0.19% per annum.

So far this Monday, BetaShares Australian Composite Bond ETF has lost 0.4% in its first morning of trading and is currently being priced at $49.67 per unit.

 

The post BetaShares just launched a new ASX ETF. Here’s what’s under the hood… appeared first on The Motley Fool Australia.

More reading

• ‘Bumper crop’: GrainCorp (ASX:GNC) share price rockets 13% on guidance update
• Why are ASX COVID test shares climbing today?
• ASX 200 (ASX:XJO) midday update: ANZ disappoints, Magellan shares crushed
• 2 ASX 200 shares that could make it rain dividends: experts
• Could IAG (ASX:IAG) shares become suddenly sexy amid rising interest rates?

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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ASX COVID-19 test shares are in the green today amid a federal government announcement. This morning Treasurer Josh Frydenberg outlined the government’s plan to make the tests tax deductible.

ASX-listed companies that manufacture COVID-19 tests include Atomo Diagnostics Ltd (ASX: AT1), Lumos Diagnostics Holdings Ltd (ASX: LDX) and AnteoTech Ltd (ASX: ADO.

Atomo’s share price is currently climbing 1.19% today, while Lumos is in the green 2.49 and Anteotech is jumping 6.98%.

Let’s take a look at the news that could be giving these shares a bump today.

Tax deductible COVID-19 tests

COVID-19 tests for people who need them for work will be tax deductible from this year, the Financial Review reported.

Sonic Healthcare Limited (ASX: SHL) and Healius Ltd (ASX: HLS) process COVID-19 tests in Australia. Sonic has conducted millions of PCR tests, while Healius is processing 40,000 COVID-19 tests every day.

Treasurer Frydenberg will discuss the tax deduction policy in a speech to the Australian Industry Group today. In a copy of the speech, reported by the SBS, he states:

Today, I’m announcing that we will ensure that COVID-19 testing expenses are tax deductible for testing taken to attend a place of work, giving businesses and individuals more clarity and assurance.

We will also ensure that fringe benefits tax will not be incurred by employers where COVID-19 tests are provided to employees for this purpose.

The Lumos share price surged 5% last week on news the Victorian Government intends to support local manufacturing of its RAT tests.

Atomo secured up to 20 million COVID-19 rapid antigen tests for Australia and New Zealand in 2022, my Foolish colleague Aaron reported in January.

Anteotech is still awaiting Therapeutic Goods Administration (TGA) approval for use of its COVID-19 rapid antigen test in Australia.

Ellume is another Australian company working on TGA approval to sell its RATs in Australia. However, it is not listed on the ASX.

Share price recap

Some COVID-19 test shares have benefitted from the pandemic, making major gains in the past 52 weeks.

In the past year, Anteotech has rocketed 27%, while Sonic has surged 9% and Healius has gained 8%.

However, that’s not true across the board. The Atomo share price has slumped 27% while the Lumos share price is down 17%.

In contrast, the S&P/ASX 200 Index (ASX: XJO) has returned more than 3.4% in the past year.

The post Why are ASX COVID test shares climbing today? appeared first on The Motley Fool Australia.

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• 2 ASX shares every dividend investor needs to know about
• The Lumos Diagnostics (ASX:LDX) share price is soaring another 8% today. Here’s why
• Why the Lumos Diagnostics (ASX:LDX) share price is up 15% today
• 2 great value ASX dividend shares that brokers love
• AnteoTech (ASX:AD) share price surges 15% as COVID-19 RAT race continues

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 Sonic Healthcare 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 Monday, the S&P/ASX 200 Index (ASX: XJO) is on course to start the week with a decline. The benchmark index is currently down 0.45% to 7,087.4 points.

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

ANZ share price falls on Q1 update

The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has tumbled lower today following the release of its first quarter update. While the bank didn’t provide the market with financials, it did advise that a poor performance for its Markets business in October is expected to impact its first half results. ANZ also revealed that its net interest margin (NIM) fell 8 basis points during the quarter.

Magellan shares sink

The Magellan Financial Group Ltd (ASX: MFG) share price is crashing lower on Monday following the release of another disappointing funds under management update and news that its Chairman and Chief Investment Officer, Hamish Douglass, is taking a leave of absence. This follows “a period of intense pressure and focus on both his professional and personal life.”

James Hardie Q3 update

The James Hardie Industries plc (ASX: JHX) share price is rising today following the release of its third quarter update. The building products company reported a 22% increase in global net sales to US$900 million and a 25% lift in adjusted net income to US$154.1 million. Management advised that this reflects strong price/mix growth in all three regions.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Monday has been the Graincorp Ltd (ASX: GNC) share price with a 13% gain. This morning the grain exporter revealed that it expects FY 2022’s underlying net profit after tax to come in at $235 million to $280 million. This is up from $139 million in FY 2021. The worst performer has been the Magellan share price with an 11% decline following its two aforementioned announcements.

The post ASX 200 (ASX:XJO) midday update: ANZ disappoints, Magellan shares crushed appeared first on The Motley Fool Australia.

More reading

• 2 ASX 200 shares that could make it rain dividends: experts
• Could IAG (ASX:IAG) shares become suddenly sexy amid rising interest rates?
• ‘Plenty of bargains’ following ASX tech shares sell-off: expert
• James Hardie (ASX:JHX) share price up as company cements trading gains
• Top broker picks 6 ASX 200 shares with earnings surprise potential

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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There are a handful of S&P/ASX 200 Index (ASX: XJO) shares that are predicted to pay big dividends over the next couple of years.

Not every business that pays a dividend offers a large yield. It’s influenced by a few different factors including the dividend payout ratio and the valuation of a business.

Companies with relatively low price/earnings ratios (p/e ratios) have the potential to pay particularly high dividend yields.

However, an ASX 200 dividend share isn’t necessarily a buy just because of the yield. The investment case also has to make sense. The experts currently like these two businesses which are expected to make it rain dividends in the next few years:

BHP Group Ltd (ASX: BHP)

BHP is one of the largest resource businesses in the world.

It has a diversified portfolio of different commodities. After the planned divestment of its petroleum business to Woodside Petroleum Limited (ASX: WPL), the commodities that BHP will have exposure to will be iron ore, copper, nickel, potash and coal. However, the resources giant has said it’s focused on future-facing commodities, so time will tell what happens with the coal division.

Iron ore is typically the biggest profit generator for the business. The iron ore price went through a large drop near the end of 2021, but it has since come storming back. CommSec pointed out today that the iron ore price rose another 0.4% to US$146.60 per tonne on Friday, due to “shrinking supply from Brazil and hopes for a boost in infrastructure spending in China.”

BHP is currently rated as a buy by the broker Morgans, with a price target of $48.60. The broker reckons that the ASX 200 dividend share is going to pay a grossed-up yield of 10.2% in FY22 and 8% in FY23.

The company continues to work on extending its list of projects. The potash Jansen project in Canada is expected to have a multi-decade lifespan and be able to earn high margins.

Bank of Queensland Limited (ASX: BOQ)

BOQ is one of the largest challengers to the other big four ASX banks of Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group Ltd (ASX: ANZ).

There are now three main brands within the BOQ business: BOQ, ME Bank and Virgin Money Australia.

It’s currently rated as a buy by the broker Morgan Stanley with a price target of $10. The broker thinks the bank is going pay a grossed-up dividend yield of 8.25% in FY22 and 9% in FY23.

In the first quarter of FY22, the ASX 200 dividend share reported strong application volumes across both the housing and business lending portfolios. Management said that growth was disciplined and high-quality with low levels of lending with a loan-to-value ratio of more than 90%.

BOQ said its net interest margin (NIM) was going to be slightly lower than previously guided because of tougher trading conditions, including yield curve volatility, intense price competition, increased fixed rate lending and higher liquid asset balances.

But, FY22 expenses are expected to be around 1% lower than FY21. The ME Bank integration program is on track, with approximately $23 million of full year synergies delivered in the first quarter of FY22 thanks to things like operating model changes and early supply chain benefits.

The post 2 ASX 200 shares that could make it rain dividends: experts appeared first on The Motley Fool Australia.

More reading

• Could IAG (ASX:IAG) shares become suddenly sexy amid rising interest rates?
• These are the 10 most shorted ASX shares
• ‘Plenty of bargains’ following ASX tech shares sell-off: expert
• The Bank of Queensland (ASX:BOQ) share price has underperformed the ASX 200 by 10% over the last 6 months. Here’s why
• Top broker picks 6 ASX 200 shares with earnings surprise potential

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 Westpac Banking Corporation. 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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Insurance Australia Group Ltd (ASX: IAG) hasn’t exactly shot the lights out over the past 12 months.

IAG shares are down 11% since this time last year. By comparison the S&P/ASX 200 Index (ASX: XJO) is up 2% over the 12 months.

But things could be looking up for the insurance giant.

Why IAG shares are looking compelling

Deputy portfolio manager at Yarra Capital Management Edward Waller admits insurance isn’t perceived as a sexy industry.

Writing in Live Wire, he labels insurance as “complex, technical and mundane”.

That aside, he adds, “For the first time in close to a decade we believe insurance is now compelling.”

What’s changing for the insurance sector?

Rising inflation and the near certainty of rising interest rates ahead could buoy the insurance sector and IAG shares in the year ahead.

According to Waller, “The sector is one amongst a handful that benefits from higher interest rates, with a 1% increase in rates equating to 10-20% earnings upside.”

And insurance companies can match or top any broader increases in prices. Waller points out that home and car insurance premiums are rising by 5% or more per year with commercial insurance up 10% plus per annum.

Then there’s the recent spate of natural hazards that have seen the insurance companies have to shell out big payments.

According to Waller, “After a surge in natural hazards, it ‘probably can’t get much worse’; the July to October 2021 period saw natural hazard costs at 8-times normal levels.”

This, he said, has 2022 financial year earnings estimates for IAG coming in 20­-30% below FY2019 earnings. But, “[u]nlike other sectors,” Waller said, “we expect there will be no post-COVID earnings slump”.

Why else are IAG shares appealing?

Atop currently low expectations and sentiment towards the insurance sector, Waller said the insurance companies’ balance sheets look strong. “The sector raised billions in business interruption reserves, much of which of which we expect is surplus to requirements and will be returned to investors,” he said.

IAG shares are also “attractively valued and trade in line with long run historic multiples”. He said that’s an “exception in the current market where 75% of Industrials are trading above long run average multiples”.

Waller added (as quoted by Live Wire):

IAG, meanwhile, has been de-rated after experiencing 8-times normal losses in the first 4 months of FY22 – which we view as a genuine one off – and its $1.15bn in largely unnecessary business interruption provisions speaks to capital flexibility.

The post Could IAG (ASX:IAG) shares become suddenly sexy amid rising interest rates? appeared first on The Motley Fool Australia.

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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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