As all shareholders of ASX banking shares would know, 2020 wasn’t exactly a great year to be holding any of the ASX’s most famous dividend payers. The onset of the coronavirus pandemic, and the subsequent economic shock, played havoc with ASX bank share prices.

Take Westpac Banking Corp (ASX: WBC). Its share price started the year just a touch over $24 a share. But by 23 March, Westpac shares hit a low of just $13.47. That was the lowest share price the ASX’s oldest bank had seen since 2003 (yes, even lower than the depths of the global financial crises).

Commonwealth Bank of Australia (ASX: CBA) faired the best amongst the ASX banks. But even the yellow diamond dropped more than 40% in value between 14 February and 23 March.

One of the major catalysts for these drops was likely the sudden inability for the banks to fork our their famous dividends. Not that this was entirely the banks’ fault. The financial regulator APRA (Australian Prudential Regulatory Authority) actually told the banks to keep their dividends at a minimum shortly after the pandemic hit, and only eased these restrictions recently.

Will 2021 be an ASX banking bonanza?

But that was 2020. So what does 2021 hold? Will we be getting back to the days of a 6% fully franked yield anytime soon?

One banking analyst thinks we might get half-way there at least. Reporting from the Australian Financial Review (AFR) this week quotes bank analyst Brian Johnson (not the AC/DC singer, if you were wondering) on the matter.

Mr Johnson is tipping that the ASX banks will return to paying out 60-70% of their earnings as dividends in at least the first half of 2021. That’s not quite at the 80-90% ratios we were seeing in 2019, but it’s a lot more generous than the 50% cap that APRA imposed for most of 2020.

Johnson also says that what Commonwealth Bank (the first banking cab off the rank) announces as its interim dividend next month will “set a standard across the industry”. He also states that the banks might even contemplate share buybacks and other “capital initiatives” in the second half of the year. That would further return cash to investor pockets, as share buybacks increase earnings per share (EPS) for existing shareholders.

Not out of the woods yet

However, Johnson also points out that CBA’s earnings results will be closely watched for another reason – to assess the economic damage from the coronavirus pandemic. Johnson notes that JobKeeper has “injected a massive amount of money into the economy, and unemployment numbers look better than people thought they would”, which has prompted “massive deposit growth so capital ratios look so much better, and the banks have strengthened their balance sheet provisioning”.

 However, he also states that credit growth has been “extremely anaemic” and investors will be looking to CBA’s numbers to make sure “that the bad debts that the banks have incurred as a result of the pandemic are much smaller than feared even a few months ago”.

Still, investors will be buoyed by Mr Johnson’s comments. No doubt many will be hoping that CBA’s current trailing yield of 3.45% and Westpac’s 1.47% will see some much-welcomed appreciation this year.

More reading

• This ASX 200 stock is tipped to lift dividends by 87% this year
• Why this broker likes ANZ (ASX:ANZ), NAB (ASX:NAB), and Westpac (ASX:WBC)
• Does Xinja’s downfall mean neobanks are dead?
• Tyro (ASX:TYR) could face legal action for catastrophic outage
• Loan deferrals down, big four ASX banks up?

Motley Fool contributor Sebastian Bowen 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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In morning trade the Objective Corporation Limited (ASX: OCL) share price has been on fire.

At the time of writing, the information technology software and services provider’s shares are up 11% to a record high of $14.49

Why is the Objective share price rocketing higher?

The catalyst for this strong gain has been the release of its first half guidance this morning.

According to the release, based on unaudited management accounts, Objective is expecting to report a 40% increase in revenue to $46.5 million for the half.

And thanks to margin expansion, the company is guiding to a 74% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to $11.8 million.

Also growing strongly during the half was its annual recurring revenue (ARR). The company’s ARR grew 30% year on year to $70.1 million. Positively, upfront licence fees have continued to decline as a percentage of revenue and now represent only 3.6% of its total revenues. This is down from 7.4% a year earlier.

At the end of the period, Objective had a cash balance of $27.7 million. This takes into account the $18.4 million the company paid to acquire Itree and its dividend payments of $6.6 million. In addition to this, the company made an $11.1 million investment in research and development during the half, up 45% from $7.7 million a year earlier.

Management commentary.

Objective’s CEO, Tony Walls, revealed that the company has been battling tough trading conditions because of the pandemic.

He commented: “As expected, operating conditions in the first half of the 2021 financial year have been challenging for all of us due to the impacts of COVID-19. At Objective, our priority has been in supporting our employees and customers around the globe.”

“Despite these challenges, we have great confidence in our future and we are well placed to transition to the new normal that the world will adapt to in due course. Objective’s suite of products will be critical in assisting our customers to do the same. With this conviction, we have continued to invest in our team to capture the opportunities that lie ahead,” he added.

More reading

• Objective (ASX:OCL) share price continues its rise in 2021 after doubling last year
• The top 5 performing ASX SaaS shares of 2020

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 Objective 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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The Integrated Research Limited (ASX: IRI) share price is dropping lower on Friday morning.

At the time of writing, the user experience and performance management solutions provider’s shares are down 2.5% to $2.42

Why is the Integrated Research share price dropping lower?

Investors have been selling the company’s shares this morning following the release of an update on its guidance for the first half of FY 2021.

At the end of December, the Integrated Research share price crashed lower after it revealed that its trading performance had been below expectations due to a continuation of customers deferring purchasing decisions.

In light of this, it provided guidance for half year revenue in the range of $34 million to $37 million and profit after tax in the range of breakeven to $2 million. This compared to revenue of $53.2 million and profit of $11.8 million in the prior corresponding period.

This morning the company advised that it is in the early stages of preparing its interim financial results. Based on internal management accounts and subject to audit review, it anticipates both revenue and profit after tax to be at the lower end of its guidance range.

It notes that the AUD/USD exchange rate strengthened by another cent on the last day of the year, resulting in further unrealised exchange losses.

This means that Integrated Research is expecting revenue of ~$34 million and no profits for the half. This represents a 36% and 100% decline, respectively, on the prior corresponding period.

At the end of December, the company’s cash balance (net of debt) stood at $1.7 million. This is down from $4.7 million at the end of June.

New product launch.

Management also advised that the company has expanded its Collaborate product line with the release of new cloud solutions for Microsoft Teams and Zoom.

A further update on its cloud-based solutions will be provided at the formal half year results announcement scheduled for 18 February 2021.

More reading

• ASX 200 drops lower
• Why Afterpay, DEXUS, Integrated Research, & Regis Healthcare are dropping lower
• Why the Integrated Research (ASX:IRI) share price crashed 9% lower
• Why is the Integrated Research (ASX:IRI) share price sliding 6%?

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 Integrated Research 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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The Michael Hill International Limited (ASX: MHJ) share price is in focus today after a trading update from the jewellery group.

Why is the Michael Hill share price on watch?

Michael Hill provided an update on its second quarter trading performance for the period ended 27 December 2020.

The Aussie jeweller expects to see group earnings before interest and tax (EBIT) growth of 30–40% for the first half of the year (1H 2021). 

EBIT is forecast to be $56 million to $60 million against comparable EBIT of $41 million to $45 million in 1H 2020.

The group experienced strong same store sales growth across all markets and channels. That saw same store sales climb 6.3% for the half.

Digital sales were up 102% for the half with increased sales and margins. Digital channels now represent 5.8% of total sales for the group compared to 2.8% in 1H 2020.

The Michael Hill share price is one to watch in early trade following this morning’s update.

Michael Hill also reported continued growth of its branded collections, which now represent 38.4% of all product sales. 

The Aussie jeweller is now in a strong cash position thanks to “diligent management” of its expenditure, working capital and inventory levels.

However, coronavirus restrictions continue to weigh on international sales channels. The group reported 46 stores in its Canadian segment that closed over November and December.

The Michael Hill share price remains down 4.2% over the last 12 months but has rocketed 195.7% higher since 8 April 2020.

The Aussie jeweller also provided an update on its deferred dividend debt. After conserving cash in March 2020 by deferring payment, Michael Hill will now be paid to those eligible shareholders.

Foolish takeaway

The Michael Hill share price is one to watch in early trade after its second quarter trading update.

The company currently trades with a market capitalisation of $263.8 million with a dividend yield of 3.8% and a price to earnings (P/E) ratio of 86.2.

More reading

• Could ASX retail shares be the best ASX shares to own right now?

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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Tyro Payments Ltd (ASX: TYR) announced on 7 January 2021 it had started to experience connectivity issues for approximately 15% of its active terminal fleet. Since the announcement, the Tyro share price has slumped 20% lower to a 9-month low. 

Goldman Sachs released a report on Wednesday that believes the temporary terminal connectivity issues could weigh on Tyro’s medium-term growth prospects. 

Terminal connectivity issues 

Tyro has disclosed that its first half total transaction volume (TTV) was $12.118 billion, which was 3.7% ahead of Goldman’s forecasts. However, this was offset by the connectivity issues that have indicated to reduce Tyro’s TTV by around 5% to what would otherwise be expected for that period, said Goldman. 

The connectivity issues are reported to impact 19% of its merchants, or 6,300 merchants. A further 11% or ~3,650 have been impacted but have multiple terminals on site, allowing for the working terminals to still be used. Around 70% of merchants are not affected by this issue at all. 

The company advised it has a team of 250 personnel working to replace the affected terminals and indicated that a “majority” of merchants should be back online by the end of this week and balance in the course of next week. 

Goldman observes that the direct impact on Tyro’s lost merchant fees should be “relatively immaterial”. However, the impact on potential lost revenues for its merchants “could be material” and estimates a loss of “$57.5 million to 230 million”, assuming merchants are not able to find an alternative basis to process sales. 

Tyro has said that once connectivity is restored, it will be in a position to consider compensation for customers and other options. 

Alongside this, Goldman is also concerned about the possibility that merchants may churn to alternative service providers regardless of compensation received. The broker cited that on social media, several merchants indicated they bought a Square terminal as a workaround. 

Furthermore, the report fears that future market share gains may slow as a result of reputational damage and delayed/lost opportunity for future partnerships such as its partnership with Bendigo and Adelaide Bank Ltd (ASX: BEN).

Lower Tyro share price target 

Goldman lowered its 12 month Tyro share price target from $3.65 to $3.15 with a neutral rating. This represents a 11% upside to Tyro’s close on Wednesday. Its lower price target was driven by anticipated lower new customer growth rate assumptions.

More reading

• Does Xinja’s downfall mean neobanks are dead?
• Why BrainChip, Pilbara Minerals, Premier Investments, & Tyro shares are dropping lower
• Top fund managers reveal 3 top ASX shares to buy for 2021
• Tyro (ASX:TYR) could face legal action for catastrophic outage
• Why Altium, Clover, PolyNovo, & Tyro shares are dropping lower

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. 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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One area of the market that has been performing strongly in FY 2021 has been the retail sector.

Thanks partly to the redirection of spending, stimulus, and tax cuts, a number of retailers have reported strong sales and profit growth.

Two retail shares that have been growing strongly and have been tipped as buys are listed below. Here’s what you need to know about them:

Baby Bunting Group Ltd (ASX: BBN)

Baby Bunting is Australia’s leading baby products retailer. It has been a strong performer in FY 2021, reporting financial year to date (to 2 October) comparable store sales growth of 17%. Impressively, this figure includes its Melbourne metropolitan stores which were impacted by lockdowns. Excluding these stores, comparable store sales would have been up 28.5% on the prior corresponding period.

Analysts at Citi are positive on the company and see a long runway for growth ahead. This is largely due to management’s plan to almost double its store network from 56 stores to over 100 stores in the future. In fact, the broker sees opportunities for this number to increase thanks to opportunities in the New Zealand market. This will be a big positive as a greater size should provide it with increased buying power with suppliers and supply chain efficiencies.

Citi has a buy rating and $5.48 price target on the company’s shares.

Universal Store Holdings Ltd (ASX: UNI)

Another retailer growing strongly in FY 2021 is Universal Store. The fashion retailer recently released a very strong trading update which revealed that it expects its underlying earnings before interest and tax (EBIT) to be in a range of $30 million to $31 million for the first half. This represents growth of between 61% and 67% on the prior corresponding period and was driven by strong like for like sales growth and gross margin improvements.

This update impressed analysts at Morgans. Particularly given how it performed strongly despite facing headwinds such as lockdowns and continued restrictions on youth events like music festivals. And with the company now cycling a weak six-month period from a year earlier, the broker sees scope for its second half EBIT to increase 125% on the prior corresponding period.

After which, Morgans is forecasting its earnings to grow at a 30% compound annual growth rate through to FY 2023. It feels this makes its shares cheap at the current level and has an add rating and improved price target of $6.93 on them.

More reading

• Why Oil Search, Praemium, Premier Investments, & Universal Store are storming higher
• Here’s why the Universal Store (ASX:UNI) share price is surging 10% higher
• Why these ASX shares just stormed to 52-week highs or better
• 3 recent ASX IPOs to watch
• Citigroup picks the best ASX retail stocks to own for 2021

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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The dividend outlook for ASX stocks is much improved for FY21 but there’s one large cap that could lead the pack.

Dividends from S&P/ASX 200 Index (Index:^AXJO) stocks were slashed in COVID-19-stricken FY20 but the worst seems to have passed.

Companies are again ready to grow their dividends this financial year and ASX big banks like the National Australia Bank Ltd. (ASX: NAB) share price and Westpac Banking Corp (ASX: WBC) share price are good examples.

Best large cap dividend grower for FY21?

While the dividend increase from this sector is expected to be impressive, it could be outpaced by the Sonic Healthcare Limited (ASX: SHL) share price.

UBS is predicting that dividends from the medical testing facilities operator will surge by 87% in FY21 compared to the previous year.

This puts Sonic’s dividend payment at $1.59 a share and we will find out as early as next month if UBS’ estimates are on the money.

COVID testing drives Sonic’s dividend surge

What’s driving the big dividend upgrade is COVID testing. This is something I’ve highlighted over a week ago as Australia ramped up its testing regime.

Now that the first half of FY21 is passed, the broker has run the numbers on what the increase in COVID PCR tests will mean for Sonic, and it’s substantial.

The contribution isn’t only from Australia where the emergence of the more contagious UK-variant sent state governments into a testing frenzy. The increase in testing in Europe and the US is also benefiting Sonic’s bottom line.

PCR worth more than $1 billion to Sonic

“We note that in US/Germany/UK, testing rates increased in the Oct-Dec 2020 period (vs Jul-Sep), with a degree of softening in AUS (prior to a surge in late December),” said UBS.

“For 1H21, we now derive ~A$1.4bn (out of total group revenue of A$4.65bn), specifically from PCR testing revenue (an increase of ~A$400mn vs our previous forecast, translating to a ~20% FY21 EPS upgrade), with 16.4mn tests conducted in the six month window.”

Based on the high margin contribution from PCR testing, the broker is forecasting a 74% growth in group earnings before interest, tax, depreciation and amortisation (EBITDA) in 1HFY21.

That is a little above the 71% growth reported in Sonic’s September quarterly update.

Is the Sonic share price cheap?

But UBS isn’t quite ready to recommend the Sonic share price as a “buy” at this point. It pointed to the group’s poor track record at growing earnings per share, despite the benefit of acquisitions.

It also pointed out that the rate of COVID testing will drop in the next 12 to 18 months if the rollout of mass vaccinations stays on schedule.

Given how vaccinations programs from the US to UK have kicked off though, that might be a big assumption.

UBS rates the Sonic share price as “neutral” with a 12-month price target of $34.75 a share.

More reading

• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises 0.4%
• 3 reasons we might see higher ASX share prices in 2021
• Does the ASX care that Donald Trump has been impeached, twice?
• Why this broker likes ANZ (ASX:ANZ), NAB (ASX:NAB), and Westpac (ASX:WBC)

Motley Fool contributor Brendon Lau owns shares of National Australia Bank Limited and Westpac Banking. Connect with me on Twitter @brenlau.

The Motley Fool Australia has recommended Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Late yesterday afternoon, Australian-based gold producer Medusa Mining Limited (ASX: MML) notified the market of a tragic incident at one of its mines in the Philippines.

What happened?

In yesterday’s release, Medusa advised that it received notice of a fatal accident through its Philippines operating company, Philsaga Mining Corporation.

Two workers were fatally injured while carrying out maintenance tasks at an underground pumping station on the third level of the mine.

Medusa said that the incident took place on 12 January and the Philippine Mines and Geosciences Bureau was immediately notified. Authorities have launched a full investigation into the cause of the tragedy.

The affected families of the workers are receiving support as Philsaga Mining Corporation works with the contracting company involved.

In its announcement, Medusa commented that the accident occurred “despite the additional daily focus on safe work practices, additional training and improved procedures.”

The company advised it has immediately reinforced its safety procedures in relation to the circumstances of the accident, and is reviewing all safety components.

Lastly, Medusa noted that following safety inspections, all other areas of the mine continue to operate as normal.

Medusa share price snapshot

Medusa operates two projects, the Co-O mine and the Royal Crowne Vein Prospect, both located in the Philippines.

The Medusa share price has been a weak performer over the past 12 months, down 10% since this time last year.

Based on the current share price of 76 cents per share, Medusa commands a market capitalisation of $159 million.

More reading

• 3 blue chip ASX dividend shares with big yields
• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises 0.4%
• Are they really profiting from JobKeeper?
• These ASX shares are growing at a rapid rate in FY 2021

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.

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Luckily in this low interest rate environment, there are a number of blue chip shares offering investors generous yields.

Three blue chips that are highly rated right now for income investors are listed below. Here’s what you need to know:

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

With the worst now seemingly behind the banks, investors have been piling into the sector again in recent months. The good news is that it may not be too late to invest and still generate a generous yield. According to a note out of Morgans, now that dividend restrictions have been removed, its analysts are forecasting a $1.27 per share dividend in FY 2021. This represents a fully franked 5.2% yield. Morgans has an add rating and $26.00 price target on its shares.

BHP Group Ltd (ASX: BHP)

Another blue chip that comes highly rated is BHP. Thanks to favourable commodity prices, particularly the sky high iron ore price, analysts at Macquarie are tipping the mining giant to generate significant free cash flow this year. The broker expects this to result in a fully franked ~$3.85 per share dividend in FY 2021. Which based on the current BHP share price, represents an 8.3% dividend yield. Macquarie has an outperform rating and $46.00 price target on its shares.

Telstra Corporation Ltd (ASX: TLS)

This telco giant has struggled for a number of years due to the NBN rollout but has been tipped to return to growth in the not so distant future. This is thanks to its T22 strategy and the arrival of 5G internet. In the meantime, analysts at UBS believe that Telstra will be able to maintain its 16 cents per share fully franked dividend for the foreseeable future. Based on the current Telstra share price, this equates to a 5.2% dividend yield. UBS has a buy rating and $3.70 price target on the company’s shares.

More reading

• 5 things to watch on the ASX 200 on Friday
• 2 ASX 50 shares to buy
• Why this broker likes ANZ (ASX:ANZ), NAB (ASX:NAB), and Westpac (ASX:WBC)
• Why this top broker thinks the Telstra (ASX:TLS) share price could surge ~40%
• BHP, Rio Tinto’s new copper mine under threat

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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On Thursday the S&P/ASX 200 Index (ASX: XJO) was on form again and stormed higher. The benchmark index rose 0.4% to 6,715.3 points.

Will the market be able to build on this on Friday? Here are five things to watch:

ASX 200 expected to rise again.

The Australian share market looks set to end the week on a positive note. According to the latest SPI futures, the ASX 200 is expected to open the day 8 points or 0.1% higher this morning. This follows a positive night of trade on Wall Street, which in late trade sees the Dow Jones up 0.2%, the S&P 500 up 0.1%, and the Nasdaq trading 0.3% higher.

Oil prices push higher.

It could be a good day for energy producers Beach Energy Limited (ASX: BPT) and Santos Ltd (ASX: STO) after oil prices pushed higher overnight. According to Bloomberg, the WTI crude oil price is up 1.1% to US$53.48 a barrel and the Brent crude oil price has risen 0.5% to US$56.35 a barrel. This was despite rising COVID cases in Europe and new lockdowns in China renewing concerns about global oil demand.

Gold price softens.

Gold miners such as Newcrest Mining Ltd (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) will be on watch after the gold price dropped lower. According to CNBC, the gold futures price is down 0.5% to US$1,847.60 an ounce. This appears to have been driven by a strengthening US dollar.

Iron ore price rises.

It could be a good day for mining giants BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) on Friday after the iron ore price pushed higher again. According to Metal Bulletin, the iron ore price has risen 1.3% to US$172.36 a tonne overnight. In late trade in the United States, the US listed shares of BHP and Rio Tinto are up 4.5% and 4%, respectively. Similar gains were made by their UK listed shares.

Whitehaven rated neutral.

The Whitehaven Coal Ltd (ASX: WHC) share price could be fully valued according to analysts at Goldman Sachs. The broker has responded to its “weaker than expected” December quarter update by retaining its neutral rating and $1.60 price target on the coal miner’s shares. This compares to the current Whitehaven Coal share price of $1.81.

More reading

• ASX 200 rises 0.4%
• 2 ASX 50 shares to buy
• 3 reasons we might see higher ASX share prices in 2021
• Does the ASX care that Donald Trump has been impeached, twice?
• Why the Meridian (ASX:MEZ) share price is dropping lower 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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