The Adairs Ltd (ASX: ADH) share price has sunk 60% since June 2021 and is almost 30% lower since March 2024.

With such a massive fall over the past few years, could the ASX dividend stock be capable of providing solid passive income?

When a share price falls, it can increase the prospective dividend yield. For example, if a company had a share price of $10 and paid a dividend per share of 60 cents, it’d have a dividend yield of 6%. If the share price fell 50% to $5, and the dividend payment was still 60 cents per share, the dividend yield would become 12%.

However, it’s common for a dividend payment to be reduced during a period of heavy share price decline because the sinking valuation is a sign that profits are under pressure.

But, it’s still possible to find cyclical ASX dividend stocks that can deliver recovering profit and a resurgent dividend.

Adairs may be one of those cyclical businesses that could recover over the next couple of years.

Is recovery on the way?

The trading environment for discretionary ASX retail shares has been tough, with many households having less money to spend amid this inflationary environment. Expensive mortgages and soaring rent have certainly made things challenging for the retail sector.

The company’s latest earnings results did not indicate booming trading conditions. In February, Adairs said it continued to see “significantly lower” customer traffic than the same period last year. Consumers remained “value-orientated, with conversion declining notably when offers are reduced”.

In weeks 27 to 34 of FY24, group sales were down 9.6% year over year, with Adairs sales down 9.5%, Focus on Furniture sales down 14.1%, and Mocka sales up 4%.

However, there were some silver linings. Due to the material decline in sales that occurred in May 2023, Adairs management expects that the group’s comparative sales performance will improve across the second half of FY24. It’s also focused on managing the gross profit margin, which was up 200 basis points (2.00%) year over year.

Adairs expects trading to remain subdued, but initiatives could help profit recover, such as its product range, supply chain improvements, the Adairs-operated national distribution centre, cost of doing business (CODB) management and a store rollout.

The broker UBS suggests Adairs could generate net profit after tax (NPAT) of $36 million in FY24, $44 million in FY25 (up 22%) and $52 million in FY26 (up 18%).

Large dividends predicted

UBS has forecast that Adairs could pay an annual dividend per share of 18 cents in FY25, which would be a grossed-up dividend yield of 14%.

The broker has suggested Adairs could then pay an annual dividend per share of 21 cents per share in FY26 — a grossed-up dividend yield of 16%.

Dividends are not guaranteed, but if the company can reset its profitability, it could be a significant dividend payer in the coming years. However, it can’t be ruled out that tough trading conditions could continue throughout FY25.

The post 1 ASX dividend stock to buy that’s down 60% appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs. The Motley Fool Australia has positions in and has recommended Adairs. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Vanguard Australian Shares High Yield ETF (ASX: VHY) may be best known for its high level of passive income. But there’s more to consider about the ASX exchange-traded fund (ETF) than that.

ETFs pass on the dividends they receive to their shareholders, so the higher the dividend yield from an underlying holding, the stronger the yield collected by the EFT.

This is why the VHY ETF focuses on ASX stocks with a high dividend yield, investing in companies that have “higher forecast dividends relative to other ASX-listed companies.”

It achieves diversification by (regularly) restricting the proportion invested in any one industry to 40% of the total ETF and 10% in any one company. Australian real estate investment trusts (REITs) are excluded from the fund.

Which ASX shares are in the VHY ETF portfolio?

The largest positions in the portfolio are some of the biggest companies on the ASX.

At the end of May 2024, these were the biggest weightings in descending order:

• Commonwealth Bank of Australia (ASX: CBA)
• BHP Group Ltd (ASX: BHP)
• National Australia Bank Ltd (ASX: NAB)
• Wesfarmers Ltd (ASX: WES)
• Westpac Banking Corp (ASX: WBC)
• ANZ Group Holdings Ltd (ASX: ANZ)
• Woodside Energy Group Ltd (ASX: WDS)
• Macquarie Group Ltd (ASX: MQG)
• Rio Tinto Ltd (ASX: RIO)
• Telstra Group Ltd (ASX: TLS)

Looking at the overall portfolio’s balance, more than 60% of the sector allocation is to financial and mining shares, with weightings of 42.8% and 21.3%, respectively. ASX energy shares have a 10.4% position in the portfolio. These sectors typically have high dividend yields.  

Vanguard Australian Shares High Yield ETF dividend yield

This fund will undoubtedly produce a high level of passive dividend income each year. But how much?

Each ASX position in the portfolio influences the overall yield of the VHY ETF. Vanguard uses forecast dividend figures from Factset to tell investors the fund’s overall forecast yield.

According to the fund’s monthly update for May 2024, the Vanguard Australian Shares High Yield ETF has a forecast partially franked dividend yield of 4.9% and a forecast grossed-up dividend yield of 6.6%.  

Is this fund a good long-term buy?

For investors entirely focused on passive dividend income, I think it can be an effective option. Its annual management fee is only 0.25%.

However, I believe almost everyone should want to see earnings growth and capital growth from their invested businesses.

The sectors that the VHY ETF is invested in are typically slower-growing, compared to technology for example. To have a high dividend yield, businesses typically pay out a lot of their profit, so they do not retain much profit to reinvest for growth. This dynamic has resulted in the Vanguard Australian Shares High Yield ETF producing little capital growth.

In the last three years, the VHY ETF has returned an average of 8.8% per annum, but only 3% per annum of that was capital growth. In the past 10 years, it has returned an average of 6.9% per annum and the capital growth has been a paltry 0.6% per annum.

This ETF can provide good cash flow. However, it may be useful to invest in other ASX ETFs that focus on globally growing businesses, which can produce stronger overall returns due to their earnings and capital growth.

Examples of global ETFs include Vanguard MSCI Index International Shares ETF (ASX: VGS) and VanEck MSCI International Quality ETF (ASX: QUAL), which have track records of total long-term returns of more than 10% per annum. However, past performance is not a guarantee of future performance.

The post Is the Vanguard Australian Shares High Yield ETF (VHY) a good long-term buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group and Wesfarmers. The Motley Fool Australia has positions in and has recommended Macquarie Group, Telstra Group, and Wesfarmers. The Motley Fool Australia has recommended Vanguard Australian Shares High Yield ETF and Vanguard Msci Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Information technology shares and financial stocks were the best performers among the 11 market sectors comprising the S&P/ASX 200 Index (ASX: XJO) in FY24.

The S&P/ASX 200 Information Technology Index (ASX: XIJ) rose by 27.99%, and the S&P/ASX 200 Financials Index (ASX: XFJ) ascended 23.11%, in FY24.

The laggards among the sectors were consumer staples and materials shares. This may be surprising given staples are usually defensive during periods of high inflation.

Materials shares were affected by mixed commodity price performances, with silver, gold, and copper rising strongly over the financial year while iron ore was volatile and lithium tanked.

The S&P/ASX 200 Consumer Staples Index (ASX: XSJ) tumbled 6.89% and the S&P/ASX 200 Materials Index (ASX: XMJ) fell 6.4% in FY24.

Let’s delve deeper.

Technology led the market sectors in FY24

Overall, the S&P/ASX 200 Index (ASX: XJO) booked a 7.83% gain over the FY24 trading year.

The index rose from 7,203.3 points on 30 June 2023 to 7,767.5 points last Friday.

As the chart below shows, the ASX 200 gradually fell over the first four months of FY24. Then, in early November, an early Santa Rally began amid speculation that interest rates would be cut in 2024.

The ASX 200 was volatile after reaching a record 7,910.5 points on 2 April. Hope for potential rate cuts faded over the next three months as inflation proved stickier than expected.

Why did technology lead the ASX market sectors?

The hype around artificial intelligence (AI) and its potential to meaningfully move the dial on global productivity growth after many sluggish years is certainly a factor in this sector’s success.

US semiconductor company NVIDIA Corp was the poster child of global AI stocks in FY24.

Nvidia stock rose by close to 200% in FY24 and is up 2,900% over five years. Such is the excitement over AI and its potential to spur innovation in businesses across many market sectors in the future.

The technology-dominated NASDAQ Composite Index, where Nvidia and its fellow Magnificent Seven stocks live, outperformed the S&P 500 in FY24, and AI was a driving factor in its approximate 30% surge.

This enthusiasm rubbed off on ASX tech shares in FY24, especially those most closely connected to the AI tailwind.

The CEO of data centre-as-a-service operator Nextdc Ltd (ASX: NXT), Craig Scroggie, described AI as “the fourth industrial revolution” in a recent interview published on asx.com.au.

Scroggie said:

It is significantly shaping the data centre industry, particularly in environments where AI workloads are managed, whether for training or inference purposes.

Although the full impact of AI on the Australian market is still unfolding, the trends observed globally, specifically in the US, combined with our active engagements with global customers, suggest a massive increase in demand for data centre services driven by AI applications. 

The NextDC share price ascended 41.72% in FY24 to close at $17.63 per share on Friday. It was the sixth-best performer for price growth among ASX 200 technology shares in FY24.

5 best ASX 200 shares of the tech sector in FY24

The tech sector’s top performer in FY24 was social networking app provider Life360 Inc (ASX: 360).

Life 360 shares rose 122.72% over FY24 to close at $16.37 last Friday.

Here are the others making up the top 5 ASX 200 tech stocks for share price growth in FY24.

The post Leaders and laggards of the ASX market sectors in FY24 appeared first on The Motley Fool Australia.

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• $20,000 invested in NextDC and these ASX shares 10 years ago is worth how much?

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, Life360, Megaport, and Nvidia. The Motley Fool Australia has recommended Megaport and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Income investors have a lot of options on the Australian share market. So much so, it can be hard to decide which ASX income shares to buy above others.

But don’t worry, to narrow things down for you, listed below you will find three options with good dividend yields that are rated highly by analysts. Here’s what they are saying about these shares:

GDI Property Group Ltd (ASX: GDI)

Bell Potter is tipping this property company as an ASX income share to buy.

Its analysts highlight “GDI calling out that following recent leasing success it sees much higher Property FFO on a LFL basis in FY25.”

The broker believes this leaves GDI Property well-positioned to pay some big dividends in the coming years. It is forecasting dividends per share of 5 cents across FY 2024, FY 2025, and FY 2026. Based on the current GDI Property share price of 56 cents, this implies dividend yields of 8.9% for the next three financial years.

It has a buy rating and 75 cents price target on its shares.

SRG Global Ltd (ASX: SRG)

Bell Potter also thinks that SRG Global could be an ASX income share to buy right now.

It is a diversified industrial services group that provides multidisciplinary construction, maintenance, production drilling and geotechnical services.

The broker believes “SRG’s short-to-medium term outlook is reinforced by Government-stimulated construction activity in the Infrastructure and Non-Residential sectors and increased development and sustaining capital expenditures in the Resources industry.”

It expects this to underpin fully franked dividends of 4.7 cents in FY 2024 and then 6.7 cents in FY 2025. Based on its current share price of 84 cents, this will mean dividend yields of 5.6% and 8%, respectively.

Bell Potter has a buy rating and $1.30 price target on its shares.

Super Retail Group Ltd (ASX: SUL)

Over at Goldman Sachs, its analysts think that Super Retail could be an ASX income share to buy right now. It is retail company behind popular store brands BCF, Macpac, Rebel, and Super Cheap Auto.

Its analysts “believe SUL will display resilience in a softer economic environment that is built upon its competitive advantage of high loyalty (~11.0m active members accounting for >75% of sales) and this will be further bolstered as the company launches the Rebel loyalty program and continues to build personalisation capabilities.”

Goldman is expecting the retailer to offer attractive dividend yields in the near term. It is forecasting fully franked dividends per share of 67 cents in FY 2024 and then 73 cents in FY 2025. Based on the latest Super Retail share price of $13.95, this will mean good yields of 4.8% and 5.2%, respectively.

The broker currently has a buy rating and $17.80 price target on its shares.

The post 3 ASX income shares to buy this month appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Super Retail Group. The Motley Fool Australia has positions in and has recommended Super Retail Group. The Motley Fool Australia has recommended Srg Global. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Investors that are on the lookout for big gains and a generous dividend yield may want to check out the ASX 200 stock in this article.

That’s because analysts at Bell Potter think this dividend-payer could be undervalued by the market.

Which ASX 200 stock?

The stock in question is Inghams Group Ltd (ASX: ING). It is the largest integrated poultry producer across Australia and New Zealand.

According to the note, the broker has been looking at industry data and feels it is supportive of its forecasts and its bullish view.

In respect to feed cost indicators, the broker said:

Since our Mar’24 update feed pricing indicators have been volatile, with a 7-9% firming. In light of ING’s forward purchasing arrangements, we see FY25e feed cost indicators (CY24TD pricing flows into FY25e assumptions) down an implied -12% relative FY24e levels. Note that the spot feed index is broadly consistent with the CY24TD average. With ABARE and CSIRO Wheatcast models favouring an above average yield outcome for the 2024-25 harvest, we would see the reversion to negative basis as a potential tailwind for ING in 2H25-1H26e.

Together with other factors, Bell Potter has trimmed its profit forecast for this year but boosted its medium term estimates. It explains:

We have reviewed our forecasts and updated them for channel mix, feed cost indicators, FX, interest rate movements and inflation data in ING core markets. The net impact is NPATL changes of -3% in FY24e, unchanged in FY25e and +4% in FY26e.

Big returns

In light of the above, Bell Potter has retained its buy rating and $4.35 price target on the ASX 200 stock.

Based on its current share price of $3.62, this implies potential upside of 20% for investors over the next 12 months.

In addition, the broker is forecasting fully franked dividends per share of 23 cents in FY 2024 and 24 cents in FY 2025. This equates to 6.35% and 6.6% dividend yields, respectively.

Bell Potter believes recent avian flu related share price weakness has created a buying opportunity. It said:

The ING share price has retraced ~10% following the discovery of avian flu in the Golden Plains and in NSW. While it may serve as a reminder of the inherent agricultural risks facing free range operations it has at this time had no impact on the ING business. We see the current weakness as a buying opportunity, noting similar bio risks in the almond industry (varroa mite) has had limited lasting impact on SHV. Feed cost indicators remain lower than a year ago and if 2024-25 crops develop as projected then this will likely emerge as a key earnings driver in 2H25-1H26e.

The post Buy this ASX 200 stock for 20% upside and a 6% dividend yield appeared first on The Motley Fool Australia.

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

At the start of each week, I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Pilbara Minerals Ltd (ASX: PLS) is still the most shorted ASX share with short interest of 20.7%. This is down slightly week on week. Short sellers appear to believe that lithium prices will remain at low levels for years.
• IDP Education Ltd (ASX: IEL) has 13.3% of its shares held short, which is down slightly week on week. This language testing and student placement company has warned that student visa changes in a number of key markets are going to weigh on its near term performance.
• Liontown Resources Ltd (ASX: LTR) has 11.4% of its share held short, which is up week on week again. This lithium developer’s shares lost almost 70% of their value in FY24. Short sellers appear to believe they can fall further.
• Flight Centre Travel Group Ltd (ASX: FLT) has seen its short interest rebound to 10.3%. Concerns over weak consumer spending and revenue margin headwinds could be behind this.
• Sayona Mining Ltd (ASX: SYA) has short interest of 9.9%, which is up since last week. This lithium miner is currently paying more to produce lithium than it receives from buyers.
• Syrah Resources Ltd (ASX: SYR) has short interest of 9.7%, which is down week on week. This graphite miner is currently battling production suspensions and further cash burn due to weak battery material prices.
• Chalice Mining Ltd (ASX: CHN) has short interest of 9.7%, which is up week on week. Short sellers aren’t letting up on this mineral exploration company’s shares despite them being down almost 80% over the last 12 months.
• Westgold Resources Ltd (ASX: WGX) has short interest of 9.3%, which is down sharply week on week. This short interest may be due to doubts over the gold miner’s proposed merger with Canada-based Karoa Resources.
• Australian Clinical Labs Ltd (ASX: ACL) has short interest of 9.2%, which is up since last week. This health imaging company warned that is expecting to report another sizeable decline in profits in FY 2024.
• Lynas Rare Earths Ltd (ASX: LYC) is a new entry in the top ten with short interest of 8.5%. Weak rare earths prices are likely to be why short sellers are targeting the miner.

The post These are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

More reading

• 3 fantastic ASX growth shares to buy in July
• These were the five worst ASX 200 shares to own in FY24
• These were the best performing ASX 200 shares in June
• Here are the top 10 ASX 200 shares today
• These were 3 of the worst-performing ASX 200 stocks in June. Time to buy the dip?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Idp Education. The Motley Fool Australia has recommended Flight Centre Travel Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.