There is increasing acceptance that electric cars will replace combustion engine vehicles in the coming years.

For those wanting to invest in this trend but feeling nervous about picking individual stocks, a new exchange-traded fund (ETF) is coming that might do the heavy lifting.

BetaShares revealed recently that BetaShares Electric Vehicles and Future Mobility ETF (ASX: DRIV) would be “coming soon”.

“Sales of electric vehicles are projected to grow strongly in coming years,” stated BetaShares.

“The transition to smarter vehicles is likely to significantly increase the use of semiconductors and high-tech componentry in cars.”

Which shares will this ETF hold?

While details, including launch date, are currently scarce, the fund manager did provide 4 examples of shares that the new ETF would hold:

• Tesla Inc (NASDAQ: TSLA): arguably the most famous electric vehicle stock, which has risen more than 1,000% since the start of 2020
• Nio Inc (NYSE: NIO): one of several Chinese car makers focusing purely on electric engines
• Aptiv PLC (NYSE: APTV): a US auto parts provider headquartered in Ireland, which has a large business making electronic active safety technologies
• Uber Technologies Inc (NYSE: UBER): best known for its dominance in ride-sharing.

All up, the Electric Vehicles and Future Mobility ETF will hold up to 50 different stocks involved in the future of transportation. 

According to BetaShares, the convenience of investing in foreign businesses through ASX shares is not the only advantage of the new fund.

“DRIV offers potential portfolio diversification benefits to Australian investors, given that automotive technology is under-represented in the Australian market.”

Thematic ETFs are so hot right now

The new ASX listing is the latest in a series of thematic ETFs to come to the market this year.

Just last month, BetaShares itself listed ASX’s first cryptocurrency-related ETF, while this month ETF Securities revealed it would debut the first-ever Australian funds directly investing in Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH).

ETFs have become popular in recent years on the back of the success of passive index funds.

But Nucleus Wealth spokesperson Jayden Stent warned last month there were considerable risks with theme-based ETFs.

“You don’t want to be lulled into thinking that because some ETFs offer low volatility that all ETFs are the same,” he said on a Nucleus blog.

“The potential for large swings will mainly depend on the type of the fund… Investors [need] to take note of what the ETF is tracking and what are the underlying risks associated with it.”

The post An electric car ETF is coming to the ASX: Here’s what we know appeared first on The Motley Fool Australia.

More reading

• What this EV forecast could mean for top ASX 200 resource shares
• Does the tech sell-off affect EV stocks like Nio?
• Why Nio stock is trading lower today
• Could Rivian, Lucid, or Nio become the next Tesla?
• 3 reasons to buy Tesla stock, and 1 reason to sell

Motley Fool contributor Tony Yoo owns Bitcoin, Ethereum, and NIO Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin and Ethereum. 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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On Friday the S&P/ASX 200 Index (ASX: XJO) finished a positive week on a subdued note. The benchmark index fell 0.4% to finish the period at 7,353.5 points.

Will the market be able to bounce back from this on Monday? Here are five things to watch:

ASX 200 expected to rise

The Australian share market looks set to start the week on a positive note. According to the latest SPI futures, the ASX 200 is expected to open the day 13 points or 0.2% higher this morning. This follows a positive end to the week on Wall Street, which saw the Dow Jones rise 0.6%, the S&P 500 climb 0.95%, and the Nasdaq push 0.7% higher.

Oil prices higher

Energy producers such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) will be on watch after oil prices finished the week on a positive note. According to Bloomberg, the WTI crude oil price rose 1% to US$71.67 a barrel and the Brent crude oil price rose 1% to US$75.15 a barrel. Oil prices had their best week in months, rising 8% over the period as omicron concerns eased.

Iron ore price softens

The Fortescue Metals Group Limited (ASX: FMG) and Rio Tinto Limited (ASX: RIO) shares will be on watch after the iron ore price softened. According to Metal Bulletin, the benchmark spot iron ore price edged 0.5% to US$108.03 a tonne.

Gold price higher

Gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could start the week on a positive note after the gold price pushed higher on Friday night. According to CNBC, the spot gold price rose 0.45% to US$1,784.80 an ounce. The gold price pushed higher

CSL acquisition coming?

The CSL Limited (ASX: CSL) share price will be on watch today amid reports the biotherapeutics company is getting closer to finalising a $10 billion deal for Swiss-based Vifor Pharma. CSL has previously been tipped to partly fund the deal with a $4 billion equity raising. Vifor Pharma is a leader in iron deficiency, nephrology and cardio-renal therapies.

The post 5 things to watch on the ASX 200 on Monday appeared first on The Motley Fool Australia.

More reading

• Are these 2 leading ASX 200 shares worth buying?
• Top brokers name 3 ASX shares to buy next week
• Morgans names 2 ASX 200 shares to buy
• These were the best performing ASX 200 shares last week
• Fortescue (ASX:FMG) Future Industries signs Indonesian hydrogen deal

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 CSL Ltd. 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 team at Goldman Sachs has been running the rule over a number of ASX 200 shares this month.

Two that the broker rates highly right now are listed below. Here’s what it is saying about them:

Bank of Queensland Limited (ASX: BOQ)

This regional bank could be an ASX 200 share to buy according to Goldman Sachs. It was pleased with its recent trading update and notes that the company is performing better than expected so far in FY 2021. In light of this and recent share price weakness, the broker sees a lot of value in its shares currently.

Goldman Sachs has a buy rating and $9.67 price target on the company’s shares. This compares to the latest Bank of Queensland share price of $7.94.

Goldman commented: “Our recently revised FY22E revenue growth on pro-forma FY21A had been 1.2% and costs of -0.4%. This compares to their updated implied revenue growth guidance of +1% (i.e. at least 2% positive jaws guidance) and expenses of -1%. Therefore, with costs run-rating mildly better than we had expected, we make minor revisions to our FY22/FY23/FY24E EPS of +0.5%/+0.4/+0.1% and our TP moves to A$9.67 from A$9.66. Overall we maintain our Buy recommendation on BOQ, which we believe has more offsets to these mortgage NIM pressures in the form of i) BOQ’s more rate sensitive deposit book, and ii) the continued delivery of ME Bank synergies. Coupled with 33% TSR to our revised TP, we stay Buy.”

Harvey Norman Holdings Limited (ASX: HVN)

This retail giant could be a top option for investors right now. This is due to Goldman’s belief that the company will continue to benefit from strong consumer spending in the home category.

The broker has a buy rating and $6.00 price target on the retailer’s shares. This compares to the current Harvey Norman share price of $5.17.

Goldman explained: “We update our earnings outlook on HVN to reflect the latest trading update. We continue to expect the underlying sales growth vs. pre-COVID levels to remain strong due to the positive housing related spending environment and an overall expected increase in spending for the home category. Additionally, we also update our FX forecasts for HVN, in line with the latest GSe. Overall, this results in a revision of group EBIT outlook by +0.1% and +0.8% respectively over FY22 and FY23e respectively. Our 12m Target Price for HVN remains unchanged at A$6.00 and we maintain a Buy rating on HVN.”

The post Goldman Sachs names 2 ASX 200 shares to buy appeared first on The Motley Fool Australia.

More reading

• Bank of Queensland (ASX:BOQ) shares: $8 one day, $10 the next?
• Top brokers name 3 ASX shares to buy today
• ASX 200 retail shares lift as Aussies head into Christmas with $240bn in savings
• Why Bank of Queensland, Imugene, Webjet, and Zip shares are pushing higher
• Why the Bank of Queensland (ASX:BOQ) share price is racing 5% higher today

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 owns and has recommended Harvey Norman Holdings 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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There are some market leaders of industry within the S&P/ASX 200 Index (ASX: XJO). The ASX 200 shares in this article could be compelling ideas to think about.

Businesses that have strong competitive positions may be good ideas to think about for an investor’s portfolio.

Companies can continually improve their business if they keep investing and focusing on their strengths.

Could these two top ASX 200 shares be worth owning?

JB Hi-Fi Limited (ASX: JBH)

This company is made up of three operating businesses – JB Hi-Fi Australia, The Good Guys and JB Hi-Fi New Zealand.

It sells a wide array of electronics like computers, phones, TVs, as well as other home items like fridges, cooking appliances, air conditioning and so on. Many of the products it sells are integral parts of our homes and lives.

JB Hi-Fi says that its group model is underpinned by five unique competitive advantages – scale, a low cost operating model, quality store locations, supplier partnerships and multichannel capability. Another aspect of its success is that its stores are very effective, with a high level of sales per square metre.

FY21 saw the ASX 200 share’s profitability significantly increase. Whilst total sales went up 12.6% to $8.9 billion, net profit after tax (NPAT) soared 67.4% to $506.1 million.

Analysts were impressed by the FY22 first quarter sales update. Despite restrictions, lockdowns and so on, JB Hi-Fi Australia sales only fell 7.5%, JB Hi-Fi New Zealand sales dropped 6.4% and The Good Guys sales dropped 5.6% in the first three months.

JB Hi-Fi also said that in October, the group had seen sales momentum continue and has benefited from the reopening of stores in NSW and changes to the timing of key product releases compared to prior years.

Credit Suisse rates JB Hi-Fi as a buy, with a price target of $55.86 and thinks it has a very strong position in the retail world.

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

Soul Patts is one of the oldest ASX 200 shares. It was listed over a century ago.

It has built an investment portfolio of different businesses in different sectors.

Soul Patts is in telecommunications with TPG Telecom Ltd (ASX: TPG) and Tuas Ltd (ASX: TUA), resources with substantial investments in New Hope Corporation Limited (ASX: NHC) and Round Oak, agriculture, property and so on. Brickworks Limited (ASX: BKW) is another major position. Soul Patts also has a large cap ASX share portfolio and a small cap ASX share portfolio.

This business has grown its dividend every year for the last two decades. It has achieved this by having a range of asset classes, with mostly defensive and contrarian investments that it picks for the long-term. The reliable cashflow it generates both funds the growing dividend and can be re-invested into more opportunities.

A recent merger with the listed investment company (LIC) Milton will allow the ASX 200 share to jump on investment opportunities in a number of different target asset classes and thematics. It’s looking at private equity, structured high yield, emerging companies, global equities, ‘real’ assets, property, health and ageing, energy transition, agriculture, financial services and education.

Whilst the Soul Patts share price has a 15% upside to the Morgans price target of $36.78, it’s only rated as a hold at the moment by that broker.

The post Are these 2 leading ASX 200 shares worth owning? appeared first on The Motley Fool Australia.

More reading

• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• Soul Pattinson (ASX:SOL) share price dips as investors digest AGM
• Here are the top 10 ASX shares today
• These 3 ASX 200 shares are topping the volume charts on Friday

Motley Fool contributor Tristan Harrison owns Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Brickworks. The Motley Fool Australia owns and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended TPG Telecom 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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The Westpac Banking Corp (ASX: WBC) share price has been a poor performer in recent weeks.

For example, since the start of November, the banking giant’s shares have lost approximately 19% of their value.

Is the weakness in the Westpac share price a buying opportunity?

One leading broker that is sitting on the fence with the Westpac share price is Goldman Sachs. Last week the broker retained its neutral rating on Australia’s oldest bank’s shares.

Though, it is worth noting that with a price target of $25.60, Goldman still sees 23% upside for the Westpac share price over the next 12 months.

Furthermore, its analysts are forecasting a fully franked 5.8% dividend yield in FY 2022. If you add this into the equation, this brings the total return on offer to almost 29%. Not bad for a neutral rating!

What did the broker say?

The main reasons Goldman Sachs isn’t overly positive about the Westpac share price are the bank’s margin outlook and doubts over management’s bold cost reduction plans.

Goldman explained: “We remain Neutral rated on WBC, reflecting: i) the significant reset in the margin at the FY21 result provides a weak platform for revenue growth in FY22E; ii) with expenses disappointing in 2H21, we believe the potential for WBC to reach its FY24 cost target of A$8.0 bn should be more heavily discounted than previously was the case, and we note that our like-for-like FY24E cost forecast is c. A$8.6 bn; and iii) the benefits to non-interest income from increased economic activity are set to be offset by a loss of income from divestments.”

Though, the broker does acknowledge there is potential upside risk from “higher interest rates, outperformance on NIM management, better than expected performance on cost management.”

The post Is the Westpac (ASX:WBC) share price a buy after falling 19% in 6 weeks? appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy next week
• ASX 200 (ASX:XJO) midday update: Fortescue CEO steps down, Westpac buyback update
• Westpac (ASX:WBC) share price higher on $3.5bn buyback update
• Could rumours over a Westpac (ASX:WBC) mega-merger ever become facts?
• RBA maintains interest rate but removes 2024 reference. What could this mean for ASX shares?

Motley Fool contributor James Mickleboro owns Westpac Banking Corporation. 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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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that investors might want to be aware of are summarised below.

Here’s why brokers think investors ought to buy them next week:

Rio Tinto Limited (ASX: RIO)

According to a note out of Morgan Stanley, its analysts have upgraded this mining giant’s shares to an overweight rating with an improved price target of $110.50. The broker believes there is upside risk to expectations thanks to an improving housing outlook in China and strong demand for aluminium. Morgan Stanley also highlights that the company’s shares have pulled back materially from recent highs. The Rio Tinto share price was trading at $95.83 at the end of the week.

Webjet Limited (ASX: WEB)

A note out of Goldman Sachs reveals that its analysts have retained their buy rating but trimmed their price target on this online travel agent’s shares to $6.90. The broker has been looking at the Omicron variant of COVID-19 and the impact it could have on travel markets. While it does expect it to push back Webjet’s recovery, it remains positive. Goldman continues to see a long term growth story in the Webjet business. The Webjet share price was fetching $5.49 at Friday’s close.

Westpac Banking Corp (ASX: WBC)

Analysts at Morgans have retained their add rating and $30.50 price target on this banking giant’s shares. According to the note, the broker believes the market is pricing Australia’s oldest bank’s shares as a value trap. However, it doesn’t believe this is the case and instead sees significant value in them. All in all, it feels the recent pullback is a buying opportunity for investors. The Westpac share price ended the week at $20.85.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Fortescue CEO steps down, Westpac buyback update
• Evergrande officially defaults, downgraded by Fitch. What next?
• Westpac (ASX:WBC) share price higher on $3.5bn buyback update
• Analysts name 2 ASX dividend shares to buy now
• Could rumours over a Westpac (ASX:WBC) mega-merger ever become facts?

Motley Fool contributor James Mickleboro owns Westpac Banking Corporation. 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 Webjet Ltd. and 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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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that investors might want to hear about are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

Commonwealth Bank of Australia (ASX: CBA)

According to a note out of Morgans, its analysts have retained their reduce rating and $73.00 price target on this banking giant’s shares following a review of the banking sector. While Morgans is positive on the sector, it continues to believe the CBA share price is overvalued at the current level and sees better value on offer with other banks. Morgans has previously stated its belief that the premium CBA’s shares trade at to the other big banks is unjustifiably large. The CBA share price ended the week at $97.90.

Insurance Australia Group Ltd (ASX: IAG)

A note out of Morgan Stanley reveals that its analysts have downgraded this insurance company’s shares to an underweight rating and cut the price target on them to $3.75. The broker has concerns over IAG’s margin outlook and ability to hold onto its market share. In light of this, it feels investors should stay away from the company’s shares, even though they’re trading close to their 52-week low. The IAG share price was fetching $4.40 at Friday’s close.

Magellan Financial Group Ltd (ASX: MFG)

Analysts at UBS have retained their sell rating and $29.50 price target on this struggling fund manager’s shares. According to the note, the broker was pleased to see Magellan’s funds under management update reveal an end to its run of net outflows during November. However, given the very poor performance of its flagship fund, which trails its benchmark materially, the broker isn’t getting excited. It feels this will weigh on performance fees and fund inflows. The Magellan share price ended the week at $29.12.

The post Top brokers name 3 ASX shares to sell next week appeared first on The Motley Fool Australia.

More reading

• These were the worst performing ASX 200 shares last week
• Why Alcidion, Magellan, Redbubble, and Seven West shares are dropping
• Why CBA (ASX:CBA) and this dividend share could be buys
• Why the IAG (ASX:IAG) share price could be cheap for patient investors
• The Magellan (ASX:MFG) share price has lost 40% in 6 months. What now?

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 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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The Adore Beauty Group Ltd (ASX: ABY) share price has multiple factors that could make it a useful ASX share to consider.

Adore Beauty was Australia’s first beauty-focused e-commerce website. It’s now the market leader with more than 10,000 products on sale from 260 brands.

Operates in a large and rapidly growing market

The ASX share points out that it has a large and growing addressable market to look at in Australia. The beauty and personal care market in this country is worth $11.2 billion.

Compared to other countries, Australia is in the early adoption part of the process, with online sales currently representing 11.4% of the total sales at $1.3 billion.

While the beauty and personal care category is growing at a compound annual growth rate (CAGR) of 3.8%, online growth is growing at a much faster pace. The forecast CAGR for online growth is 26% between now and 2024. Within the online segment of the market, Adore has a 13% market share and boasts of a long history of growing faster than the market.

Adore Beauty has strong tailwinds behind it, with the accelerated shift to digital and convenience channels, as well as the positive of more consumers like ‘millennials’ and younger cohorts now entering the market.

Globally, accelerated growth is occurring in segments where Adore Beauty is “particularly strong”, such as skincare, which is the company’s largest category.

Heavily pursuing expansion

The e-commerce ASX share is doing everything it can to grow the business, which could also enable the best performance of the Adore Beauty share price.

It wants to have the best offering for customers. Adore Beauty offers a brand portfolio that is not normally found from a single retailer, including prestige department store brands, professional salon and clinic brands, niche brands and masstige.

The company aims to provide a best in class online customer experience that results in loyal, returning customers. In the first quarter of FY22, the company boasted of strong customer retention with returning customer growth of 63% year on year.

Adore Beauty has also been working on a data-driven personalisation and content engagement strategy that educates and entertains customers, making it the first place that customers want to look.

The online beauty business has been expanding its media network of podcasts, videos and blog posts. This year it launched three new podcasts and has three of the top 10 podcasts in the Australian fashion and beauty category.

Adore Beauty expects to maintain an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of between 2% to 4% in the short to medium-term whilst re-investing for growth.

Over the longer-term, it’s expecting scale benefits to increase operating leverage and deliver more EBITDA margin growth.

Rapid revenue growth

The above initiatives and strategies are helping the ASX share grow its sales really quickly.

In FY21 the revenue increased by 48% to $179.3 million, with a 39% increase in active customers to 818,000.

This growth has continued into the first quarter of FY22, with revenue rising by 25% to $63.8 million.

This revenue growth can help the bottom line and Adore Beauty share price over time.

The post 3 compelling reasons why the Adore Beauty (ASX:ABY) share price could be a top buy appeared first on The Motley Fool Australia.

More reading

• 3 hot ASX tech shares to buy in 2022
• Are these 2 ASX tech shares good buys in December?
• 2 small cap ASX shares to get excited about
• 10 ASX shares to buy in 2022
• 2 ASX shares with strong long term growth 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 recommended Adore Beauty Group Limited. The Motley Fool Australia has recommended Adore Beauty 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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Exchange traded funds (ETFs) continue to grow in popularity with investors and it isn’t hard to see why. Never has it been so easy for investors to gain access to groups of shares from all corners of the world.

But given how many ETFs there are to choose from, it can be hard to decide which ones to add to a portfolio.

To narrow things down, I have picked out two highly rated and popular ETFs to get better acquainted with in December. They are as follows:

iShares S&P 500 ETF (ASX: IVV)

The first ETF for investors to look at this month is the iShares S&P 500 ETF. It aims to provide investors with the performance of the famous S&P 500 Index, before fees and expenses.

The operator of the fund, BlackRock, highlights that the ETF gives investors exposure to the top 500 U.S. stocks through a single investment. It notes that Australian investors can use this to diversify internationally and seek long-term growth opportunities for a portfolio.

Among its largest holdings are Amazon, Apple, Facebook/Meta, JP Morgan, Johnson & Johnson, Microsoft, Nvidia, and Tesla.

The iShares S&P 500 ETF has provided in investors with a return of 18.5% per annum since 2016. This means a $10,000 investment five years ago would now be worth almost $23,500.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

Another ETF to look at is the Vanguard MSCI Index International Shares ETF. This ETF provides investors with exposure to over 1,500 of the world’s largest listed companies from major developed countries.

The manager of the fund, Vanguard, notes that the ETF offers low-cost access to a broadly diversified range of securities that allow investors to benefit from the long-term growth potential of the global economy. Vanguard appears to believe this makes it suitable for buy and hold investors seeking long-term capital growth, some income, and international diversification.

Among the companies included in the fund are giant such as Apple, Johnson & Johnson, JP Morgan, Nestle, Procter & Gamble, and Visa.

The Vanguard MSCI Index International Shares ETF has generated a total return of almost 15.8% per annum over the last five years. This would have turned a $10,000 investment into almost $21,000.

The post 2 highly rated international ETFs for ASX investors appeared first on The Motley Fool Australia.

More reading

• What kind of dividend does the Vanguard International Shares ETF (ASX:VGS) pay?
• Why is the Vanguard Australian Shares Index ETF (ASX:VAS) the most successful Aussie ETF?
• VGS vs VAS: Which ETF comes out on top?
• 2 leading ASX ETFs for excellent global diversification
• 3 ETFs for ASX investors to buy now

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 Vanguard MSCI Index International Shares ETF. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF and iShares Trust – iShares Core S&P 500 ETF. 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 Telstra Corporation Ltd (ASX: TLS) share price could be an option for income for investors to consider.

Telstra has been one of the biggest payer of dividends over the last decade with its generous dividend policy for shareholders.

The telco recently updated its dividend policy for investors, which indicated the board’s thoughts and intentions about its payouts.

Telstra’s latest dividend policy

Under Telstra’s new T25 strategy, it came out with an updated capital management framework. It included principles to maximise fully franked dividends and seek to grow them over time, to invest for growth and to return excess cash to shareholders.

Whilst delivering on its T25 goals, Telstra also said that it was confident in maintaining a minimum payment of a $0.16 fully franked dividend per share, as long as there are no unexpected material events and subject to the requirements of its capital management framework.

Telstra said that this principle of maximising dividends for shareholders recognised continued feedback from shareholders of the importance of fully franked dividends. It also reflects the company’s intention to return as much cashflow as can be supported by earnings, whilst balancing the objectives and principles of its capital management.

At the current Telstra share price, the $0.16 per share annual dividend translates to a grossed-up dividend yield of 5.6%.

This policy replaced the previous one of paying fully franked dividends of 70% to 90% of underlying earnings. That’s because the company is expecting cashflow to remain ahead of accounting earnings and it’s focused on growing.

What are the T25 goals?

T22 has been the focus for the last few years, which included cost cutting, restructuring and asset sales.

T25 involves extending 5G network coverage to 95% of the population, expanding regional coverage with both 4G and 5%, growing Telstra Plus members to 6 million by FY25, finding $500 million of further net fixed costs by FY25, profit growth and achieving more access to towers.

The profit growth target to FY25 is compound annual growth of mid-single digit underlying earnings before interest, tax, depreciation and amortisation (EBITDA) and high-teens compound annual growth of underlying earnings per share (EPS).

Is the Telstra share price good value?

Credit Suisse thinks so, with a price target of $4.40 on the business with reference to how Telstra wants to keep its mobile competitive advantage in Australia.

However, UBS is just ‘neutral’ on the business with a price target of $4, though the broker does think the telco is turning things around.

The post Is the Telstra (ASX:TLS) share price a buy for dividends right now? appeared first on The Motley Fool Australia.

More reading

• These 3 ASX 200 shares are topping the volume charts this Thursday
• Why the Telstra (ASX:TLS) share price is on watch on Wednesday
• Here are the 3 heaviest traded ASX 200 shares this Tuesday so far
• Why has the Telstra (ASX:TLS) share price had such a lacklustre start to December?
• These 3 ASX 200 shares are topping the volume charts on Monday

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 owns and has recommended Telstra Corporation 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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