At the current Commonwealth Bank of Australia (ASX: CBA) share price, could it offer the best dividend in the banking sector?

What’s the FY21 CBA dividend going to be?

Only the CBA board know the answer to that question, and the board probably haven’t even decided that yet considering FY21 is still ongoing.

But there are different estimates for what the CBA dividend could be. For example, Commsec has an FY21 estimate for the annual dividend of $3.15 per share. That could mean a forward grossed-up dividend yield of around 5.25%.

But brokers have different estimates for the dividend as well. On the high end, there’s UBS with a dividend estimate of $3.60 per share, translating to a grossed-up dividend yield of 6% for FY21.

However, Credit Suisse has an annual dividend estimate of $3.10 per share, which represents a potential grossed-up dividend yield of 5.15% for FY21.

How does this compare to other ASX banks?

The CBA dividend is still going to be a lot lower than the pre-COVID-19 level, but the other big banks may not pay as much of a dividend either.

Let’s look at the dividend estimates for the big four ASX banks, according to Commsec’s numbers.

Australia and New Zealand Banking Group Ltd (ASX: ANZ) has a forecast grossed-up dividend yield of 9.7%.

Westpac Banking Corp (ASX: WBC) has a forecast grossed-up dividend yield of 9.1%.

National Australia Bank Ltd (ASX: NAB) has a forecast grossed-up dividend yield of 8%.

So, it seems that ANZ has the biggest forecast dividend for FY21 out of the big four banks.

However, there are also regional banks that may be able to pay a bigger dividend than that.

For FY21, Bank Of Queensland Limited (ASX: BOQ) has an expected grossed-up dividend yield of 8.8% and Bendigo and Adelaide Bank Ltd (ASX: BEN) has a forecast grossed-up dividend yield of 10%.

So it seems that Bendigo Bank has the largest dividend yield for FY21, but there is more to an investment than just the dividend. The direction of the profit is also imporant

How is CBA tracking?

CBA’s half-year result included a cash profit decline of 10.8% to $3.9 billion. Net profit was supported by “strong business outcomes”, but it was impacted by the low interest rate environment and COVID-19 loan impairment expenses.

One positive trend is that the consumer arrears are falling. At 30 June 2020, the home loan arrears that were overdue by more than 90 days was 0.63% – this had fallen to 0.57% at 31 December 2020.

The CBA common equity tier 1 (CET1) capital ratio was 12.6% at the end of the half-year period, making it one of the strongest in the banking sector. The bank remains well capitalised and this raises the possibility of a capital release by the bank in the future.

More reading

• Westpac (ASX:WBC) considering NZ business demerger
• Top brokers name 3 ASX shares to buy today
• The ANZ (ASX:ANZ) share price is Macquarie’s top big four bank pick
• Westpac (ASX:WBC) share price on watch after NZ update
• Fund managers have been buying Blackmores (ASX:BKL) and this ASX share

Motley Fool contributor Tristan Harrison 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.

The post Is CBA (ASX:CBA) the best bank for dividends in 2021 appeared first on The Motley Fool Australia.

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The Auroch Minerals Ltd (ASX: AOU) share price is flying more than 21% higher today.

At the time of writing, shares in Auroch are trading slightly lower at 26 cents per share. Including today’s price action, the Auroch share price has bolted more than 35% in the past 2 weeks.

Here’s what’s fuelling the Auroch share price.

Why is the Auroch share price flying? 

Exactly 2 weeks ago, the Auroch share price was sent plummeting after releasing assay results from its Nepean Nickel Project. The drilling results showed that high-grade nickel sulphide ore deposits extend for more than 500 metres of strike length.

The best new results included 2 metres at 2% nickel and 0.3% copper from 66 metres. This included 1 metre at 2.9% nickel and 0.36% copper. In addition, Auroch reported 4 metres at 0.77% nickel and 0.05% copper from 25 metres. The result also included 1 metre at 0.94% nickel and 0.05% copper.

Despite what seemed to be good news, investors lightened their holdings in Auroch. As a result, shares in Aurora traded at a low of 18 cents, before closing at 19 cents 2 weeks ago. Since then, shares in Aurora have continued on a sturdy trajectory, trading more than 35% higher since the 10^th of March.  

What is the outlook for Auroch Minerals?

Auroch’s flagship Nepean Nickel Project is run as an 80:20 joint venture with Goldfellas Proprietary Limited. The historic Nepean project mine was the second producing nickel mine in Australia. Between 1970 and 1987, the site produced 1,108,457 tonnes of ore.

The company will continue exploring the extent of the known high-grade nickel sulphide mineralisation in and around the historic mine. As a result, Auroch noted that an additional five holes will be drilled to test areas of this high-grade mineralisation.

Auroch noted that all holes will be cased with downhole electromagnetic (DHEM) surveys which could indicate further mineralisation.  The fact that results are expected soon, could explain today’s euphoric price action.  

Auroch is currently fully funded after raising $2.9 million in late September last year. Earlier this month the company also signed a drilling contract with Seismic Drilling Services to lock in a drill rig for the next 12 months.

More reading

• Auroch Minerals (ASX:AOU) share price plummets 15%

Motley Fool contributor Nikhil Gangaram 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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If you’ve been noticing the news recently, you might be wondering how New Zealand-based ASX shares are performing.

New Zealand is projected to be heading for a recession, in contrast to the broader ASX, which is a bull market at the moment as confidence rides high following an electric rebound after the COVID-19 pandemic.

While much remains uncertain regarding the economic output across the ditch, with so many interesting Kiwi companies listed on the ASX, it’s worth taking stock of how three of New Zealand’s biggest companies have been performing over the past few months.

3 ASX shares that call New Zealand home

New Zealand Media and Entertainment (ASX: NZM) 

NZME is New Zealand’s leading integrated print, radio and digital media and entertainment business. The firm has a portfolio of publishing, radio, digital, newspapers, and e-commerce brands. This business model makes it particularly susceptible to economic downturns.

NZME carries a substantial amount of debt and its advertising revenues were slashed during the COVID-19 pandemic, with the business still unable to recoup those losses entirely. However, it was quick to cut its operational expenditure and has managed to make some of those cuts permanent.

While the NZME share price is down 6% this month, it’s up over 287% in the last 12 months.

Tilt Renewables Ltd (ASX: TLT)

New Zealand energy supplier Tilt Renewables has recently been the subject of a takeover from Mercury NZ Ltd (ASX: MCY). Mercury is a 51% New Zealand government-owned, 100% renewable energy generator that more than doubled its share price between 2017 and January this year.

Tilt is the owner, operator and developer of a number of established wind farms and an extensive wind and solar development pipeline across the south-east of Australia and the north and south islands of New Zealand. 

Mercury has lost 15% YTD, but Tilt is up 141% in that time period, beating the utilities sector by a similar margin. At the time of writing, its price-to-earnings ratio is 6. Both Tilt and Mercury have benefited from a high-priced wholesale energy market in New Zealand.

Xero Limited (ASX: XRO) 

Xero is one of the giants of the S&P/ASX All Technology Index (ASX: XTX) and one of the highest performing companies from across the Tasman. It provides a platform for online accounting and business services to small businesses, specialising in cloud computing. 

The Xero share price is down 1.89% this month, down 17% YTD, and down 26.9% against its technology sector over the past 12 months. This is despite acquiring workforce management platform Planday at the beginning of this month.

Between March 2020 and December 2020, Xero shares share increased from $63 to $154, but are currently sitting around $123.

More reading

• Genex (ASX:GNX) share price frozen on hydro project fund raising
• ASX 200 up 0.45%: Premier Investments results, Xero acquisition, Computershare halted
• Why Alcidion, GrainCorp, Premier Investments, & Xero are storming higher
• Xero (ASX:XRO) share price higher after announcing new acquisition
• 8 ASX 200 shares rated as ‘outperform’ by brokers

Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX and Vista Group Intl. The Motley Fool Australia owns shares of Xero. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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 Appen Ltd (ASX: APX) share price has been hit hard in 2021, particularly since the release of its full-year results in February. The timing coincides with a 10% tumble in the S&P/ASX All Technology Index (ASX: XTX) over the past month alone.

It’s a far cry from Appen’s all-time high of $43.66 reached in August last year. At the time of writing, the Appen share price is trading at $18.32.

We take a look to see what’s been happening with the artificial intelligence (AI) company.

Why is the Appen share price near multi-year lows?

The Appen share price hasn’t replicated the successes it saw during its first 5 years on the ASX boards. Since COVID-19, the company has struggled to accelerate its growth profile, to match investor’s high expectations.

While its customer base increased over the FY20 period, Appen recorded mixed business performance. Its relevance segment continued to drive the business, while its speech & image division weighed down the overall result.

In addition, the company revealed the pandemic had impacted its online digital advertising. This has led to reduced spend on advertising-related AI programs, with some projects deferred.

Restricted face-to-face sales and customer engagement have also hampered Appen’s efforts to resume business activity.

What do the brokers think?

After reporting its first-half results, a number of brokers have rated the company with varying price points.

Investment banking firm JPMorgan cut its price target for Appen by 18% to $24.75. Macquarie followed suit to also reduce its rating by 16% to $16.00. And Bell Potter had one of the largest markdowns, downgrading Appen shares by 29% with an initiated price of $19.50.

Foolish takeaway

Currently trading at $18.32, up 0.63% today, the Appen share price is swapping hands within the lower-to-mid range of the broker reports.

Looking at valuation metrics, Appen has a market capitalisation of around $2.27 billion, with more than 123 million shares outstanding.

More reading

• 2 of the best ASX shares to buy this month
• Why the Xero (ASX:XRO) share price is outperforming today
• How to turn $20,000 into $650,000 in 5 years with ASX shares
• 5 things to watch on the ASX 200 on Friday
• 3 stellar ASX tech shares to buy for the long term

Aaron Teboneras owns shares of Appen Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen 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.

The post The Appen (ASX:APX) share price is down 28% this year appeared first on The Motley Fool Australia.

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The MPower Group Ltd (ASX: MPR) share price is soaring in mid-afternoon trade following the announcement of another grid connection. At the time of writing, the technology company’s shares are swapping hands for 14 cents, up 7.7%.

What did MPower announce?

Investors are pushing the MPower share price higher after appearing pleased with the company’s latest update.

According to its release, MPower advised that it has successfully connected a 5MWac solar project to the national electricity grid in Kadina, South Australia. MWac stands for mega-watt alternating current, a commonly used term to measure power from solar PV panels.

The company noted that this is the fifth 5MW solar project that it has connected to the grid. Last week, MPower linked the South Hummocks solar project, highlighting its ability to deliver on multiple works at any time.

It’s expected that commercial operations at the solar plant will begin within the coming weeks.

Words from the CEO

MPower CEO Nathan Wise touched on the company’s significant achievement, saying:

It’s great to see MPower achieve another successful milestone on a 5MW solar project. The successful delivery of renewable energy projects highlights MPower’s capability and dependability bringing projects of this size to market, on time and to budget.

MPower is actively building a pipeline of 5MW solar project sites and currently has exclusivity over six sites. We are looking to create an initial portfolio of up to 20 renewable energy assets with an aggregate capacity of 100MWac and an estimated value of more than $150 million once fully constructed.

MPower share price summary

The MPower share price has accelerated over the past 12 months, up 1,650%, and more than 160% year-to-date. Additionally, the company’s shares are within sights of reaching its multi-year high of 16.5 cents.

Based on the current share price, MPower commands a market capitalisation of roughly $25.4 million, with 181.8 million shares outstanding.

More reading

• Why Lynas, Oil Search, Pushpay, & Webjet shares are tumbling lower
• They weren’t telling you to buy? Ouch.
• Genex (ASX:GNX) share price frozen on hydro project fund raising
• Where to reinvest your Fortescue (ASX:FMG) dividends
• 2 ASX 200 shares impacted by the daigou channel

Motley Fool contributor Aaron Teboneras 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.

The post MPower (ASX:MPR) share price up 1,650% in 12 months, and rising again appeared first on The Motley Fool Australia.

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In afternoon trade the S&P/ASX 200 Index (ASX: XJO) has defied weakness on Wall Street and is on course to record a solid gain. At the time of writing, the benchmark index is up 0.7% to 6,791.9 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are tumbling lower:

Lynas Rare Earths Ltd (ASX: LYC)

The Lynas share price is down 9% to $5.64. This is despite there being no news out of the rare earth producer today. However, this morning, one of its rivals announced a major capital raising. Australian Strategic Materials Ltd (ASX: ASM) hasn’t revealed what it is raising the money for, but it could be to fund its Dubbo Project in New South Wales. The company has previously stated its ambition to develop the Dubbo Project to supply globally significant quantities of zirconium and rare earth materials.

Oil Search Ltd (ASX: OSH)

The Oil Search share price has fallen 3% to $4.13. Investors have been selling Oil Search and other energy producer shares on Wednesday following a sizeable pullback in oil prices overnight. Both WTI and Brent crude oil dropped 6% amid concerns over demand for oil following further lockdowns in Europe.

Pushpay Holdings Ltd (ASX: PPH)

The Pushpay share price is down 3% to $1.80. This appears to have been driven by profit taking following a sharp rise on Tuesday. The Pushpay share price jumped 11% yesterday after announcing a new cornerstone investor. US investment company Sixth Street has purchased the Huljich family’s remaining stake in the donation and engagement platform company. Sixth Street will have a 17.8% interest in Pushpay once the deal completes next week.

Webjet Limited (ASX: WEB)

The Webjet share price has dropped 4% to $5.70. A number of travel stocks are trading lower again on Wednesday. This may be due to concerns over the floods in New South Wales and Queensland and further lockdowns in Europe to combat a third wave of COVID-19.

More reading

• ASX 200 up 0.45%: Premier Investments results, Xero acquisition, Computershare halted
• ASX 200 dips, travel shares drop, Pushpay soars
• Why ASX 200 energy shares should outshine as inflation picks up
• Why Kathmandu, Pushpay, Sigma, & Vulcan shares are storming higher
• Here’s why the Pushpay (ASX:PPH) share price could surge higher today

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why Lynas, Oil Search, Pushpay, & Webjet shares are tumbling lower appeared first on The Motley Fool Australia.

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One of the worst tropes of modern politics is the ‘Everything is terrible and I’m the only one who can fix it’ approach to campaigning. Yes, things can always be better, but give me a bloody break. The average Australian is luckier and better off than probably 98% of the world’s population. And, frankly, while I’m not an Australian exceptionalist, if you can find a country you’d prefer to live in, you’d be doing pretty well.

Our pollies are like the apocryphal father who, when his daughter gets 99% in an exam, asks ‘What happened to the other 1%?’. They sow seeds of discontent, reminding us of our problems — caused by the other guy, of course — as a way to try to grab our votes.

Talk about miserable.

How about ‘It’s great, but I want you to vote for me so I can make it better!’? Our wealth, life expectancy, safety nets, medical and education systems, geological stability, climate, and democracy aren’t perfect… but I wouldn’t swap what we have for any other. So next time you think you’re ‘unlucky’, remember the odds of you living in Australia are about 1 in 300. 

That’s pretty lucky.

And something to celebrate, I reckon. By all means, make the place even better, but don’t lose sight of the fact that we’re starting the 100 metre sprint at the 90m mark!

Speaking of luck, though, I got lucky this time last year.

Those of you who were invested then might disagree — yesterday was the 12 month anniversary of the ASX 200’s COVID-induced low.

Lucky? Really?

March 23, 2020, was the bottom of the crash that started one month and four days earlier — and was the fastest bear market in history. The luck I’m referring to, though, was that I happened to write an article that day. It was, to be fair, only a midpoint in my full-court-press efforts to keep our members and readers calm during a very volatile time.

I wrote a lot of similarly-themed articles. Judging by the feedback at the time, and since, we helped some people, which I’m immensely proud of. When I wrote that article, on March 23, 2020, I had no idea it was to be the low point for the ASX in 2020. I ‘fessed up to some mistakes. I made no predictions. But I did recommend that our members and readers keep buying. Or, at the very least, not sell. And while, as I’ve said many times, I don’t do victory laps, I have a simple question for you:

How many other experts were telling you to buy, that day?

Here’s an excerpt of what I wrote:

———————

I have no idea how much further shares may — or may not — fall from here. I have no idea how long the economic and financial pain lasts. There is no shortage of ‘experts’ out there, telling you what’s going to happen in the short term.

Do you really think they know? Or are they presenting opinion as fact?

How could they know? We’ve never been here before. And if they don’t know, why would you act on their advice? For the record, I have the same instinctive evolutionary response to the doom-and-gloomers as you do: ‘But what if they’re right? I mean, it’s possible.’

Is it likely, though?

You could be hit by the proverbial bus. It’s possible. You could be struck by lightning. It’s possible. Can you see why our brains are drawn to those spouting doom? It was an evolutionary advantage, when the choice was between ‘run’ or ‘wait and see if it’s a lion’.

You can’t diversify your life and death decisions. We’re not on the savannah any more, though. We don’t have to guess which short-term prognosticator might be right. Over the long term, things come into clearer focus.

For example:

— The ASX has always gone on to hit new highs.

— Dollar-cost-averaging has always worked — financially and emotionally.

— Diversification is the only free lunch in investing.

Those are long term approaches.

Yes, maybe it’s different this time. I can’t rule it out.

All I can do is look at more than a century of market data — through wars, panics, a depression and a GFC — as a guide.
The health news will get worse. The economic news will get worse. We will have a recession. Some small and large businesses will fail.

Here’s the thing, though — I fully expect that those that survive will likely go on to thrive, as a group.

So if those same businesses are selling for cheap prices, today, and you have both a diversified portfolio and the stomach to ride out the storm… Doesn’t it seem likely that current prices might be a buying opportunity (or, at least, that quality shares are worth holding rather than selling)?

I’m still investing. Not because it’s guaranteed, but because history suggests that, done well, it’s a wonderful way to build wealth, despite the volatility.

———————

I hope that was persuasive for you, at the time. I doubly hope that, with the benefit of hindsight, it’s doubly persuasive! Because we can’t go back and relive 2020 (thank goodness), but we can prepare — mentally, emotionally and financially — for the next time the market crashes.

And when (not if) it does, how will you respond?

I hope these two messages, 366 days apart, will serve as a guide.

More reading

• Genex (ASX:GNX) share price frozen on hydro project fund raising
• Where to reinvest your Fortescue (ASX:FMG) dividends
• 2 ASX 200 shares impacted by the daigou channel
• Stock market rally: Is the stock market bubble set to burst?
• Top brokers name 3 ASX shares to buy today

Motley Fool contributor Scott Phillips 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 Genex Power Ltd (ASX: GNX) share price isn’t going anywhere after the renewable power generation company announced the final capital raising puzzle piece to fund its Kidston Pumped Storage Hydro Project (K2-Hydro).

The Genex share price is currently in a trading halt, frozen at 27.5 cents a share. The company has outperformed the S&P/ASX 200 Index (ASX: XJO) over the last year, with a staggering 175% share price gain.

Further funds enable full ownership

Genex announced today that it had secured the final funding needed for the 250MW Kidston Pumped Storage Hydro Project (K2-Hydro). As a result, the full $777 million of financing required for the project has been sourced.

The final piece comes from the launch of a fully underwritten $90 million placement. This allows Genex to construct and operate the project with full ownership. Furthermore, the placement will involve the issuing of 170.1 million new fully paid ordinary shares in Genex. These new Genex shares will be issued at a share price of 20 cents per ordinary share.

The company has also signed an amendment with J-POWER for a further $25 million equity investment in Genex. The remaining funds have already been sourced with a $610 million debt facility from the Northern Australian Infrastructure Facility and a $47 million grant from the Australian Renewable Energy Agency.

Next step

Once all the funds are accounted for, Genex will aim to start construction in April/May 2021.

Genex chief executive officer James Harding commented on today’s milestone:

Today’s announcement, securing the balance of funding required to take the Kidston Pumped Storage Hydro Project to financial close, is a significant achievement for the Company.

More importantly, to be in a position to finance the project on a 100% equity basis and retain full ownership and control of the asset is a favourable outcome for Genex and its shareholders.

We are now in the final stages of closing out the financing and commencing construction and look forward to updating the market as we complete these milestones over the coming weeks.

Notably, Genex plans for a third stage development for the Kidston clean energy hub. The final chapter entails an additional 150MW wind and solar expansion. Although, we likely won’t hear details on it until the completion of stage 2.

Will Genex’s share price rise with renewables?

The Genex share price has certainly had a good run over the last year. In fact, much of the renewable space has gained attention in the 12 months gone. Companies like Tilt Renewables Ltd (ASX: TLT) have experienced a surge in share price as private equity floods capital into the sector.

Meanwhile, energy companies like AGL Energy Ltd (ASX: AGL) and Origin Energy Ltd (ASX: ORG) continue to add renewable assets. Even AGL’s CEO Markus Brokhof recently stated that batteries would be crucial to Australia’s energy grid in the near-term. Those comments were in the context of AGL recently proposing a 200MW battery at its Loy Yang Power Station. 

If the company can cater to the growing renewable demand, the Genex share price has the potential to grow with it.

More reading

• ASX 200 up 0.45%: Premier Investments results, Xero acquisition, Computershare halted
• 2 leading ASX 200 dividend shares to buy for income
• 5 things to watch on the ASX 200 on Wednesday
• What experts are saying about Telstra’s (ASX:TLS) big restructuring plans
• ASX 200 dips, travel shares drop, Pushpay soars

Motley Fool contributor Mitchell Lawler 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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Today is payday for eligible shareholders of mining giant Fortescue Metals Group Limited (ASX: FMG). This morning the company paid shareholders a fully franked interim dividend of $1.47 per share. Based on the latest Fortescue share price of $19.22, this represents a very generous 7.6% yield.

While some shareholders will be using this as a source of income, others may wish to invest it into the share market. If you’re in the latter group, then you might want to consider one of these ASX shares. Here’s why they are rated highly:

Altium Limited (ASX: ALU)

The first share to look at is Altium. It is a printed circuit board design software provider which has a leadership position in a market exposed to the Internet of Things and artificial intelligence. These two technologies are underpinning the proliferation of electronic devices globally, which is expected to lead to increasing demand for printed circuit board design software over the next decade.

Analysts at Morgan Stanley are positive on the company. So much so, they have an overweight rating and $37.00 price target on its shares. This compares to the latest Altium share price of $26.94.

Cochlear Limited (ASX: COH)

Another ASX share to consider investing these dividends into is Cochlear. It is one of the world’s leading hearing solutions companies and has a very long track record of delivering solid earnings growth. And while the pandemic has been weighing on its performance, its strong first half result appears to show that the situation is easing. In light of this, the ageing populations tailwind, and its industry leading products, the future looks very bright for Cochlear.

Macquarie is a fan of the company. Last month its analysts put an outperform rating and $245.00 price target on its shares. This compares favourably to the current Cochlear share price of $213.15.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Why the Xero (ASX:XRO) share price is outperforming today
• The Fortescue (ASX:FMG) share price is down 20% in March
• How to counter the ASX 200’s Achilles heel
• An important lesson from today’s Fortescue (ASX:FMG) share price

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Cochlear 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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If you’ve been living under an investor-shaped rock for the past few years, you may not know much about which S&P/ASX 200 Index (ASX: XJO) shares are influenced by the daigou channel.

The daigou channel is a term used to describe Chinese expats living in Australia who are buying and selling Australian consumer goods to send back to the Chinese mainland, where many of these products are unavailable.

This practice is bigger than you may think. Many Chinese students studying in Australia make a living from reselling these items, with full-time resellers in China who buy and then on-sell a whole range of products.

Unsurprisingly, among the big earners from this practice are companies within Australia’s adult nutrition and care (ANC) and baby nutrition and care (BNC) sectors. These companies produce products with the marketability of Australia’s clean, organic image that strongly resonates with Chinese consumers.

This industry took a towelling in 2020 as COVID-19 slammed borders shut and backlogged international freight. But with vaccinations rolling out and many industries ticking off the days until borders can reopen, it’s worth knowing which companies are significantly impacted by the daigou channel status.

2 ASX 200 shares that rely on the daigou channel

Blackmores Limited (ASX: BKL)

Natural health product manufacturer Blackmores has suffered greatly from the halt of the daigou channel and market uncertainty in China. In 2016, the Blackmore share price reached a high of more than $200, before bottoming at $60 in September last year. 

Those figures help highlight the degree to which significant Chinese market exposure can wreak havoc on a company’s share price. The company’s FY20 full-year results showed a 16% drop in sales for the first half of 2020 that hasn’t fully recovered.

The Blackmores share price is currently down 0.44% this week, but market sentiment around the company already appears to be changing. Blackmores shares have increased 5.44% this month following a 3% increase in half-year revenue to end 2020.

A2 Milk Company Ltd (ASX: A2M)

The A1-protein free milk producer has been one of the more volatile (and keenly watched) companies on the ASX 200 in recent months. The A2 Milk share price has fallen by more than 48% over the past 12 months. The company’s shares reached their 52-week high of around $20 in late July 2020 but have fallen dramatically since then, now sitting at $8.33.

In addition to the impacts of a declining daigou channel, A2 Milk has also been hit with a myriad of other headwinds. Its chair and previous CEO have been engaged in a war-of-words in the media over the past fortnight, executives dumped millions of shares in the midst of the pandemic, and the company’s reinvestment in the daigou channel hasn’t sparked much confidence.

In positive news, however, A2 Milk has recently been focusing on expanding its penetration of the US market. At the current A2 Milk share price, the company has a price-to-earnings (P/E) ratio of 17.

More reading

• The A2 Milk (ASX:A2M) share price is at a 3-year low and could go lower
• Fund managers have been buying Blackmores (ASX:BKL) and this ASX share
• A2 Milk (ASX:A2M) shares and one other slapped with sell ratings
• Leading brokers name 3 ASX shares to sell today
• Which ASX 200 shares haven’t recovered from the COVID-19 crash?

Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk and Blackmores 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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