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Fortescue Ltd (ASX: FMG) shares may be best known for iron ore mining, but it has also been a commendable passive income stock in the last few years, thanks to the strength of the iron ore price.

With a market capitalisation of $75.03 billion, according to the ASX, it’s one of the largest miners in the world. This scale allows the business to deliver impressive profit margins compared to its smaller peers.

Interestingly, Fortescue shares usually trade on a relatively low price/earnings (P/E) ratio, partly because of how unpredictable the iron ore miner’s earnings are. The lower P/E ratio enables a higher dividend yield.

What is the Fortescue dividend yield?

The dividend yield is decided by a combination of a company’s dividend payout ratio and the P/E ratio.

In the FY24 half-year result, Fortescue’s dividend payout ratio was 65% of net profit after tax (NPAT). The company’s dividend policy is to pay out between 50% and 80% of underlying NPAT.

In my opinion, the next dividends are more important than the last ones declared because those old ones are history and not necessarily indicative of future payouts.

Broker UBS has projected owners of Fortescue shares could receive a dividend per share of $1.28 in FY25. At the current Fortescue share price, that would represent a grossed-up dividend yield of 7.5%, which is still quite high. This potential payout is lower than the predicted grossed-up dividend yield of 9.8% for FY24.

Owning 1,000 shares

Buying 1,000 Fortescue shares would cost more than $24,000. However, it would also potentially result in receiving $1,280 in dividend cash and grossed-up dividend income of $1,828 (when including the potential franking credits) for FY25.

If the iron ore price is stronger than expected, the net profit and dividend could be more significant than UBS predicted. However, if the iron ore price is weaker, it would hurt Fortescue’s dividends and profit.

As a miner, its production costs don’t typically change much month to month, so additional revenue (or weaker revenue) can lead to a significant change to net profit, which flows onto the dividend payments. Time will tell what happens next.

Fortescue share price snapshot

The chart below shows that the Fortescue share price is up around 20% in the past year. However, the ASX iron ore share has declined by approximately 17% in the year to date with the iron ore price falling from above US$140 per tonne at the start of the year to around US$107 per tonne now, according to Trading Economics.

The post If I buy 1,000 Fortescue shares, how much passive income will I receive? appeared first on The Motley Fool Australia.

More reading

• How to earn $1,900 in passive income with just $10,000 in savings
• Fortescue shares rally amid claims of green tech theft
• Should you buy the 3 highest-yielding dividend shares in the ASX 200?
• Down 6% in a week. Are Fortescue shares carrying an iron anchor?
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Tristan Harrison has positions in Fortescue. 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.

Given we’re now well into the month of June, it’s inevitable that many Australians’ attentions will be turning to their tax returns. With individuals’ income tax returns due from 1 July, many of us will be looking forward to that annual windfall that often comes alongside a lodged tax return. However, many investors who own ASX shares might not be getting as much cash back as they might be entitled to.

If you own and invest in ASX shares, it immediately opens up some tax deduction doors that are not ordinarily open to your average Aussie. Understanding these doors and how you can use them to save a few extra dollars is vitally important to building your wealth using ASX shares.

So today, let’s discuss three investing deductions that you might not even be aware of today. A caveat, though. The deductions we’ll be discussing may not apply to you or your affairs. So make sure to double-check your claims with a licensed tax professional before you claim them from the Australian Taxation Office (ATO). Otherwise, you might get a nasty surprise.

Three tax deductions to claim if you own ASX shares in FY2024

Expenses arising from your investments

The general rule when it comes to tax deductions from investments like ASX shares is that any money you spend directly in the service of your portfolio is a deductible expense. If you use a computer or mobile phone to manage your portfolio, those expenses might be at least partially deductible.

You can also usually claim financial investment advice fees as a tax deduction if they relate to your ASX shares portfolio. Additionally, if you utilise a margin loan or other gearing strategy, any interest costs you might incur are deductible if the loan is for investment purposes.

Educational expenses

Many investors like to keep abreast of the current events in the financial world to help them invest appropriately and prudently. What you might not know is that any expenses you pay to further your investing portfolio are usually deductible.

Let’s say you choose to buy financial newspapers, investment magazines or online journals to pad out your financial knowledge. Chances are these will be at least partially tax deductible too. But only if you act on them and actually own ASX shares.

The tax perks of owning ASX shares

Investing in ASX shares isn’t a free lunch when it comes to paying taxes. Income that you receive in the form of dividends or distributions from ASX shares or exchange-traded funds (ETFs) is regarded as ordinary income by the ATO. These are taxed as income accordingly.

Likewise, if you buy a share and sell it for a profit down the track, those profits are counted as capital gains and are also taxed as income. However, if you buy an ASX share and hold it for longer than one year before selling it, you might be entitled to a 50% discount on those capital gains when declaring them for income. This can make the income that one earns from shares more attractive from a tax perspective.

Additionally, you probably know that most ASX dividend shares also pay out franking credits with their dividends. As we discussed earlier this week, franking credits can considerably boost the returns you receive from investing in ASX shares.

These credits, a reflection of the corporate tax already paid by a company, can be used as a tax deduction against all other income. So make sure that your tax return reflects the level of franking you are entitled to receive this year.

The post Own ASX shares? Here are 3 investing tax deductions you may not be aware of appeared first on The Motley Fool Australia.

More reading

• Buy and hold these ASX ETFs until 2034
• These ASX shares could rise 25% to 50%
• How to earn $1,900 in passive income with just $10,000 in savings
• 4 top quality ASX dividend shares to buy in June
• CSL shares can ‘absolutely’ head to $500: ASX expert

Motley Fool contributor Sebastian Bowen 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.

If you want to make some long term investments but aren’t a fan of stock picking, then it could be worth considering exchange-traded funds (ETFs).

That’s because they allow investors to buy a large collection of shares through a single investment. This makes it easier to diversify a portfolio and reduces risk.

But which ASX ETFs could be great buy and hold options for investors right now? Let’s take a look at three funds that could be worth holding until at least 2023. They are as follows:

BetaShares Global Cybersecurity ETF (ASX: HACK)

The first ASX ETF that could be a great buy and hold option is th BetaShares Global Cybersecurity ETF. It provides investors with access to the leading players in the rapidly growing cybersecurity sector.

Betashares highlights that “an estimate of the total addressable market by McKinsey suggests that the cybersecurity market is $1.5-$2.0 trillion globally, and at best only 10% penetrated with a very long runway for growth.”

It also notes that “during the period 2024-2028, cybersecurity revenue is expected to grow at an annual rate of 10.6%, resulting in a total market size of $273.6 billion by 2028.”

This bodes well for the companies that are held by the BetaShares Global Cybersecurity ETF. This includes Accenture, Cisco, Crowdstrike, and Palo Alto Networks.

Betashares Global Cash Flow Kings ETF (ASX: CFLO)

Another ASX ETF that could be a great long term option is the Betashares Global Cash Flow Kings ETF. In fact, Betashares recently named it as one to consider.

It notes that companies that generate high levels of free cash flow have tended to outperform broad global equity benchmarks over the medium to long term.

The Betashares Global Cash Flow Kings ETF focuses on global companies that demonstrate strong and consistent free cash flow generation, growth of free cash flow, and relatively low levels of debt.

Among its holdings are tech giant Alphabet and retailer Costco.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

A final ASX ETF that could be a great buy and hold option is the Vanguard MSCI Index International Shares ETF.

This ETF gives investors exposure to approximately 1,500 of the world’s largest listed companies from major developed countries.

Vanguard highlights that investing internationally offers greater access to sectors such as technology and health care that aren’t as well represented in the Australian share market. Among the ETF’s largest holdings are giants from numerous industries such as Apple, Johnson & Johnson, JP Morgan, Nestle, and Visa.

The post Buy and hold these ASX ETFs until 2034 appeared first on The Motley Fool Australia.

More reading

• Top ASX shares to buy in June and hold for retirement
• Is the Vanguard MSCI Index International Shares ETF (VGS) a better buy for beginner investors or retirees?
• 1 highly diversified ASX AI share to buy now
• Buying ASX shares, rentvesting and co-ownership: How young Australians are achieving home ownership
• 5 ASX ETFs that could be great long-term buys

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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 Accenture Plc, Alphabet, Apple, BetaShares Global Cybersecurity ETF, Cisco Systems, Costco Wholesale, CrowdStrike, JPMorgan Chase, Palo Alto Networks, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Johnson & Johnson and Nestlé and has recommended the following options: long January 2025 $290 calls on Accenture Plc and short January 2025 $310 calls on Accenture Plc. The Motley Fool Australia has positions in and has recommended BetaShares Global Cybersecurity ETF. The Motley Fool Australia has recommended Alphabet, Apple, CrowdStrike, 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.

The share market has historically delivered investors a return of 10% per annum.

While this is a great return, there are some ASX shares that have been tipped to rise significantly more than this over the next 12 months.

Let’s take a look at three ASX shares that analysts believe have market-beating potential:

Arcadium Lithium (ASX: LTM)

If you’re looking for exposure to the beaten down lithium industry then it could be worth checking out Arcadium Lithium.

That’s the view of analysts at Bell Potter, which see significant value in the lithium giant’s shares at current levels. It said:

LTM provides the largest, most diversified exposure to lithium in terms of mode of upstream production, asset locations, downstream processing and customer markets. It is a key large-cap leverage to lithium prices and sentiment, which we expect to improve over the medium term. The group has a strong balance sheet and growth portfolio.

Bell Potter has a buy rating and $9.50 price target on the ASX share. This implies potential upside of almost 50% for investors from current levels.

IDP Education Ltd (ASX: IEL)

Goldman Sachs is sticking with this language testing and student placement company after a disappointing trading update last week.

While it expects another tough year in FY 2025, it believes IDP Education’s growth will resume the following year. In light of this, it thinks that now could be the time for patient investors to load up. It said:

IEL remains well placed to capitalise as conditions normalise into FY26E, with IEL selectively investing for growth while SP competitors come under significant pressure. In our view the regulatory headwinds are cyclical, while structural SP growth can resume off the FY25E baseline.

Goldman has a buy rating and $21.75 price target on its shares. This suggests that upside of 42% is possible for investors over the next 12 months.

Universal Store Holdings Ltd (ASX: UNI)

A third ASX share that could be destined to deliver big returns is youth fashion retailer Universal Store.

Morgans is a big fan of the company and believes it has a very positive long term growth outlook. It said:

Our positive view about the fundamental long-term appeal of Universal Store as a retail proposition and investment opportunity is undiminished. The growth opportunities are in place. Universal Store’s women’s banner Perfect Stranger is performing well, justifying an acceleration in its network expansion; the prospect of building out the wholesale distribution channels acquired with CTC is compelling; and customers continue to respond well to the Universal Store banner, rendering its plan to grow this network to more than 100 stores more than reasonable.

Morgans has an add rating and $6.50 price target on its shares. This implies potential upside of 27% for investors between now and this time next year.

The post These ASX shares could rise 25% to 50% appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Brokers name 3 ASX shares to buy now
• Why IDP Education, Novonix, PYC, and Regis Resources share are racing higher
• Goldman Sachs names 2 ASX 200 shares to buy now
• Why Core Lithium, IDP Education, Seek, and Skycity shares are sinking today

Motley Fool contributor James Mickleboro has positions in Universal Store. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Idp Education. 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.

Got $10,000 in savings and looking to turn that into a $1,900 annual passive income stream?

That may sound like a lofty goal. But it’s quite achievable if you invest in the right basket of ASX dividend shares.

Now to get $1,900 a year in extra income from an initial $10,000 investment implies a 19% dividend yield. So, barring a stroke of excellent good fortune, you’re unlikely to achieve that in year one.

But by tapping into the power of compounding you could be enjoying that passive income landing in your bank account sooner than you may think.

Below, we’ll look at three top ASX dividend stocks you might wish to consider. But do keep in mind that a properly diversified portfolio will hold more than just three stocks. While there’s no magic number, 10 is a decent yardstick. That will help to lower the overall risk of your ASX dividend portfolio.

Also, remember that the yields you generally see quoted are trailing yields. Future yields may be higher or lower, depending on a range of company-specific and macroeconomic factors.

With that said…

Three ASX dividend stocks for passive income

The first company I’d buy for passive income is the S&P/ASX 200 Index (ASX: XJO) bank stock Australia and New Zealand Banking Group Ltd (ASX: ANZ).

ANZ paid a partly franked final dividend of 94 cents per share on 22 December and will pay the interim dividend of 83 cents per share on 1 July. The ASX 200 bank stock traded ex-dividend on 13 May, so we’re a bit late to score that payout.

With a full-year payout of $1.77 a share, ANZ trades on a partly franked trailing yield of 6.1% at Friday’s closing price of $29.18. The ANZ share price is up 28% in 12 months.

The second company I’d buy for passive income is ASX coal stock Yancoal Australia Ltd (ASX: YAL).

Over the past 12 months, Yancoal has paid two fully franked dividends, totalling 69.5 cents a share. At Friday’s closing price of $6.27 a share, Yancoal trades on a fully franked trailing yield of 11.1%. The Yancoal share price is up 39% in 12 months.

And the third dividend stock I’d buy for passive income is ASX 200 mining giant Fortescue Metals Group Ltd (ASX: FMG).

Fortescue shares delivered a fully franked final dividend of $1.00 a share on 28 September and an interim dividend of $1.08 a share on 27 March for a 12-month payout of $2.08 a share.

At Friday’s closing price of $24.37, Fortescue shares trade on a fully franked trailing yield of 8.5%. The Fortescue share price is up 21% in 12 months.

So, how long will it take before we can sit back and enjoy $1,900 a year in passive income without touching or initial capital investment?

To the maths!

Assuming you buy an equal number of each of these three ASX dividend stocks, you could expect to earn a yield of 8.6%.

That would see your $10,000 of invested savings return $860 a year in passive income. Or slightly less than half our goal of $1,900.

With an 8.6% yield, you’ll need to build that investment up to $22,093 before you can withdraw $1,900 a year without drawing down that capital.

Which means you’ll need to be a bit patient and reinvest those dividends at first.

Now atop the dividends, I’d also expect Fortescue, Yancoal and ANZ to continue to deliver share price gains over time. However, I wouldn’t expect them to deliver the same kinds of outsized gains they have over the past 12 months. But I think that an accumulated annual gain (dividends plus share price appreciation) of 10% is realistic, if not conservative.

Tapping into the power of compound interest, that would see your initial $10,000 in savings grow to $22,182 in eight years.

Then, you can sit back and enjoy an extra $1,907 in annual passive income.

The post How to earn $1,900 in passive income with just $10,000 in savings appeared first on The Motley Fool Australia.

More reading

• Fortescue shares rally amid claims of green tech theft
• Guess which ASX All Ords stock has rocketed 37% in a year AND pays an 11% dividend yield!
• Should you buy the 3 highest-yielding dividend shares in the ASX 200?
• Why this top broker says ANZ shares can deliver 10%+ returns in FY25
• Are ASX 200 bank shares a good investment right now?

Motley Fool contributor Bernd Struben 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.

There are a lot of ASX dividend shares to choose from on the local market.

But which ones could be top buys this month? Let’s take a look at four that analysts are recommending:

APA Group (ASX: APA)

The first ASX dividend share that has been tipped as a buy is APA Group. It is an energy infrastructure business that owns and operates a $27 billion portfolio of gas, electricity, solar and wind assets.

Macquarie is bullish on the company and has an outperform rating and $9.40 price target on its shares.

As for dividends, the broker is forecasting dividends of 56 cents per share in FY 2024 and 57.5 cents per share in FY 2025. Based on the current APA Group share price of $8.58, this equates to 6.5% and 6.7% dividend yields, respectively.

Aurizon Holdings Ltd (ASX: AZJ)

Another ASX dividend share that has been given the thumbs up is Aurizon. It transports a range of commodities across its vast rail network to customers across Australia.

Ord Minnett rates the company highly and has an accumulate rating and $4.70 price target on its shares.

In respect to income, the broker is forecasting partially franked dividends of 18.6 cents per share in FY 2024 and then 24.4 cents per share in FY 2025. Based on the current Aurizon share price of $3.77, this will mean dividend yields of 4.9% and 6.5%, respectively.

Coles Group Ltd (ASX: COL)

Analysts at Morgans think that Coles could be an ASX dividend share to buy right now.

The broker currently has an add rating and $18.70 price target on its shares.

As well as decent upside, the broker is forecasting some attractive yields. It expects fully franked dividends of 66 cents per share in FY 2024 and then 69 cents per share in FY 2025. Based on the current Coles share price of $16.98, this implies yields of approximately 3.9% and 4%, respectively.

Dexus Convenience Retail REIT (ASX: DXC)

A fourth ASX dividend share that analysts are tipping as a buy is Dexus Convenience Retail REIT. It owns a portfolio of service station and convenience retail assets across Australia.

Morgans is also positive about this one and has an add rating and $3.23 price target on its shares.

As for dividends, the broker is forecasting dividends per share of 21 cents in both FY 2024 and FY 2025. Based on its current share price of $2.68, this implies yields of 7.8%.

The post 4 top quality ASX dividend shares to buy in June appeared first on The Motley Fool Australia.

More reading

• 3 of the best ASX blue chip shares to buy in June
• 3 lower-risk ASX dividend shares for retirees
• Buy these ASX 200 dividend stocks in June for an income boost
• With 6%+ yields, here are 2 ASX dividend shares to consider buying now
• Bell Potter names the best ASX shares to buy in June

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 Macquarie Group. The Motley Fool Australia has positions in and has recommended Apa Group, Coles Group, and Macquarie Group. The Motley Fool Australia has recommended Aurizon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

There was a time when buying CSL Ltd (ASX: CSL) shares meant buying into a healthcare company that always seemed to be rising in value.

To illustrate, CSL shares first hit $100 each back in 2015. By 2018, they were at $200 and by early 2020, they’d hit $300.

But ever since the pandemic took hold in March 2020, the CSL share price has been stuck in the mud. Today, this ASX 200 healthcare stock is trading at just under $289 a share, the same price the company was asking four Junes ago.

Put another way, since early 2020, there has only been CSl’s rather miserly 1.13% dividend yield (at today’s pricing anyway) to keep investors company as they waited in vain for some capital growth.

Back in October last year, CSL even got back down to below $230 a share (albeit briefly). Check this all out for yourself below:

But perhaps investors won’t have to wait too much longer to see CSL break out of its four-year funk. That’s the view of one ASX expert, anyway.

ASX expert says $500 CSL shares are “absolutely” possible

As reported in the Australian Financial Review (AFR) last week, Roy Hunter, portfolio manager of the SG Hiscock Medical Technology Fund, is exceptionally bullish on CSL. When asked if CSL could get to $500 a share in the next few years, Hunter responded, “Absolutely”.

Here’s some more of what Hunter had to say on this ASX 200 healthcare giant’s shares:

…I think it’s a fool’s errand to bet against the ongoing success of a company like CSL. Its core plasma business looks set to deliver strong growth and margin expansion over the next few years.

However, the FY24 result will be an important determinant of whether the share price hits $500 within a three-year time frame.

The pressure that CSL shares have been under over recent years has arguably stemmed from its previously sky-high earnings multiple, and the growth rates that ASX investors anticipate the ~$140 billion company will be able to maintain going forward.

To illustrate, despite CSL’s share price stagnation over the past four years, the company still trades on a lofty price-to-earnings (P/E) ratio of 37.6 today.

Hunter addressed these concerns as well:

The market is getting somewhat impatient and questions will start to be asked about whether the company has entered a phase of structurally lower growth, in which case you will see some valuation headwinds.

The stock needs to see valuation multiple expansion to reach this target, and it will only be rewarded by the market if you see an acceleration of growth and margin expansion.

So, reading between the lines here, Hunter seems to be arguing that CSL shares could indeed hit $500 over the next few years. But to do so, a lot has to go right for the company.

Let’s see what happens after CSL’s next earnings report, which is due later this winter on 13 August.

The post CSL shares can ‘absolutely’ head to $500: ASX expert appeared first on The Motley Fool Australia.

More reading

• 3 of the highest quality ASX shares to buy for a retirement portfolio
• Are these 2 ASX healthcare shares the best that money can buy?
• Could the CSL share price end 2024 above $300?
• How much passive income would a $10,000 investment in CSL shares generate?
• How you could retire rich by investing like Warren Buffett with ASX shares

Motley Fool contributor Sebastian Bowen has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Having some ASX blue chip shares in your investment portfolio is always a good thing.

But which ones could be great options for investors in June?

Let’s look at three that brokers rate very highly right now:

Coles Group Ltd (ASX: COL)

Analysts at Bell Potter think that supermarket giant Coles would be a great blue chip share to buy. Particularly given recent investments to strengthen its market position. It said:

Costs are expected to remain elevated but should moderate through FY24 and FY25 as general inflation tapers off. In the medium term, 1) higher immigration should support grocery spending, and 2) Coles is entering a period of elevated capex intensity as it reinvests to modernise its supply chain and to catch up to competitors on online and digital offerings, which should help Coles maintain its market position.

Bell Potter has a buy rating and $19.00 price target on Coles’ shares.

Qantas Airways Limited (ASX: QAN)

Goldman Sachs sees Qantas as a top ASX blue chip share to buy right now. The broker believes its shares are undervalued based on its structurally stronger earnings and in comparison to global airline peers. It explains:

QAN is trading 4% below pre-COVID market capitalization with the enterprise value still 7% lower despite a structurally improved earnings capacity. Relative to regional/ US peers (median PE of 9.1x), QAN is trading on a 29% discount at 6.4x FY25 PE. This is more than 2x below the historical 5Y average discount of 14%. We expect this gap to narrow as QAN delivers earnings that are sustainably above pre-COVID levels and demonstrates ability/ willingness to distribute capital to shareholders while renewing the fleet.

Its analysts have a conviction buy rating and $8.05 price target on its shares.

Washington H Soul Pattinson & Company Ltd (ASX: SOL)

This investment house could be a great ASX blue chip share to buy according to analysts at Morgans. The broker highlights its track record of strong returns and appears to believe this can continue in the future. It said:

SOL’s investment portfolio includes a diversified pool of assets ranging from listed equities (both large cap and emerging companies), private equity, property and structured yield. On a 20-year horizon, SOL’s annualised TSR is 12.5% vs the All Ords accumulation index of 9%. SOL has a 20-year history of increased dividend distributions, with a 20-year CAGR of c.8%. In our view, SOL’s management team continues to deliver both organic and inorganic growth over the long term. We continue to like the SOL story, particularly its track record of growing distributions.

Morgans has an add rating and $35.60 price target on its shares.

The post 3 of the best ASX blue chip shares to buy in June appeared first on The Motley Fool Australia.

More reading

• Top ASX shares to buy in June and hold for retirement
• Here’s where I see the Qantas share price ending in FY 2025
• Why I’d back up the truck on Soul Patts shares right now
• Bell Potter names the best ASX shares to buy in June
• Here are the top 10 ASX 200 shares today

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

When it comes to investing, few names command as much respect and admiration as Warren Buffett.

Known as the Oracle of Omaha, Buffett’s investment philosophy centres around value investing, seeking out companies with strong fundamentals, competitive advantages, and capable management teams.

His phenomenal performance over 50 years speaks for itself.

Curious about what Warren Buffett looks for when selecting companies to invest in? I’ve done the research for you and found some ASX companies that could meet his investment criteria.

Before jumping in, though, a reminder that this is just the first step of the screening process for idea generation purposes. Please remember to do further research before investing your hard-earned money.

What did Warren Buffett say?

Buffett is known as a value investor, but he really doesn’t differentiate value investing from growth investing so much. For him, investing is one process where he allocates his capital to excellent companies selling at reasonable valuations.

Buffett had this to say in his early investment letters:

Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now.

In determining great businesses, he famously uses the return on capital employed (ROCE) measure. While here he meant ROCE in a true sense — meaning without undue leverage, accounting gimmickry etc — for simplicity, I will just use the reported return on equity (ROE) from the companies.

Based on the above, I’ve used the following criteria:

• Price-to-earnings (P/E) ratio of below 15x using FY24 earnings estimates from S&P Capital IQ
• Reported ROE of 15% or higher
• Simple business model that even I can understand how they make money

Now, here’s the list of three companies that came out of this basic screening process.

BHP Group Ltd (ASX: BHP)

Let’s start with a major ASX company that many of us are familiar with: BHP. The mining giant makes its money from producing and selling copper, iron ore, coal and other basic resources across the globe.

While BHP has to endure the cyclical nature of the commodities it mines, the miner is most likely to generate higher revenues and profits in a couple of decades from today.

Based on its financials for the 12 months ending December 2023, BHP boasts an ROE of 19%. Although its ROE tends to fluctuate between single digits and north of 40% throughout the commodities cycle, on average, it generates double-digit ROE.

The BHP share price is traded at just about 11 times based on its FY24 earnings estimates.

Nick Scali Ltd (ASX: NCK)

Next up is furniture maker Nick Scali selling through its Nick Scali and Plush brands.

The company has provided high-quality lounges and other furniture to Australians over decades, and now it is ready to expand its markets to the bigger UK market by acquiring Fabb Furniture.

Although there’s nothing too sexy about selling furniture, one of Warren Buffett’s famous investments in the past was in Nebraska Furniture Mart, founded in 1937 by a Russian immigrant, Rose Blumkin. Certainly, he doesn’t mind boring businesses.

Nick Scali has an astonishing ROE history, hovering around 50%, and the company is trading at a forward P/E ratio of 14 times on FY24 estimates by S&P Cap IQ.

Super Retail Group Ltd (ASX: SUL)

Last on my list is Super Retail Group, a retailer behind popular chains like Super Cheap Auto, Macpac, Rebel and BCF.

As my colleague Sebastian pointed out, its business tends to cope better with economic cycles than other consumer discretionary companies.

Super Retail Group has grown its earnings per share from 70 cents in FY19 to $1.15 in FY23. Even in the challenging business environment, the company reported a solid half-year result, increasing half-year revenues by 3.2%.

Over the last ten years, its ROE has moved between 8% and 27%. According to its half-year FY24 report, it is standing at approximately 20%.

The Super Retail Group shares are trading at a forward P/E ratio of 13 times.

The post 3 ASX stocks Warren Buffett could buy today appeared first on The Motley Fool Australia.

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Motley Fool contributor Kate Lee has positions in Nick Scali. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Super Retail Group. The Motley Fool Australia has positions in and has recommended Super Retail Group. The Motley Fool Australia has recommended Nick Scali. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Rural Funds Group (ASX: RFF) is an ASX dividend stock that everyone should pay attention to, in my opinion. It’s one ASX share I have bought myself recently and plan to hold forever.

The farmland real estate investment trust (REIT) is unique on the ASX. There are plenty of operating agriculture companies, but their profit and performance can often be quite volatile. Rural Funds can provide a higher level of stability because its underlying earnings are based on consistent rental income rather than variable commodity-linked revenue.

Why it looks like a buy now

Every business has an underlying balance sheet value, which can be measured with the net asset value (NAV) metric. This is a net total of the assets minus the liabilities.

Every result, Rural Funds tells investors what its adjusted NAV is, which includes the market value of its water entitlements (rather than at cost).

Rural Funds disclosed that its adjusted NAV on 31 December 2023 was $3.07 per unit, which was up around 5% from 30 June 2023, primarily due to the asset revaluations.

At the current Rural Funds share price, it’s at a discount of around 33% to the December 2023 NAV. I think that’s a compelling discount.

It’s challenging to say precisely how much the ASX dividend stocks’ farms are worth without Rural Funds going through a sales process, but another way to judge it would be to look at the distribution yield.

The business currently pays an annual distribution of 11.73 cents per unit, which translates into a distribution yield of 5.8%. I think that’s a solid starting point for the passive income.

Why I’d hold Rural Funds shares forever

Farmland has been a valuable asset for many centuries, if not thousands of years. I believe it will continue to be a useful asset for a long time to come, so I’m comfortable with the idea of owning Rural Funds shares for the rest of my life.

The business has rental growth built into its contracts, with some contracts linked to CPI inflation and others having a fixed annual increase. This can help drive rental income higher over time, offsetting the higher cost of debt and hopefully helping fund larger distributions in future years.

Another tailwind for the business is that the Australian and global population continues climbing, which should be a helpful tailwind for food demand, which can help increase the underlying value for Rural Funds’ farms.

Overall, I think this ASX dividend stock is a solid candidate to own for the ultra-long term.

The post 1 incredible ASX dividend stock to buy now and hold forever appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Rural Funds Group. 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 positions in and has recommended Rural Funds Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.