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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of Tesla (NASDAQ: TSLA) popped more than 5% on Wednesday after Reuters reported CEO Elon Musk as having filed an appeal to end his 2018 agreement with the Securities and Exchange Commission (SEC) over his Twitter posts. 

Meanwhile, an analyst just forecast stronger days ahead for the electrical vehicle (EV) manufacturer.

So what

After the SEC filed a lawsuit in 2018 alleging that Musk defrauded investors through “false and misleading statements” on Twitter about having secured sufficient funding to take Tesla private, Musk and Tesla entered into an agreement with the regulator. As part of the settlement, Musk stepped down as Tesla’s chairman, and Tesla and Musk agreed to pay $20 million each in penalties while also agreeing to have the CEO’s tweets about any material business information screened by a lawyer before posting on the social media platform.

The SEC later sought a probe and subpoenaed documents, though, causing Musk to accuse it of harassment and undermining his constitutional right to free speech. Earlier this year, he sought to end the decree to get his tweets vetted, but a U.S. district judge quashed his efforts in April.

Musk isn’t relenting just yet, though. This morning, he appealed the judge’s refusal, and will ask the 2nd U.S. Circuit Court of Appeals in Manhattan to overturn the judge’s decision, according to Reuters.

Now what

As long as the decree stands, Musk and Tesla will continue to face noncompliance and other legal risks. Musk’s latest appeal shows his firm intent to end the decree and the legal overhang on Tesla.

Meanwhile, Mizuho analyst Vijay Rakesh reiterated his buy rating on Tesla stock this morning, saying he believes the company should benefit as China eases COVID-19 lockdowns and sales of EVs pick up globally. Retail sales of new-energy vehicles in China surged almost 91% year over year in May, according to data from the China Passenger Car Association.

Tesla has other challenges to tackle right now, but with analysts projecting a strong recovery in the global EV market for the second half of 2022, investors found a good reason to turn bullish about the stock today. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Tesla stock jumped 5% today appeared first on The Motley Fool Australia.

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More reading

• Why Tesla shares were rising today
• Tesla Looks to Reinforce Its Battery Supply Chain: Why That Matters
• More likely to 5x first: Tesla vs. Ford?
• Why Tesla stock enjoyed a rally today
• Why Tesla stock bounced today

Neha Chamaria 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 Tesla and Twitter. 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.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Adairs Ltd (ASX: ADH) share price has dropped a long way in 2022, down by around 58%. This has had the effect of boosting the homewares retailer’s prospective dividend yield in FY23.

But one dividend estimate puts the potential grossed-up dividend yield at more than 20%. Is that really going to happen?

Well, to truly know, we’d need a crystal ball. But let’s look to see if it’s possible.

Dividends aren’t guaranteed

Dividends are a useful way for investors to benefit from owning shares.

It gives the chance for companies (and trusts) to pay shareholders a portion of the annual profit each year.

But dividends are certainly not guaranteed. Companies can reduce payments or even cut them altogether.

Sometimes a dividend projection may simply not come true.

It may be worth noting the above things before getting to the dividend estimate for Adairs.

Projected Adairs dividend

The ASX retail share, which sells homewares and furniture, has had a tough time in FY22 with lockdowns in the first half hurting sales and profit in NSW and Victoria.

However, Morgans is currently projecting the company’s FY22 grossed-up dividend yield could be 15.8% at the current Adairs share price.

But the current financial year is nearly over – how is the FY23 projected dividend yield looking? The current projected grossed-up dividend yield in FY23 is predicted by Morgans to be 21.6%.

That would be a huge dividend yield. For instance, Morgans thinks the Fortescue Metals Group Limited (ASX: FMG) FY22 grossed-up dividend yield is only going to be 13.7%.

How is Adairs going?

Time will tell whether that dividend projection is correct or not.

However, let’s look at a trading update from Adairs. Sales are an important factor for profit generation. In the first seven weeks of FY22, Adairs said its stores’ sales were down 1.8% on the prior corresponding period, while its online sales were 9.7% higher. Mocka sales were up 14.8% year on year and Focus sales were down 7.3%.

The company is working on a number of initiatives to help grow profit. It’s trying to grow its Linen Lovers membership and increase store floor area. Online sales can keep growing.

The transition to a national distribution centre will assist in lowering costs and help the business become more efficient with stock-flow and fulfilling online orders. Management also plans to grow the Focus on Furniture business.

Being able to maintain and grow profit could be a helpful factor for the Adairs dividend and the Adairs share price, but time will tell how large the dividend yield is in FY23.

Even if the Adairs dividend were only to be two-thirds of the size of the projected dividend, then it would still be a large yield.

The post Is Adairs really going to pay a dividend yield of 21%? appeared first on The Motley Fool Australia.

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More reading

• Down 20% in a month: Top broker tips 75% upside for the Adairs share price
• What’s on the horizon for the Adairs share price in June?
• 2 ASX dividend shares that experts are tipping as buys right now
• Why was May such a shocker for the Adairs share price?
• 3 high-quality ASX 300 shares trading at 52-week lows today

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ADAIRS FPO. The Motley Fool Australia has positions in and has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Bubs Australia Ltd (ASX: BUB) share price is storming higher on Thursday.

In morning trade, the infant formula company’s shares are up 10% to 62.5 cents.

Why is the Bubs share price pushing higher?

Investors have been bidding the Bubs share price higher today after the company released yet another update on its US supply mission.

In case you’re unaware, Bubs recently signed a deal with the US government to supply over a million tins of infant formula to help the country through a supply crisis.

This was caused by a major infant formula manufacturer suspending production following an issue. Though, it is worth noting that this manufacturer is now back up and running, so supply levels should start to improve in the coming months.

What’s the latest?

This morning Bubs revealed that it has entered into an agreement with retail giant Walmart for a shipment of 85,000 tins comprising six Bubs Infant Formula products and two Aussie Bubs Toddler Formula products. These will be distributed to approximately 800 Walmart stores in the United States.

Though, it is worth noting that this is a one-off agreement for this shipment, so nothing has really changed.

The only additional potential positive will be if Bubs can form an ongoing bricks and mortar relationship with Walmart once the crisis is over. But time will tell if US consumers will still choose Bubs when supply returns to normal and their previous favourites are back in stock.

Nevertheless, Bubs’ founder and CEO, Kristy Carr, was delighted with the news. She said:

We are tremendously excited to be forging a relationship with Walmart, with all of Bubs Infant Formula and Toddler Formula products going on shelf in approximately 800 stores across America’s Central and Mid-West regions. This store distribution builds on our existing Walmart.com sales channel. More broadly, the addition of Walmart will increase our bricks and mortar exposure in the United States over the coming days and weeks to around 4,800 stores across 35 States.

The post Bubs share price jumps 10% on Walmart agreement appeared first on The Motley Fool Australia.

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More reading

• Is there still money to be made from Bubs shares?
• Why Breville, Bubs, Terracom, and Xero shares are pushing higher today
• Bubs share price lifts as the brand readies for debut on 4,000 US shelves
• These were the best performing ASX 200 shares last week
• Why Bubs, IGO, Strike Energy, and Woodside shares are pushing higher

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The Sayona Mining Ltd (ASX: SYA) share price has plunged lower over the last 30 days.

At the time of writing, the Sayona Mining share price is 13 cents, 50% lower than it was this time last month.

For context, the broader market has also slipped in that time. The S&P/ASX 200 Index (ASX: XJO) has dropped 6.7%, while the All Ordinaries Index (ASX: XAO) has fallen 7.1%.

Let’s take a closer look at what’s been weighing on the ASX lithium share lately.

What’s going wrong for the Sayona Mining share price?

The last 30 days have been challenging for Sayona Mining.

The stock’s first blow came on 23 May when the company released the results of a pre-feasibility study at its North American Lithium operation. The study found the project’s net present value is around $1 billion. That factored in an average spodumene concentrate price of US$1,242 per tonne and was seemingly less than the market expected.

After plunging 25% over the two days following the release of the study’s results, the Sayona Mining share price was put into a trading halt on 25 May as the company conducted a $190 million institutional placement. The placement saw the company offering new shares for 18 cents apiece.

But the worst knock felt by Sayona Mining’s stock came earlier this month.

ASX lithium shares suffered through a sell-off event on 1 June. Stock in Sayona Mining tumbled 18% amid news of a bearish broker’s note on lithium prices, an Argentinian reference price, and a major electric vehicle manufacturer’s intent to mine its own lithium.

And the dip didn’t end there. The Sayona Mining share price is now nearly 41% lower than it was at the end of May. It’s also 7% lower than it was at the start of 2022 but 116% higher than it was this time last year.

The post The Sayona Mining share price has crashed 50% in a month. What’s going on? appeared first on The Motley Fool Australia.

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More reading

• Which ASX lithium shares are producing and which are not?
• Why Macquarie still sees ‘material upside’ for ASX lithium shares
• Why Nanosonics, REA, Sayona Mining, and Zip shares are dropping
• Which ASX lithium shares are rebounding on Thursday, and which are not?
• Is this the real reason ASX lithium shares cratered on Wednesday?

Motley Fool contributor Brooke Cooper 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.

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Are you looking for some ASX 200 mining shares to buy?

If you are, then look no further. The two listed below have been named as buys by analysts at Morgans. Here’s why it is bullish on them:

BHP Group Ltd (ASX: BHP)

Analysts at Morgans are positive on the Big Australian and see it as one of the best mining shares to buy. This is due to BHP being a lower risk option in the sector and its strong balance sheet and dividend profile.

It explained:

We view BHP as relatively low risk given its superior diversification relative to its major global mining peers. The spread of BHP’s operations also supplies some defence against direct Covid-19 impact on earnings contributors. While there are more leveraged plays sensitive to a global recovery scenario, we see BHP as holding an attractive combination of upside sensitivity, balance sheet strength and resilient dividend profile.

Morgans currently has an add rating and $48.30 price target on its shares. In addition, the broker expects dividend yields of 9% in FY 2022 and 7% in FY 2023.

South32 Ltd (ASX: S32)

Another mining share that Morgans is bullish on is South32. Its analysts have been pleased with the transformation of the miner’s portfolio in recent years. This has improved the quality of its earnings and also its ESG credentials.

Morgans commented:

S32 has transformed its portfolio divesting South African thermal coal and acquiring an interest in Chile copper, substantially boosting group earnings quality, as well as S32’s risk and ESG profile. Unlike its peers amongst ASX-listed large-cap miners, S32 is not exposed to iron ore. Instead offering a highly diversified portfolio of base metals and metallurgical coal (with most of these metals enjoying solid price strength). We see attractive long-term value potential in S32 from de-risking of its growth portfolio, the potential for further portfolio changes, and an earnings-linked dividend policy.

Its analysts have an add rating and $6.10 price target on South32’s shares. And, like BHP, the broker is expecting some big dividends in the near term. Morgans is forecasting dividend yields of 6% in FY 2022 and 8% in FY 2023.

The post Broker names 2 ASX 200 mining shares with big dividends to buy now appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most traded ASX 200 shares on Wednesday
• 2 top ASX dividend shares to buy according to analysts
• Why BHP, Block, Harvey Norman, and PointsBet shares are sinking
• Why is the BHP share price sinking 6% today?
• 5 things to watch on the ASX 200 on Tuesday

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.

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The DroneShield Ltd (ASX: DRO) share price has failed to take off in the past month.

Investor sentiment is waning off on the drone security company as the ASX heads towards bear market territory.

While DroneShield shares finished flat at 18 cents at yesterday’s market close, they are down 21% in a month.

In contrast, the All Ordinaires (ASX: XAO) is down 7% over the same time frame.

What’s dragging DroneShield shares lower?

The DroneShield share price has tumbled in recent times despite the current hype surrounding demand for drone technology products.

The Russian war in Ukraine has highlighted the importance for any military wishing to counter unmanned aerial systems (UAS).

However, sky-rocketing inflation along with a potential global economic slowdown has put a strain on DroneShield shares. This is because if the world does head into a recession next year as economists are predicting, countries will likely tighten up military spending.

Nonetheless, when war breaks out, DroneShield benefits from this just as it did from Ukraine.

The company supplied hand-held detection drone devices as well as its prized drone gun to the besieged country.

With further contracts possibly in the works, DroneShield shares could receive a much welcome boost.

What’s next for the company?

DroneShield put out a release yesterday advising that its equipment has been deployed at the World Economic Forum (WEF).

Located in Switzerland and held between 22 –26 May, this could be an opportune time to showcase its products.

The event attracts over 2,500 participants including world leaders and senior business executives.

DroneShield CEO, Oleg Vornik provided a brief outlook on the future, saying:

…The company continues to increase its presence in the tier 1 global events sector, as well as increasing the profile of the products with other key customers such as law enforcement and military personnel.

As stated in its quarterly results in April, the company has a sales pipeline of $155 million for 2022. This is expected to increase to $175 million in the following year, cementing its place in the multi-billion counter-drone market.

DroneShield share price snapshot

Despite its recent fall, the DroneShield share price is up around 9% from this time 12 months ago.

The company’s shares reached a 52-week high of 30 cents in early May before retracing 40% to current levels.

DroneShield has a market capitalisation of roughly $84.35 million, with approximately 432.54 million shares on its books.

The post The DroneShield share price has tumbled 21% in a month. What’s next? appeared first on The Motley Fool Australia.

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More reading

• Best ASX shares to buy in June 2022

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

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If you’re looking to increase your income with some dividend shares, then the ones listed below could be worth a look.

Both dividend shares are expected to provide investors with attractive yields in the near term. Here’s what you need to know about them:

Rural Funds Group (ASX: RFF)

The first ASX dividend share to look at is Rural Funds. It is an Australian agricultural property company with a portfolio of high quality assets leased to some of the biggest players in the sector.

Its property portfolio includes almond and macadamia orchards, premium vineyards, water entitlements, cropping and cattle farms.

In FY 2022, Rural Funds intends to reward its shareholders with a 11.73 cents per share distribution.

It also plans to increase its FY 2023 distribution by its annual target rate of 4% to 12.2 cents per share in FY 2023. And while rising funding costs could potentially prevent this increase, even a flat dividend would be attractive.

Based on the current Rural Funds share price of $2.54, Rural Funds’ FY 2022 dividend equates to a 4.6% yield.

Telstra Corporation Ltd (ASX: TLS)

Another ASX dividend share that looks set to provide investors with a generous dividend yield is Telstra.

This telco giant has been through a difficult time over the last decade, but at long last there is light at the end of the tunnel. In fact, earlier this year Telstra released its half year results and returned to growth for the first time in years.

This allowed the telco to maintain its fully franked interim dividend at 8 cents per share, with another 8 cents per share final dividend expected to be paid in the second half.

Looking ahead, with the company’s T22 strategy bearing fruit and management expecting its upcoming T25 strategy to underpin solid growth over the coming years, the outlook for the Telstra dividend has been improving greatly.

For now, the 16 cents per share dividend that Telstra expects to pay in FY 2022 represents a yield of just over 4.2% based on the current Telstra share price of $3.83.

The post Here are 2 ASX dividend shares with 4%+ yields appeared first on The Motley Fool Australia.

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More reading

• Despite recent volatility, brokers are predicting big things for the Telstra share price. Here’s why
• Here are the 3 most traded ASX 200 shares on Wednesday
• 2 top ASX dividend shares to buy according to analysts
• 2 ASX shares I want to buy more of for my portfolio
• Top ASX dividend shares to buy in June 2022

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

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No doubt you’re getting sick of the sea of red on your online ASX shares portfolio.

But it’s not just everyday retail investors feeling the pinch. The professionals aren’t faring much better in a rough market.

One of the most successful funds in recent years, the Cyan C3G Fund, revealed this week that it “suffered badly” in May to see a fall of 14%.

“Performance in May was incredibly frustrating,” portfolio managers Dean Fergie and Graeme Carson told clients in a memo.

“All but one of our holdings fell over the month, resulting in the overall poor performance.”

Cyan attributed the “severe selling pressure” to a perfect storm of supply constraints, central bank tightening and geopolitical issues.

“In the six weeks to early June, the S&P/ASX Emerging Companies (ASX: XEC) index has fallen 17%.” 

Normal programming will return sooner or later

But in the long run, the pair said fortunes would turn around.

“Logistics is improving, supply chains are opening up, costs are still a challenge but will subside as other parts of the supply chain normalise.”

A steep hike in interest rates will indeed temporarily result in depressed consumer spending. 

But the portfolio managers reminded clients that even a 150-basis point increase would result in a cash rate that’s still historically low.

“In terms of valuing companies on future earnings (which is what the stock market does), it is far from terminal, or perhaps not even particularly material,” read the document.

“We feel the market is being overly bearish on where long-term rates might land.”

Considering this, the Cyan team named three ASX shares that plunged last month that still have excellent underlying businesses (and it’s still holding onto):

Value of brands could exceed the company’s current valuation

Brewer Mighty Craft Ltd (ASX: MCL) watched in horror as its share price lost a quarter of its value last month.

It has lost even more in this week’s brutal sell-off, to be down 42% since the start of May.

For the Cyan team, this is purely a macroeconomic reaction — because the business is going gangbusters.

“It is currently being valued at $70 million by the market,” read the memo. 

“[But] it is expected to deliver more than $70 million in sales during this COVID-impacted year and strong profitable growth in FY23.”

The company has a 37% stake in fast-growing brand Better Beer, which is expected to sell 4 million litres this financial year and 10 million in the next.

“On those metrics — at $25 per litre of value (which is the general metric for valuing boutique beer brands that reach scale) — Mighty Craft’s ownership of the brand alone could be worth $90 million+.”

No debt, profitable, pays dividend

Cyan lost 15% on its Kip McGrath Education Centres Limited (ASX: KME) last month.

Kip McGrath runs an education and tutoring business in the English-speaking markets of Australia, New Zealand, the United States, the United Kingdom and South Africa.

The financials are healthy, according to Fergie and Carson, who noted it has no debt, is cash flow positive, profitable, and pays a dividend. 

The company is also forecast to grow revenue and earnings in excess of 20% next financial year. 

“It is potentially an M&A target and has recently successfully pushed into the US,” read the Cyan memo.

“The stock is down 40% from its highs of a few months ago and has delivered no negative news.”

‘Extremely attractive’ takeover target

Fergie and Carson have been fans of micro-investing platform RAIZ Invest Ltd (ASX: RZI) for a while, and a 15% loss in May hasn’t changed this view.

This is another ASX share that has no debt and holds $18 million in cash.

“Over the past 12 months, it has grown active customers by 50% to around 650,000, who collectively invest more than $1 billion,” read the Cyan memo.

“The company is profitable in its core operations in Australia and is pushing successfully into south-east Asia.”

May was just the continuation of a shocking run in 2022. Raiz shares have plunged almost 64% since the start of the year.

Similar to Kip McGrath, Raiz could make an “extremely attractive” takeover target.

“As a comparative valuation, Raiz’s US parent Acorns Grow is valued at ~$800 per customer,” the memo read.

“Completely ignoring Raiz’s 350,000 strong customer base Asia, its Australian business of 290,000 customers is presently being valued by the local market at just $170 per customer.”

The post ‘Frustrating’: Fund backs 3 great ASX shares with plunging prices appeared first on The Motley Fool Australia.

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More reading

• Here are 2 ASX dividend shares with 4%+ yields
• 3 ASX shares to buy for scary times
• Transurban shares poised for rapid dividend recovery: expert
• 2 ASX growth shares to buy for when the market rebounds
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Tony Yoo 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 Kip McGrath Education Centres Ltd. The Motley Fool Australia has positions in and has recommended Kip McGrath Education Centres Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Share markets around the world are in a bit of a panic.

Investors are pulling out their money in droves due to fears that central banks can’t raise interest rates to combat inflation without sending us all into a recession.

But as legendary investor Warren Buffett is often quoted as saying, wise investors need to be greedy when others are fearful.

That is, buy up cheap ASX shares to hold for the long run while everyone else is running around like headless chooks.

Here are three such buy suggestions from experts:

Pizza for dinner, anyone?

Perhaps one could argue that as the economy hits a low point, more people will be dining out on fast food rather than the gourmet stuff.

If you believe in that theory, you would agree with Morgans advisor Jabin Hallihan who picked Domino’s Pizza Enterprises Ltd (ASX: DMP) as a buy.

“The fast food giant faces near term challenges of currency headwinds and inflation,” he told The Bull.

“However, the company offers growth opportunities in the key markets of Japan and Taiwan.”

The Domino’s share price has halved since the start of the year.

Hallihan’s team has a price target of $93 for the stock, which is more than 50% higher than the Wednesday closing price of $61.70.

Domino’s shares are somewhat divisive in the wider professional community. According to CMC Markets, six out of 14 analysts recommend it as a strong buy, but seven rate it a hold.

$10 lettuce, anyone?

With food prices skyrocketing due to global shortages triggered by shipping delays and the war in Ukraine, backing agriculture might not be a bad move.

Fat Prophets chief Angus Geddes likes the look of Elders Ltd (ASX: ELD) to take advantage of that angle.

“Elders is leveraged to the buoyant rural sector, and reported a strong 2022 interim result.”

The company, which supplies goods and services to agricultural producers, is seeing demand outstripping supply across its whole catalogue. 

“Elders has been winning market share from targeted acquisitions and from tweaks to its strategic positioning.”

Elders shares have dropped about 17% over the past three weeks.

Want to play the pokies, anyone?

While Australians may not gamble as much during an economic downturn, gaming provider Aristocrat Leisure Limited (ASX: ALL) is still a cheap buy in the long run for Hallihan.

“The slot machine maker remains a high quality growth business with long term opportunities,” he said. 

“We’re forecasting 16% growth in earnings before interest, taxes and amortisation in the coming year.”

Morgans recommends it as a buy with a target of $43.

That’s about a 30% premium on the Wednesday closing stock price of $33.01.

Most other analysts absolutely agree with Hallihan, with 11 of 16 recommending Aristocrat shares as a strong buy on CMC Markets.

Aristocrat shares have lost about a quarter of their value since the start of this year.

The post 3 ASX shares to buy for scary times appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo 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 recommended Dominos Pizza Enterprises Limited and Elders Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Transurban Group (ASX: TCL) shares are still trading about 15% below their pre-pandemic levels in February 2020.

Though, until this week’s broader selling action, the S&P/ASX 200 Index (ASX: XJO) toll road developer and operator was in the green for the calendar year.

Closing 1% lower yesterday, Transurban shares are now down 1% in 2022, which still compares favourably to the 13% year-to-date loss posted by the ASX 200.

At the current share price, Transurban has a market cap just shy of $43 billion and pays a dividend yield of 2.6%, unfranked.

Looking ahead, however, the company could be on track to return to the fatter dividend yields it paid before the pandemic lockdowns impacted its business model.

Well placed for population growth and urbanisation

Analysts at Morgans have placed Transurban shares among the top 12 ASX 200 companies it thinks will provide the highest risk-adjusted returns over the next 12 months “supported by a higher-than-average level of confidence”.

Transurban’s Australian and North American toll road operations and projects also see it listed among the broker’s most preferred sector exposures.

Andrew Tang, equity strategy analyst at Morgans, explained why Transurban shares made the broker’s top 12 list on Livewire.

According to Tang:

Transurban owns a pure-play portfolio of toll road concession assets located in Melbourne, Sydney, Brisbane, and North America. This provides exposure to regional population and employment growth and urbanisation.

Given very high [earnings before interest, taxes, depreciation and amortisation] EBITDA margins, earnings are driven by traffic growth – with the recovery from Covid – and toll escalation.

Approximately half of the tolls are indexed in line with the consumer price index (CPI) with the rest fixed at roughly 4% per year.

Morgans believes Transurban shares “will continue to be attractive to investors given its market cap weighting, [which is] important for passive index-tracking flows, the high quality of its assets, management team, balance sheet, and growth prospects”.

As for dividends, Tang said, “Watch for rapid recovery in DPS [dividends per share] alongside traffic recovery and WestConnex acquisition prospects.”

He said a negative overhang that investors should keep an eye on is “the contaminated soil disposal issues related to its West Gate Tunnel Project.”

How have Transurban shares performed longer term?

Over the past five years, the Transurban share price is up 12%. By comparison, the ASX 200 has gained 14% over that same time.

The post Transurban shares poised for rapid dividend recovery: expert appeared first on The Motley Fool Australia.

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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.

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