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New Hope Corporation Ltd (ASX: NHC) shares could be in danger of crashing deep into the red.

That’s the view of analysts at Goldman Sachs, which are feeling very bearish about the ASX 200 mining giant.

What is the broker saying about this ASX 200 mining giant?

Goldman has been busy running the rule over the coal miner’s recent quarterly update.

In case you missed it, for the three months ended 30 April, New Hope delivered a 28% quarter on quarter increase in ROM coal production to 3,665,000 tonnes. This was driven by a 23% increase in Bengalla production to 2,955,000 tonnes and a 55% jump in New Acland production to 710,000 tonnes.

The ASX 200 mining giant also delivered the goods with its sales volumes. It reported a 21% quarter on quarter increase in coal sold to 2,358,000 tonnes. This was achieved with an average realised sales price of $179.78 per tonne, which was flat on the previous quarter.

Goldman was relatively satisfied with the company’s update. It commented:

NHC reported 3Q24 total saleable coal production and sales of 2.5Mt/2.4Mt, +21% QoQ (+5%/-6% vs. GSe) with the ongoing ramp-up of the Bengalla and the New Acland mines running slightly ahead of schedule. EBITDA for the April Q was A$219mn, broadly in-line with 50% of our ~A$400mn estimate for the 2H (end of July).

NHC finished the quarter with net cash of ~A$381m (incl. leases and cash held in fixed income assets), down only slightly from ~A$400m at end of Jan, and post the payment of the A$144mn interim dividend and A$80mn further investment in Malabar Resources.

However, it hasn’t been enough to change its bearish view on the ASX 200 mining giant.

Goldman remains bearish

According to the note, the broker has responded to the update by retaining its sell rating with an improved price target of $3.60 (from $3.50).

Based on the current New Hope share price of $5.08, this implies potential downside of just under 30% for investors over the next 12 months.

The broker named two reasons why it is bearish on this ASX 200 mining giant. One is its valuation, the other is its belief that the thermal coal market will soon soften. It explains:

[W]e rate NHC a Sell based on: 1. Valuation & FCF: The stock is trading at ~1.35x NAV (A$3.67/sh) and discounting a long-run thermal coal price of ~US$100/t (real) vs. our US$83/t estimate (based on our view of long run global marginal costs). NHC is also trading on a NTM EBITDA multiple of ~5x vs. global coal peers on ~4.5x (median). We note that FCF yield is -3%/10% in FY24/25 on our ~US$132/113/t thermal coal price assumptions, and -2%/17% at spot thermal (both include benefits from hedging). 2. Thermal Coal market to soften further in 2024: our global commodity team forecasts a ~40Mt surplus for 2024 due to decreasing global import demand, largely driven by a weakening in China hoarding demand (-80Mt) and high inventory levels, and growing export capacity (+50Mt) from Indonesia, Australia and Russia, and we expect marginal costs to fall to US$100/t in 2024. We forecast US$130/t for 6000kcal NEWC benchmark in 2024.

The post Guess which ASX 200 mining giant could crash 30% appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• Why did this ASX 200 mining stock jump 7%?
• Why Gentrack, New Hope, Nuix, and Star Entertainment shares are charging higher
• Own Xero shares? Here’s what to expect from next week’s results

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. 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.

The ASX dividend giant Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) appeals to me much more than Westpac Banking Corp (ASX: WBC) shares.

Both businesses are more than 120 years old and have provided investors with long-term dividend streams. Soul Patts has paid a dividend annually since it was listed in 1903.

Westpac is one of the largest ASX bank shares, while Soul Patts is a diversified investment conglomerate.

There are three key reasons why I’ve chosen the investment business for my portfolio over Westpac shares.

Dividend growth

Westpac currently has a higher dividend yield, with a trailing grossed-up yield of 6.6%, compared to the Soul Patts grossed-up dividend yield of 4%.

However, in the long term, Soul Patts has been much more successful at growing its dividend.

The last two dividends (91 cents per share) from Soul Patts are almost double what was paid in 2013 (46 cents per share).

Westpac’s last two dividends ($1.62 per share) are 16.5% lower than what the ASX bank share paid in 2013 ($1.94 per share).

I believe Soul Patts’ asset base gives it more scope to deliver growth over time.  

Earnings diversification

Westpac largely makes its profit by lending to households and businesses in Australia and New Zealand, which doesn’t offer much earnings diversification. So, Westpac shares are very reliant on the bank’s loan book.

Soul Patts is invested in numerous industries and ASX shares, it has the flexibility to invest wherever it sees opportunities. Some of its biggest industry exposures include resources, telecommunications, building products, property, financial services, agriculture, electronics, and electrical parts. These investments generate profit and pay dividends for Soul Patts.

Some of the biggest positions in its ASX portfolio include TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Ltd (ASX: NHC), Tuas Ltd (ASX: TUA) and Macquarie Group Ltd (ASX: MQG).

Over time, Soul Patts’ portfolio can continue to grow and generate further cash flow to fund bigger dividends.

Dividend stability

If I invest in a stock for passive income, I’d like to know that the dividend will likely keep flowing even in a recession. That’s likely when I would need the cash flow the most!

Ignoring the one-off year of 2020, which was heavily impacted by the pandemic, Westpac saw its 2021 annual dividend decrease by approximately a third compared to the 2019 annual dividend. The 2023 dividend was 18% lower than 2019.

Meanwhile, Soul Patts has grown its annual ordinary dividend every year since 2000 – it kept rising during the COVID-19 years.

Soul Patts’ dividend isn’t guaranteed to keep growing, but it’s invested in a portfolio of primarily defensive assets, which offers security. The investment house usually retains some of its annual cash flow each year to invest in more opportunities to help grow its dividend in future years.

The post An ASX dividend giant I’d buy over Westpac shares right now appeared first on The Motley Fool Australia.

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• Here’s when Westpac says the RBA will cut interest rates
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• With $1,000 to invest, should I buy ASX growth stocks or income shares?

Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, Macquarie Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks, Macquarie 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.

Sometimes it can be tempting to invest in a speculative stock promising the world.

However, unfortunately for investors, more often than not, these type of ASX shares fail to deliver on expectations and destroy wealth instead of creating it.

At the same time, investors keeping it simple and focusing on defensive ASX shares with stable and strong business models are slowly getting rich with limited effort.

But which ASX shares could deliver the goods for investors in this way? Let’s take a look at a couple that are reliable and defensive.

CSL Ltd (ASX: CSL)

This biotechnology giant could be a quality option for investors. It has delivered market-beating returns over the past decade thanks to the strength of its business, its investment in research and development, and increasing demand for immunoglobulins.

And thanks to a rare period of underperformance for its shares, analysts at Morgans believe now is a great time for investors to invest in CSL. They commented:

While shares have struggled of late, we continue to view CSL as a key portfolio holding and sector pick, offering double-digit recovery in earnings growth as plasma collections increase, new products get approved and influenza vaccine uptake increases around ongoing concerns about respiratory viruses, with shares trading at 25x, a substantial discount (20%) to its long-term average.

Morgans currently has an add rating and a $315.40 price target on the company’s shares.

REA Group Limited (ASX: REA)

Over at Goldman Sachs, its analysts believe that REA Group could be a high quality ASX share to buy now.

REA Group is the leading player in Australian real estate listings through its dominant realestate.com.au website. It is thanks to this market leadership position that Goldman is so positive on its outlook. It highlights REA Group’s pricing power and opportunity in lead generation. It explains:

We believe REA Group, a leading real estate classified business with strong market positions across Australia, Asia and the United States, has one of the best risk/reward profiles in our domestic media coverage. In particular, we are positive on the pricing power of the real estate classified vertical, given that we believe budgets will rise (at the expense of commissions), and within existing budgets, REA, as a leading player in the vertical, under-monetises its lead generation. We also see the current negative sentiment around AU property as more a driver of share prices over earnings.

We believe REA is among the highest-quality names in our coverage, given it has the highest ability to continue to drive pricing, with: (1) significant disparity between lead share and revenue share; (2) the lowest cost relative to overall vertical transaction; (3) a profitable and still fragmented end market; and (4) the existence of Vendor Paid advertising, with strong valuation support with current trading multiples in-line with historical levels.

Goldman has a buy rating and $202 price target on its shares.

The post Don’t get clever, just buy stability: 2 defensive ASX shares to buy now appeared first on The Motley Fool Australia.

More reading

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• Buy, hold or sell these 3 ASX 200 healthcare shares: Experts
• Here are the top 10 ASX 200 shares today

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

Coles Group Ltd (ASX: COL) shares are a popular investment on the ASX. That’s understandable. After all, Coles is one of the most prominent businesses in the country, given that it runs the nation’s second-largest network of supermarket grocery stores.

Coles is, in my view, a relatively defensive company. It has a durable earnings base and a solid and reliable dividend track record. Despite this, the Coles share price has displayed significant volatility since it was listed on the ASX in its own right back in late 2018.

To illustrate, Coles shares have traded between $12.50 and $19 over the past five years. Today, the company is priced smack bang in the middle of this range. At the close of trading on Wednesday, it was asking $16.11 a share.

Take a look at all this for yourself here:

As we’ve covered before here at the Fool, I find Coles appealing for a number of reasons. This stock’s dividend track record, as well as its defensive nature, are two things I tend to look for in an ASX share.

But finding a quality company is only half the investment process. As the late great Charlie Munger once said, “No matter how wonderful a business is, it’s not worth an infinite price.”

So, what price would I be happy to buy Coles shares at today?

What price would make me buy Coles shares?

Well, when it comes to a dividend payer like Coles, I like to gauge an investing case by using the dividend yield. As any good investor knows, a company’s dividend yield has an inverse relationship with its share price.

Because of this relationship, in Coles’ case, we can use the dividend yield to determine what has historically been a good investment price.

Right now, Coles has a dividend yield of 4.1%, which includes full franking credits. That’s not bad, given that the company was trading at a yield of just 3.53% last June when it was at its last 52-week high of $18.70.

However, it’s not quite at a level where I’d be happy to buy. Coles’ current 52-week low is $14.82, which was hit back in October last year. At this price, Coles’ dividend yield would have been as high as 4.45%.

Now, I’m not waiting for Coles to get back to those levels. But I would become very interested if the company reached around $15 a share. At that price, investors could expect a dividend yield of around 4.4%.

Now, $15 might seem a long way from the current Coles stock price. But given this company’s volatile past, I wouldn’t be surprised to see it get back there at some point in the next year or two. And if it does, I might just have to buy some shares and hopefully secure a 4.4% dividend yield for my portfolio.

The post Here’s the Coles share price I would buy at appeared first on The Motley Fool Australia.

More reading

• Broker says these ASX dividend shares are top buys
• 4 ASX income stocks to buy for 4% to 8% dividend yields
• Top ASX dividend shares to buy in May 2024
• 2 of the best ASX 200 blue-chip shares to buy in May
• Why Goldman Sachs just upgraded Coles shares

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

The good news for income investors is that there are a large number of ASX dividend shares to choose from on the Australian share market.

The hardest part can be deciding which ones to buy over others.

But don’t worry, analysts have done all the hard work for you and picked out three shares that they think could be in the buy zone now. They are follows:

Deterra Royalties Ltd (ASX: DRR)

Deterra Royalties could be a good option for income investors that are not averse to investing in the mining sector.

Although the company doesn’t do any mining itself, it reaps the rewards of others doing so. This is because it receives royalties from a range of operations. This includes the key asset in its portfolio – the Mining Area C iron ore operation in the Pilbara region of Western Australia.

Morgan Stanley believes that plenty of cash will be flowing into its bank accounts in the near term. So much so, it is forecasting bumper fully franked dividends per share of 32.7 cents in FY 2024 and 39 cents in FY 2025. Based on the current Deterra Royalties share price of $4.83, this will mean dividend yields of 6.75% and 8.1%, respectively.

Morgan Stanley has an overweight rating and $5.60 price target on its shares.

IPH Ltd (ASX: IPH)

Another ASX dividend share that has been given the thumbs up by analysts is intellectual property solutions company, IPH.

Goldman Sachs is the broker recommending the company. It is positive due to its belief that IPH is “well-placed to deliver consistent and defensive earnings with modest overall organic growth.”

The broker is expecting this to underpin fully franked dividends per share of 34 cents in FY 2024 and 37 cents in FY 2025. Based on the current IPH share price of $6.19, this represents yields of 5.5% and 6%, respectively.

Goldman currently has a buy rating and $8.70 price target on IPH’s shares.

NIB Holdings Limited (ASX: NHF)

Another ASX dividend share that gets the seal of approval from analysts at Goldman Sachs is private health insurance giant NIB.

Goldman notes that NIB “offers defensive exposure to the private health insurance sector which is experiencing favourable operating trends.”

It expects this to put the company in a position to pay fully franked dividends per share of 31 cents in FY 2024 and 30 cents in FY 2025. Based on the current NIB share price of $7.05, this would mean 4.4% and 4.25% yields, respectively.

Goldman currently has a buy rating and $8.10 price target on the company’s shares.

The post Brokers say these ASX dividend shares are top buys now appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Buy these ASX dividend stocks for a passive income boost
• 3 ASX 200 dividend stocks for investors to buy
• Buy Rio Tinto and these ASX 200 dividend shares
• 3 bargain Australian shares with over 5% dividend yields

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. The Motley Fool Australia has positions in and has recommended NIB Holdings. The Motley Fool Australia has recommended IPH. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

On Wednesday, the S&P/ASX 200 Index (ASX: XJO) had a subdued session and ended the day a fraction lower. The benchmark index fell 3.5 points to 7,848.1 points.

Will the market be able to bounce back from this on Thursday? Here are five things to watch:

ASX 200 expected to fall

The Australian share market looks set for a tough session on Thursday following a poor night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 54 points or 0.7% lower this morning. In the United States, the Dow Jones was down 0.5%, the S&P 500 fell 0.3%, and the Nasdaq dropped 0.2%.

BHP makes third offer for Anglo American

BHP Group Ltd (ASX: BHP) shares will be in focus on Thursday after the mining giant confirmed that it has made a third offer for Anglo American plc (LSE: AAL). However, despite bumping its offer nicely for the copper miner, BHP has once again had its proposal rejected. Anglo American said: “The Board considered BHP’s Latest Proposal carefully, concluded it does not meet expectations of value delivered to Anglo American’s shareholders, and has unanimously rejected it.” In response to the news, BHP shares ended the day 4.5% lower on Wall Street.

Oil prices drop

It looks set to be a disappointing session for ASX 200 energy shares including Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) after oil prices tumbled overnight. According to Bloomberg, the WTI crude oil price is down 1.7% to US$77.32 a barrel and the Brent crude oil price is down 1.5% to US$81.67 a barrel. Oil prices are on track for a third consecutive decline.

Xero FY 2024 results

The Xero Ltd (ASX: XRO) share price will be one to watch today when the cloud accounting platform provider releases its FY 2024 results. Goldman Sachs has pencilled in a 22% increase in revenue to NZ$1,709 million. This is a touch ahead of the consensus estimate of NZ$1,696 million. Goldman also expects Xero’s earnings to grow quicker than the market is expecting. It is forecasting EBITDA of NZ$480 million for FY 2024. This represents a 59% increase on the prior corresponding period and is ahead of the consensus estimate of NZ$469 million.

Gold price tumbles

It looks set to be a tough session for ASX 200 gold miners Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) after the gold price tumbled overnight. According to CNBC, the spot gold price is down 1.85% to US$2,381 an ounce. This was reportedly driven by profit taking from traders after some strong gains recently.

The post 5 things to watch on the ASX 200 on Thursday appeared first on The Motley Fool Australia.

More reading

• Why this ASX 200 gold stock is ‘the BHP of gold mining’
• BHP shares on watch after new $74b Anglo American takeover offer rejected
• Here are the top 10 ASX 200 shares today
• These 2 ASX shares could win big time in the long term
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has positions in Woodside Energy Group and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Over the last 12 months, the Australian share market has been a relatively strong performer.

During this time, the benchmark index has risen by 8%.

While this is positive, there are plenty of exchange-traded funds (ETFs) that have delivered stronger returns.

For example, three ASX ETFs that have achieved this are listed below. Here’s what you need to know about them and why they could continue to outperform:

BetaShares Global Cybersecurity ETF (ASX: HACK)

The BetaShares Global Cybersecurity ETF has been on form over the last 12 months. During this time, the fund has smashed the market with a 33% return. Investors have been buying this ETF for exposure to the rapidly growing cybersecurity sector.

The good news is that the sector has been tipped to continue its meteoric growth long into the future. This is being underpinned by the shift to the cloud, artificial intelligence, and the increasing prevalence of cybercrime.

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

Betashares Global Uranium ETF (ASX: URNM)

Another ASX ETF that has smashed the market over the last 12 months has been the Betashares Global Uranium ETF. This fund has risen by an astonishing 95% since this time last year thanks to sky high uranium prices and optimism over nuclear power adoption as a clean energy.

And while this fund is unlikely to deliver such incredible returns again over the next 12 months, it appears well-placed to continue being a market-beater. This is because uranium demand is increasing at a time when supply is tightening. This has many believing that uranium prices are only going higher from here over the coming years.

Included in the fund are locally listed uranium developers Boss Energy Ltd (ASX: BOE) and Paladin Energy Ltd (ASX: PDN).

VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO)

A third ASX ETF that has beaten the market over the past 12 months is the VanEck Vectors Video Gaming and eSports ETF. Over this time, the popular fund has generated a return of 25%.

Investors appear attracted to the growing video games and eSports markets. In respect to the former, there are estimated to be almost 3 billion active gamers globally.

And with these markets tipped to continue to grow over the next decade, this bodes well for the companies included in the fund. These are gaming industry titans such as Electronic Arts, Nintendo, Roblox, and Take-Two.

The post These market-beating ASX ETFs could be fantastic options in 2024 appeared first on The Motley Fool Australia.

More reading

• Buy these 4 ASX ETFs for income, growth, or mining exposure
• 3 excellent ASX ETFs I think are a buy right now
• How much money should I put in one ASX ETF?
• 5 excellent ASX ETFs to buy next week
• How to invest in uranium on the ASX

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, BetaShares Global Cybersecurity ETF, Cisco Systems, CrowdStrike, Palo Alto Networks, Roblox, and Take-Two Interactive Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Electronic Arts and Nintendo 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 Betashares Global Uranium Etf and CrowdStrike. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

S&P/ASX 200 Index (ASX: XJO) gold stock Newmont Corp (ASX: NEM) only began trading on the ASX on 27 October.

The United States-based gold mining giant was previously only listed on the New York Stock Exchange (NYSE).

But following Newmont’s successful acquisition of former ASX-listed gold miner Newcrest Mining, the company opted to dual list in the United States and Australia.

And having swallowed up Newcrest’s assets, Newmont’s market cap now stands at a whopping $76 billion.

That dwarfs the second biggest ASX 200 gold stock, Northern Star Resources Ltd (ASX: NST), which has a market cap of $16.8 billion.

Indeed, Newmont’s wide range of high-quality gold mines has Blake Henricks, portfolio manager at the Firetail Australian High Conviction Fund, labelling the company the “the BHP Group Ltd (ASX: BHP) of gold mining”.

Here’s why Henricks is bullish on Newmont shares.

A massively overlooked ASX 200 gold stock

The Firetail Australian High Conviction Fund recently increased its holdings of Newmont shares.

That’s despite, or perhaps because, the ASX 200 gold stock tumbled a painful 25% over the first two months of 2024.

“It was one of our biggest detractors over the last six months – and it’s fair to say the market has put Newmont in the sin bin,” Henricks said (quoted by The Australian Financial Review).

Commenting on Newmont’s performance on the NYSE, Henricks added, “Gold prices are up more than 20% in the past two years, and yet Newmont is down close to 30%. That’s a very large dislocation.”

Indeed, the gold price has had a strong run over the past two years, with the yellow metal really taking off at the end of February.

On 28 February, gold was trading for US$2,035 per ounce. At market close yesterday, that same ounce was trading for US$2,414. That sees bullion up almost 19% in just 10 weeks.

As you’d expect, this has been a boon for most ASX 200 gold stocks, with Newmont shares surging 43.72% since market close on 28 February.

And citing the comparison to BHP’s market dominance, Henricks believes there’s more outperformance to come from Newmont.

According to Henricks (courtesy of the AFR):

[Newmont] is the BHP of gold mining. They own more than half of the world’s tier one assets… this is the kind of business you want to buy. We believe the market’s massively overlooked [this stock].

In April, the ASX 200 gold stock reiterated its FY 2024 guidance.

Newmont expects to produce 6.9 million ounces of gold over the full year at an all-in sustaining cost (AISC) of US$1,400 per ounce.

The post Why this ASX 200 gold stock is ‘the BHP of gold mining’ appeared first on The Motley Fool Australia.

More reading

• ASX 200 gold stocks in focus as gold price smashes record highs
• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Thursday
• Why more ASX mining shares could soon turn to takeover bids

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.

Superannuation is the key asset for driving future prosperity for most Australians, according to research by Findex. Reaching $1 million in retirement may sound like a monumental task, but it is possible for many Australians.

Findex research showed that three in five (59%) Aussies believe they will need at least $750,000 in superannuation, including more than two in five (42%) who believe they will need at least $1 million.

Becoming a millionaire is an appealing target, so let’s consider how it can be done.

Superannuation contributions

Australia’s superannuation set-up is viewed as one of the best retirement systems in the world. One of the elements that makes it so strong is the mandatory contributions employees receive.

Generally, all workers should receive superannuation payments, regardless of whether someone earns $2,000 a year working part-time or $200,000 a year full-time from a high-paid salary.

In the current financial year (FY24), from 1 July 2023 to 30 June 2024, workers should receive superannuation payments equivalent to 11% of their earnings, according to the ATO. In FY25, for the year to 30 June 2025, the superannuation payment will increase to 11.50% of earnings. The superannuation payment will then rise to 12% of earnings in FY26.

Everyone earns different amounts, so I’ll use the average Australian’s earnings to illustrate the size of their superannuation contributions.

According to the Australian Bureau of Statistics (ABS), in November 2023, the average weekly total earnings for all employees was $1,431.10, or $74,417.20 annually, if we multiply that figure by 52 weeks. Full-time workers earned an average of $1,886.50 per week, but I will use the lower figure in my calculations.

Considering superannuation contributions will soon be 12% of earnings going forward, I’ll use that for my calculation.

Contributions equating to 12% of $74,417.20 result in an annual net amount of $7,591 after the 15% tax on contribution amounts.

Let’s look at how much those contributions can grow over the long term.  

Compounding

Albert Einstein once reportedly said that compounding is the “most powerful force in the universe. Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t pays it.”

Starting with an investment balance of $0, if someone’s net superannuation contributions were $7,591 a year to their retirement fund, and the fund generated returns of 9% per annum, it would become worth $1.03 million after 30 years. A 35-year-old could reach 65 with a very commendable nest egg.

Of course, there are many variables. For starters, I assumed a $0 starting balance – I expect most people reading this article have more than $0 in their superannuation fund.

The superannuation fund could produce more substantial returns than 9% per annum over time, particularly if the money is allocated to investments that could deliver stronger long-term returns, such as (international) shares rather than cash or bonds. Tax on superannuation earnings will have a negative effect, though it’s hard to calculate at this stage.

I haven’t accounted for any wage growth over that period, and plenty of full-time workers earn more than $74,400 annually.

However, I’ll also acknowledge that not everyone works full-time every year between the ages of 35 and 65, but the above example shows what can happen.

Foolish takeaway

I believe a full-time worker can reach $1 million in retirement, especially if they earn more than average or make additional superannuation contributions beyond the minimum required.

In my opinion, growth shares are the best asset for compounding wealth to a satisfying amount over the long term.

The post Can your superannuation deliver you a $1 million retirement? appeared first on The Motley Fool Australia.

More reading

• BHP shares on watch after new $74b Anglo American takeover offer rejected
• Here are the top 10 ASX 200 shares today
• 2 of the best ASX growth shares to buy right now
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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 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.

All eyes will be on BHP Group Ltd (ASX: BHP) shares on Thursday after the mining behemoth confirmed that it has made a third offer for Anglo American plc (LSE: AAL).

At the time of writing, the miner’s shares on Wall Street are down almost 4% on the news. This doesn’t bode well for things locally today.

Third offer

BHP advised that on 20 May it submitted an increased and final offer ratio to the Board of Directors of Anglo American.

It notes that the structure of the revised proposal remains the same as previous proposals and comprises an all-share offer for Anglo American. It will once again be subject to the pro-rata distribution by Anglo American of its entire shareholdings in Anglo American Platinum and Kumba Iron Ore to shareholders immediately before completion of the scheme of arrangement.

Under the terms of the revised proposal, BHP has offered:

• 0.8860 BHP shares for each ordinary Anglo American share, and
• Ordinary shares in Anglo Platinum and Kumba Iron Ore (which would be distributed by Anglo American to its shareholders in direct proportion to each shareholder’s effective interest in Anglo Platinum and Kumba)

This final offer ratio represents a total value of GBP31.11 (A$59.64) per Anglo American share or a total consideration of approximately A$74 billion.

It also represents an improvement on the original offer of 0.7097 BHP shares per Anglo American share, as well as its most recent offer of 0.8132 BHP shares per share.

Commenting on the offer, BHP CEO Mike Henry said:

BHP has put forward a final offer ratio of 0.8860 BHP shares for each Anglo American share. This is a significant increase from our first proposal and would provide Anglo American shareholders with 17.8% of a combined BHP and Anglo American. The revised proposal is underpinned by BHP’s disciplined approach to mergers and acquisition and our focus on delivering long term fundamental value.

BHP’s revised proposal will offer immediate value for Anglo American shareholders and allow them to benefit from the long-term value generation of the combined group. BHP looks forward to engaging with the Board of Anglo American to explore this unique and compelling opportunity to bring together two highly complementary, world class businesses.

Thanks but no thanks

Unfortunately for Mike Henry and his team, this latest offer has been rejected immediately by the copper miner.

Anglo American’s chair, Stuart Chambers, revealed that its board believes the company is better off going it alone. He commented:

The Board is confident in Anglo American’s standalone future prospects and believes that Anglo American has set out a clear pathway and timeframe to deliver the acceleration of its strategy to unlock significant and undiluted value for Anglo American’s shareholders.

In addition, Chambers advised that the offer was not expected to deliver sufficient value to shareholders. He adds:

The Board considered BHP’s Latest Proposal carefully, concluded it does not meet expectations of value delivered to Anglo American’s shareholders, and has unanimously rejected it. In particular, it does not address the Board’s concerns about the structure, which results in significant complexity, execution risks, an extended timeline to completion and consequently has the potential for material value leakage to be disproportionately suffered by Anglo American’s shareholders. Multiple engagements with the BHP team have not yet been able to resolve the concerns on these issues.

However, Anglo American has left the door open to further talks. Chambers concludes:

However, the Board is willing to continue to engage with BHP and its advisers on this topic and has therefore requested a one week extension to the PUSU deadline which has been consented to by the Panel.

But whether BHP will be willing to increase its “final” offer remains to be seen.

The post BHP shares on watch after new $74b Anglo American takeover offer rejected 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.