The VGI Partners Ltd (ASX: VGI) share price is one to watch in early trade today after the Aussie equities manager unveiled the group’s new CEO pick.

Why is the VGI Partners share price on watch?

The VGI Partners share price will be one to watch following this morning’s announcement.

The board has appointed Jonathan Howie as the new VGI Partners CEO. In today’s release, the company said it followed a “comprehensive selection process undertaken with the assistance of a search firm”.

Mr Howie was most recently Asia Pacific head of index equity at BlackRock Investment Management in Hong Kong. He previously worked as head of iShares Australia from 2011 to 2018 and brings extensive leadership experience across the Asia Pacific region.

VGI Partners’ executive chair Robert Luciano said VGI was “delighted” with the appointment. “Jonathan’s appointment is part of our focus to further build out VGI’s investor relations, operational and risk management capabilities”, he said.

Mr Luciano will remain as executive chair following Mr Howie’s appointment.

Mr Howie is set to join VGI Partners on 12 April 2021 with the new CEO saying he was “excited” to join the team and “drive the next phase of growth”.

The VGI Partners share price fell 1.2% lower in yesterday’s trade to close at $7.51 per share. Shares in the Aussie investment group have fallen 12.7% in 2021 and 21.5% in the last 12 months.

Foolish takeaway

The VGI Partners share price will be one to watch this morning following Mr Howie’s appointment as the new CEO. Mr Howie is an ex-BlackRock executive who brings extensive Asia Pacific experience to help drive key strategies for VGI.

Prior to Wednesday’s open, VGI was trading at a 20.6 price to earnings (P/E) ratio with a $524.0 million market capitalisation.

More reading

• Broker tips Sydney Airport (ASX:SYD) share price to push even higher
• Brokers rate these 2 top ASX shares as buys
• Is the A2 Milk (ASX:A2M) share price too cheap to ignore?
• The Lynas (ASX:LYC) share price is bouncing back, what’s next?
• 2 high yield ASX dividend shares to buy today

Motley Fool contributor Ken Hall 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 Sydney Airport Holdings Pty Ltd (ASX: SYD) share price was on form yesterday following the announcement of a travel bubble between Australia and New Zealand.

The airport operator’s shares pushed almost 3% higher to finish the day at $6.24.

Where next for the Sydney Airport share price?

One broker that believes the travel bubble between Australia and New Zealand will be a big boost to Sydney Airport is Goldman Sachs.

In response to the news, this morning the broker reiterated its buy rating and $6.73 price target on the company’s shares.

Based on the latest Sydney Airport share price, this implies potential upside of almost 8% over the next 12 months.

What did Goldman say?

Goldman Sachs believes that the travel bubble, which is due to open on 18 April, will deliver a much-needed return in international passengers through Sydney Airport’s gates, which will ultimately reduce retail lease abatement.

The broker commented: “Trans-Tasman volumes accounted for 14% of SYD’s total international in CY19 and the proposed move allows for international capacity to return. More importantly, it allows for international retail and duty-free business to recommence.”

“We are Buy-rated on SYD.AX. We maintain that SYD remains in an effective hibernation and expect SYD to be a major beneficiary of the Australian domestic inoculation strategy, if it facilitates relaxation of border restrictions.”

What about other airports?

The broker is less positive on Auckland International Airport Limited (ASX: AIA). It currently has a neutral rating and NZ$7.08 price target on its NZ shares. This compares to the current Auckland International Airport share price of NZ$7.75.

Goldman said: “Trans-Tasman volumes accounted for 31% of AIA’s total international in CY19. The AIA management indicated the business would be break even under a trans-Tasman bubble scenario.”

“We are Neutral-rated on AIA.NZ. AIA’s profitability remains tied to a recovery in international passenger movements, which is 97% below pre-Covid-19 levels and remains tied to the NZ government’s conservative border closure policies. That said, the company has limited cash burn (GSe NZ$10mn/mth) and solid available liquidity (NZ$1.6bn),” it concluded.

More reading

• Trans-Tasman Bubble: Does this mean take off for ASX listed airports?
• Top broker picks the best ASX shares to buy for the new quarter
• Are ASX 200 value shares still good value? Why these experts are at loggerheads
• Qantas (ASX:QAN) share price takes off after latest COVID updates
• What’s driving the Sydney Airport (ASX:SYD) share price today?

Motley Fool contributor James Mickleboro 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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Brokers are always keeping their eyes on what ASX shares look like they could be good value and worth pouncing on.

Share prices change every day and the value on offer is steadily shifting. Hopefully investors can jump on opportunities that look good.

The below businesses are ideas that appear to have good long-term potential whilst also looking like they’re trading at attractive value today:

Australian Finance Group Ltd (ASX: AFG)

Australian Finance Group is the biggest mortgage broking business in Australia. It’s currently rated as a buy by at least three brokers.

In the first half of FY21, the company saw high levels of growth. Residential settlements went up 24% to $20.9 billion, the securities loan book increased 18% to $2.96 billion and the residential trail loan book went up 5% to $160 billion.

This translated into strong financial numbers, with revenue rising 11% to $371 million, gross profit growing 16% to $50 million, statutory net profit going up 36% to $25 million, underlying profit going up 41% to $24.9 million and operating cashflow rising 53% to $25.8 million.

AFG said that government stimulus supported increases in first home buyers as well as upgraders and refinance activity.

The broker Macquarie Group Ltd (ASX: MQG) has a positive outlook on AFG, with a price target of $3.06.

The ASX share’s management are also positive about the future, saying that the business is well capitalised with a strong balance sheet, no debt and strong brand. The business model includes annuity style trail revenue from the existing trail book.

On Macquarie’s estimates, the AFG share price is valued at 16x FY21’s estimated earnings.

Idp Education Ltd (ASX: IEL)

IDP Education is currently rated as a buy by at least five brokers.

The business helps international students study overseas and it’s also heavily involved in English language testing.

IDP has been impacted by the COVID-19 pandemic with the closure of international borders and changes to learning. The company has managed to somewhat compensate with online learning and testing for students.

Morgan Stanley is one of the brokers that rates IDP Education as a buy, with a price target of $30. That suggests potential upside over the next 12 months of more than 20%.

IDP Education said in its half-year result that its English language testing had rebounded to pre-pandemic levels. It also had $293 million of cash to see it through the crisis.

However, despite those positive signs, total revenue still declined 26% to $269.1 million, earnings before interest and tax (EBIT) fell 43% to $47.3 million and net profit after tax (NPAT) dropped 45% to $29.7 million.

Management said that it was encouraging to see a recovery was already underway when comparing the FY20 second half and FY21 first half results.

The ownership of the ASX share is changing, but this shouldn’t lead to any material change in the operations of the business.

Andrew Barkla, IDP CEO and managing director, said:

With our global teams in place, a supported pipeline of students, and increased digital capabilities, we are beginning to capture the demand as our customers reignite their global travel and study ambitions.

According to Morgan Stanley, the IDP share price is valued at 122x FY21’s estimated earnings and 59x FY22’s estimated earnings.

More reading

• 2 excellent ASX growth shares to buy
• 2 excellent ASX growth shares to buy
• 2 ASX shares rated as buys by many brokers
• Here’s why the IDP Education (ASX:IEL) share price sank 6% today
• The worst performing ASX 200 shares last week

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Idp Education Pty Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie 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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Could the A2 Milk Company Ltd (ASX: A2M) share price be too cheap to ignore any more?

It has certainly had a really rough time. Over the last month it’s down 16%, in the year to date it’s down 34% and over the last six months it has fallen 46%.

Reporting season was an opportunity for the business to reassure investors that things are turning around. But it wasn’t able to do that.

Headline figures in A2 Milk’s HY21 report

Total revenue was down 16% to $677.4 million, earnings before interest, tax, depreciation and amortisation (EBITDA) declined 32.2% to $178.5 million and the net profit after tax (NPAT) declined 35% to $120 million.

A2 Milk attributed some of the decline to pantry destocking after strong FY20 third quarter sales, with reduced tourism from China and international student numbers. This is one of the main issues impacting the A2 Milk share price.

The company went on to say:

In September the company further advised that it had also started to observe additional disruption to the corporate daigou/reseller channel, particularly due to the prolonged stage 4 lockdown in Victoria, with a contraction beyond its previous expectations. These events, combined with subdued online pricing and channel inventory unwinding, have resulted in daigou/resellers being slower to re-enter the market to promote the brand. While there was some improvement in the channel towards the end of the period, the recovery was not as strong as had previously been expected.

How is management trying to fix this?

A2 Milk continues to focus on re-activating the daigou/reseller channel and is confident that it remains attractive and an strategically important channel for distribution penetration and new user recruitment.

There are three key areas that A2 Milk is doing. It’s ‘rebalancing’ its inventory levels and improving traceability through the channel. A2 Milk is providing support to the daigou/resellers. It’s also working with corporate daigou to drive innovation in distribution.

Is the A2 Milk share price too cheap to ignore?

Speaking to Angus Kennedy from Livewire, Chris Tynan from DNR Capital said that A2 Milk’s greatest asset right now is not being Australian. But it’s tricky with regulators wanting local Chinese players to play a bigger part in the market.

Mr Tynan pointed to escalating inventory problems, he said this was:

concerning because management has been quite dismissive of this problem in the past – they tied themselves in knots dancing around this problem on the earnings call. It’s probably going to be a bigger focus going forward just given the limited visibility they’ve got across these unique distribution platforms. If you lose control of this inventory, especially as expiration dates on products approach, there is risk of uncontrolled discounting which can result in brand damage and further margin impacts on other channels.

However, DNR Capital liked that A2 Milk is improving its market share locally in China, with the Chinese label brands growing sales and mother and baby store (MBS) penetration continuing to increase. The liquid milk business was also a good thing, but a bit of a sideshow.

Mr Tynan said that there are some things that the company can do to help things, but it won’t be cheap or easy. The new CEO may do well, but it’s a big job. Even so, the company has a very trusted brand and it has very strong market credentials.

He concluded:

So I do think the structures are there for performance to improve. But unfortunately, a lot of this relies on factors outside of their control. The one thing they can control is capital allocation to brand and channel. It is likely that they will have to bear more pain in the short to medium term as invest to fend off stiffer competition from domestic producers. This investment is key to driving future success, but it will likely take some time.

Both UBS and Morgans rate the A2 Milk share price as a buy. UBS thinks A2 Milk’s formula sales will recover over two years and it still has a good opportunity in China, with good online sales growth. Morgans has a price target of $10.40 on A2 Milk.

More reading

• These are the 10 most shorted shares on the ASX
• 2 ASX growth shares to buy in April
• These were the worst performing ASX 200 shares in March
• The A2 Milk (ASX:A2M) share price was down almost every day in March
• ASX 200 dips lower, Webjet drops, REA bids for Mortgage Choice

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. 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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March proved to be a volatile month for the Lynas Rare Earths Ltd (ASX: LYC) share price.

Its shares surged as much as 20% in the first week to an all-time record high of $6.82. This was followed by a sharp sell-off between 23 and 25 March where its shares shed ~15% to a 1-month low of $5.56. 

In the final stretch of March, the Lynas share price staged a 10% recovery to finish the month relatively flat. 

What’s next for the Lynas share price? 

Higher neodymium prices to lift earnings 

Neodymium (NdPr) is the primary material produced by Lynas, typically used in the production of magnets for automotive and energy industries. 

A global commitment for reducing emissions has put the critical material in the spotlight, propping both NdPr prices and the Lynas share price to 9-year highs. 

In Lynas’ half-year results, the company acknowledges that it is still premature to make a full assessment of global demand for rare earths, but preliminary data is positive nonetheless. It pointed to accelerating electric car penetration in Europe and Asia (primarily China) which more than compensates for the overall year-on-year decrease in global car sales.

Preliminary estimates highlight 40% growth in global sales of electric vehicles in 2020 compared to 2019, reaching a market share of approximately 4%. Other notable sectors include wind energy capacity which grew by 8% despite COVID-19 disruptions. 

Solid demand has seen the average Chinese domestic price of NdPr increase to US$55.5/kg in December 2020, compared to the US$35.9/kg in December 2019. This translated to a net profit of $40.6 million in 1H21 compared to the $3.9 million in 1H20.

Lynas 2025 growth plan 

The ‘Lynas 2025’ growth plan is focused on building a larger business to meet forecast demand growth. 

Lynas announced a $425 million capital raising back in August 2020 to fund its Kalgoorlie rare earths processing facility to produce mixed rare earth carbonate for shipment to the Lynas Malaysia plant.

In January 2021, the company signed an agreement with the United States government to build a commercial Light Rare Earths separation plant in the US, with the US government to provide up to approximately US$30 million. 

Once operational, the plant is expected to produce approximately 5,000 tonnes per annum of rare earths products, including approximately 1,250 tonnes per annum of NdPr. The plant will be designed to receive material directly from the new Kalgoorlie plant in Western Australia. 

More reading

• These were the best performing ASX 200 shares last week
• These were the best performing ASX 200 shares in the Q1 of 2021
• ASX 200 Weekly Wrap: ASX 200 gets its mojo back
• These were the worst performers on the ASX 200 last week
• Why Lynas, Oil Search, Pushpay, & Webjet shares are tumbling lower

Motley Fool contributor Kerry Sun owns shares of Lynas Limited. 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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On Tuesday the Reserve Bank of Australia kept the cash rate on hold at the record low of 0.1%.

The central bank also appeared to indicate that it expects rates to stay at this level for a few more years. While this is good news for borrowers, it is the opposite for savers and income investors.

But don’t worry, because the Australian share market is home to a number of quality companies that are sharing their profits with shareholders in the form of dividends.

Two ASX dividend shares to consider buying are listed below. Here’s what you need to know about them:

Accent Group Ltd (ASX: AX1)

Accent is a footwear-focused retailer with a collection of popular store brands. It has been growing very strongly over the last few years and during the pandemic.

This has been driven by a combination of new store brand launches, the expansion of its existing footprint, and strong demand in-store and online.

Positively, Accent is on form again in FY 2021. In February the company reported a 6.6% increase in total sales to $541.3 million and a 57.3% lift in net profit after tax to $52.8 million.

According to analysts at Bell Potter, they are confident it will have a strong second half and are forecasting an 11.9 cents per share dividend in FY 2021. Based on the current Accent share price, this will mean a fully franked 5.4% yield.

Bell Potter has a buy rating and $2.65 price target on its shares.

Telstra Corporation Ltd (ASX: TLS)

This telco giant could be a great dividend share to buy to overcome low interest rates. Especially given its improving outlook, which is being underpinned by its T22 strategy and the easing NBN headwind.

In addition to this, the company is looking to unlock value by splitting into three separate businesses and offloading some assets.

Analysts at Goldman Sachs are positive on its future and are forecasting a 16 cents per share annual dividend for the foreseeable future. Based on the current Telstra share price, this will mean a 4.7% fully franked dividend yield.

Goldman Sachs has a buy rating and $4.00 price target on its shares.

More reading

• 2 high yield ASX dividend shares for income investors to buy
• Brokers name 3 ASX shares to buy right now
• Why the Telstra (ASX:TLS) share price rose 11% in March
• 3 ASX dividend shares to buy with yields above 5%
• 2 of the best ASX shares to buy for your retirement portfolio

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Accent Group. 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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Value and dividend shares have done nicely out of the market’s rotation out of growth stocks this year.

Two experts had even predicted the S&P/ASX 200 Index (ASX: XJO) would deliver 4.5% to 4.8% gross yield this year.

This would be sweet relief for all those income investors that suffered in 2020.

“The February reporting season saw a number of companies declaring record dividends and what’s most encouraging is that many of those businesses that have handsomely rewarded investors, look to have strong tailwinds in the foreseeable future,” Plato Investment Management managing director Dr Don Hamson said last month.

“Thankfully, we’ve now seen a very swift recovery in dividends.”

AMP Capital portfolio manager Dermot Ryan this week agreed, saying there was an almost market-wide “rejuvenated dividend outlook”.

“The turnaround at this stage has been led by larger cap names, whereas smaller companies without the benefit of diversified cash flows have been somewhat later to benefit. That said, we should see strong growth across the board from this point on.”

Don’t just blindly pick dividend shares though

However, Ryan warned that ASX investors still need to be selective about which industries and companies to harvest dividends from.

Two sectors are even forecast to produce shrinking yields in the next couple of years.

“Dividends in almost every sector are forecast to grow strongly on a one- and two-year basis, with the exception of materials, which are coming off records driven by those soaring iron ore prices and volumes – and utilities, who are suffering from poor pricing, particularly in wholesale electricity.”

He also red-flagged a couple of subsectors.

“Tourism and education are expected to also continue to languish, along with the insurance sector which now has widespread flooding to add to its list of woes at a time when low interest rates are strangling the carry on insurers’ cash reserves.”

The big risk to expected dividend growth

Ryan said that the coronavirus pandemic still remained the largest threat to expanding dividends.

“The main risk to this two-year dividend outlook is linked to vaccinations and the associated threat of lockdowns, which will remain high until a critical proportion of the population are inoculated.”

A critical mass of the vaccinations will mean travel and tourism can be resurrected, and might even trigger an export boom.

“The world – and particularly Australia – appears overstimulated and we believe that when the world is vaccinated, inflation might follow,” said Ryan.

“We have seen a little in the way of that kind of inflation recently in parts of the mining sector in Western Australia, a state that has been largely COVID-free since the first wave of the pandemic. But for now, we believe a little inflation is normal this early in the cycle, although a factor to keep an eye on in the event that asymmetrical inflation in sales or cost lines starts to cut into company profit margins.”

But if the vaccine program could continue without disruptions, Ryan, like his AMP Ltd (ASX: AMP) colleague Shane Oliver, thinks the ASX will break its all-time record.

“We expect that the market will continue its strong push higher through the ASX’s record high of 7,200, driven by the strong profit and dividend growth in local equity markets.”

More reading

• 2 great ASX 200 blue chip shares for dividends
• 5 things to watch on the ASX 200 on Wednesday
• Why ASX 200 shares are at a 6-week high
• Why the Webjet (ASX:WEB) share price closed 5% higher today
• ASX 200 jumps, Cleanaway’s treasured acquisition, Afterpay soars

Motley Fool contributor Tony Yoo 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 Qantas Airways Limited (ASX: QAN) share price was on form on Tuesday and charged higher.

The airline operator’s shares ascended over 3% to close the day at $5.26.

Why did the Qantas share price take off?

Investors were buying Qantas and other travel shares on Tuesday following the announcement of an Australia-NZ travel bubble.

This travel bubble will allow travellers from either side of the Tasman to visit without a 14-day COVID-19 quarantine period. It is due to open in less than two weeks on 18 April.

Is it too late to invest?

According to a note out of Goldman Sachs, it isn’t too late to invest.

This morning the broker reiterated its buy rating and $6.38 price target on the airline operator’s shares.

Based on the current Qantas share price, this price target implies potential upside of 21% over the next 12 months.

What did Goldman say?

Goldman Sachs was pleased with the news, noting that this would be a big boost to its international business. Particularly given how New Zealand accounted for ~13% of international passengers and ~5% of total passengers pre-COVID.

Its analysts said: “The announcement would add international volumes which has remained minimal given international border restrictions. Pre-Covid (CY19), New Zealand accounted for c. 13% of international pax (c. 5% of total pax) for Qantas group. It is difficult to forecast the recovery volume, but we highlight that with additional routes and capacity, and while other international destinations remain closed, it could present upside to pre-Covid levels.”

In light of this, the broker continues to believe that Qantas is a great COVID recovery investment option for investors.

“We reiterate our Buy rating on QAN.AX. QAN represents a strong recovery investment, if the Australian COVID-19 vaccination program has the effect of reducing community transmission of the virus and limits the need for domestic border closures,” Goldman concluded.

More reading

• Uniti (ASX:UWL) share price on watch following bullish broker note
• 2 great ASX 200 blue chip shares for dividends
• LIVE COVERAGE: ASX to fall; oil rebounds
• 5 things to watch on the ASX 200 on Wednesday
• Why ASX 200 shares are at a 6-week high

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The Uniti Group Ltd (ASX: UWL) share price has been a strong performer in 2021.

Since the start of the year, the internet provider’s shares have risen an impressive 38%.

Is it too late to buy Uniti shares?

The good news for investors is that one leading broker doesn’t believe it is too late to invest.

According to a note out of Goldman Sachs, its analysts have initiated coverage on the company with a buy rating and $3.00 price target.

Based on the current Uniti share price of $2.41, this implies potential upside of 24.5% over the next 12 months.

What is Uniti?

Uniti is a provider of fibre connectivity to new Australian residential premises, competing with the government owned NBN. When successful, Uniti builds and operates these fibre networks as a wholesaler.

Goldman notes that developers partner with Uniti due to lower pricing, the inclusion of TV & smart-building services, improved co-ordination with developers, and estate aesthetics.

Why is the broker bullish?

The broker believes that Uniti is well-placed for growth via market share gains following a period of significant M&A activity. This includes the purchase of the Velocity assets from telco giant Telstra Corporation Ltd (ASX: TLS) late last year for $140 million.

Goldman said: “After a period of significant M&A, UWL is refocusing on organic growth and aiming to increase its share of new residential fibre connections in Australia. After consolidating all existing operators and having TLS join its network in Dec-20 (TLS = 46% fixed share), we believe UWL has both the scale and offerings to more aggressively compete and grow share from 15% (FY21E, 30k premises) to 21% (FY30E, 54k).”

“UWL’s current contracted premises (202k at Dec-20) also underpins an extended period of organic growth, with these builds delivering particularly attractive returns (we estimate 73% ROIC). However, we still see attractive economics on future builds, estimating a 15% ROIC even if developer contributions are competed away completely. We also see barriers to entry in this market, with developers requiring telco partners (UWL has > 40, incl. TLS), while RSPs require sufficient scale to justify onboarding costs.”

Valuation

Why is the Uniti share price worth $3.00 today? Goldman’s analysts explained how they came to this valuation.

They said: “Our 12-m target price of A$3.00 is based on an FY23E EV/EBITDA SOTP. We ascribe: (1) A$2.90 fundamental value (85% weight) using 15X Wholesale & Infrastructure (W&I) for +14% FY21-23E growth vs. CNU on 13X for +1%, NXT on 32X for +25%) and 8X on its CPaaS cash business; and (2) A$3.50 M&A valuation (15% weight) given elevated industry M&A. With +25% upside, we view UWL as having an attractive risk-reward and initiate at Buy, but do see a degree of integration risk given the recent M&A.”

More reading

• Why these ASX shares are breaking out into record highs

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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 S&P/ASX 200 Index (ASX: XJO) is home to some really good ASX 200 dividend shares that could be worth owning for dividends.

Some businesses didn’t manage to grow the dividend in 2020 because of COVID-19, but there were a few that managed to grow both the dividend and the profit in FY20. That growth has continued into FY21. 

These two businesses could be really good options for dividends:

Fortescue Metals Group Limited (ASX: FMG)

Fortescue is one of the biggest miners in the world and it has also been one of the ASX 200 shares paying the biggest dividends as well.

The business has been benefiting from a really strong iron ore price, with lower production in Brazil and continued high demand from China. In the first half of FY21, the realised price was 42% higher to US$114 per dry metric tonne.

Fortescue’s half-year revenue climbed 44% to US$9.3 billion, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) went up 57% to US$6.6 billion and net profit after tax (NPAT) grew 66% to US$4.08 billion.

It was the above strength that allowed management to declare a whopping 93% increase in the interim dividend to AU$1.47 per share. The board are aiming for a dividend payout ratio of 80% of net profit going forwards. It plans to invest 10% in future resource growth opportunities and the other 10% to fund renewable energy growth through Fortescue Future Industries (FFI).

Fortescue plans to find and fund large-scale green resource and infrastructure opportunities, particularly relating to hydrogen.

The ASX 200 blue chip dividend share is rated as a buy by Credit Suisse, which has a price target of $23.50 on the miner and it expects it to pay a FY21 dividend of $3.62 per share, equating to a grossed-up dividend yield of 22% for this financial year.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is another business that has a strong reputation for shareholder returns.

The business has an array of strong-performing businesses like Bunnings and Officeworks which generate excellent returns and allow Wesfarmers to pay solid and growing dividends.

Bunnings is one of the best businesses in Australia and the FY21 half-year result showed that. It reported a 76.6% return on capital and underlying earnings before tax growth of 39% to $1.27 billion. Same store sales growth was 27.7% and online penetration increased from 0.4% to 3.1%.

Bunnings earned more than 60% of the core earnings before tax for Wesfarmers.

Wesfarmers’ continuing operations net profit increased by 23.3% to $1.39 billion and underlying earning per share (EPS) grew 25.5% to $1.25, allowing the interim dividend to rise by 17.3% to $0.88 per share.

One thing to note with the ASX 200 blue chip share is that retail sales growth is expected to moderate from March as the businesses begin to cycle against the initial impacts in COVID-19 where there were strong sales, particularly in Bunnings and Officeworks.

More dividend growth could be coming because Wesfarmers said that sales across the group’s retail businesses have continued to remain strong through January and February, with some impact from government-mandated trading restrictions.

Management said that the portfolio of cash-generative businesses with trusted brands and leading market positions are well placed to deliver satisfactory shareholder returns over the long-term.

At the current Wesfarmers share price, it has a projected grossed-up dividend yield of 4.7% according to Commsec.

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Motley Fool contributor Tristan Harrison owns shares of Fortescue Metals Group Limited. The Motley Fool Australia owns shares of Wesfarmers 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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