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ASX dividend stocks can be a useful place to start for beginner investors because the good stocks can provide a mixture of capital growth and dividends.

There are loads of different types of investments that people can choose to begin with – ASX blue-chip shares, ASX small-cap shares, international shares, exchange-traded funds (ETFs) and so on.

I think it could be useful to start by looking at good companies that we regularly see in our lives.

The two I’m going to mention are high-quality retailers that have impressive brands with plenty more growth potential.   

Premier Investments Limited (ASX: PMV)

This ASX dividend stock owns a number of different apparel brands including Smiggle, Peter Alexander, Portmans, Jay Jays, Jacqui E, Dotti and Just Jeans.

The two brands I think investors should be excited by are Smiggle and Peter Alexander. When a business expands offshore from Australia, it leads to a much bigger potential population to sell products to.

Smiggle products are sold in a number of different countries, including the United Kingdom, Ireland, New Zealand, Singapore, the US and Malaysia. It sells branded products for kids, like bags, pencil cases, lunch boxes and so on. In Australia, it has products related to the AFL, Spiderman, Mickey and Minnie Mouse, Barbie and Paw Patrol.

In its FY23 result, it said it wanted to open dozens of new stores and it’s also expanding with wholesale partners, into places like Middle Eastern countries such as UAE, Qatar and others. Smiggle is also exploring potential new markets.

If Premier Investments can keep expanding its footprint, online sales, revenue and profit over time, then dividends and the Premier Investments share price could keep benefiting.

According to the estimate on Commsec, the ASX dividend stock could pay a grossed-up dividend yield of 6% in FY24 (which includes franking credits).

Wesfarmers Ltd (ASX: WES)

Wesfarmers is another high-quality retail business that has incredibly strong brands, including Bunnings, Kmart and Officeworks, which I’d call market leaders in their categories. Other sizeable businesses within Wesfarmers include Target, Catch and Priceline.

This ASX dividend stock wants to grow its dividend (and profit) for shareholders over time, which is exactly what I’m suggesting is good for beginners.

I’m a big fan of the company’s bolt-on acquisition strategy to grow its divisions. For example, in recent times it bought Beaumont Tiles for Bunnings, and it has acquired Silk Laser Australia and Instantscripts for the healthcare division.

Wesfarmers’ decision to expand into healthcare shows its ability to focus on the long-term – ageing demographics are a very powerful tailwind for businesses involved.

If Wesfarmers keeps re-investing in its great businesses, and acquiring new ones, it has an appealing outlook to keep performing.

In FY24, the business is projected to pay an annual dividend per share of $1.90, according to Commsec, which would be a grossed-up dividend yield of 4.7% (including franking credits).

The post Beginners: Here are 2 ASX dividend stocks to get your portfolio started! appeared first on The Motley Fool Australia.

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More reading

• Are Wesfarmers shares a good long-term buy?
• 2 ASX stocks that could explode in February
• Own Wesfarmers shares? Here’s your half-year results preview
• Here’s why Premier Investments shares are on my ASX dividend watchlist
• Would I be crazy to buy Wesfarmers shares at $58?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. The Motley Fool Australia has recommended Premier Investments. 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 Macquarie Group Ltd (ASX: MQG) share price is falling on Tuesday.

In morning trade, the investment bank’s shares are down over 4% to $180.01.

Why is the Macquarie share price falling?

Investors have been selling the company’s shares today after it released an operational briefing for the third quarter of FY 2024.

According to the release, financial year to date net profit after tax remains “substantially down” on the prior corresponding period.

Management notes that this was due to the company cycling an exceptional quarterly result in the third quarter of FY 2023.

How did its segments perform?

Macquarie’s annuity-style businesses, Macquarie Asset Management (MAM) and Banking and Financial Services (BFS), reported a combined third quarter net profit contribution that was “down” on the prior corresponding period.

This was mainly due to lower asset realisations in green investments in MAM and margin compression along with run off in the car loan portfolio, partially offset by volume growth across home loans and business lending in BFS.

Macquarie’s markets-facing businesses, Commodities and Global Markets (CGM) and Macquarie Capital, reported a combined quarterly net profit contribution that was “substantially down” on the prior corresponding period. This was primarily due to exceptionally strong results in CGM in the prior corresponding period and lower fee and commission income, partially offset by investment-related income in Macquarie Capital.

In other news, after 28 years with Macquarie and five years as Group Head, Nicholas O’Kane has decided to step down as Head of CGM and from Macquarie’s Executive Committee, effective 27 February 2024. O’Kane, the company’s highest earner, is pursuing opportunities outside Macquarie.

Management commentary

Macquarie Group’s Managing Director and Chief Executive Officer, Shemara Wikramanayake, was pleased with the company’s performance given the tough trading conditions. She said:

Underlying client franchises were resilient in ongoing uncertain conditions with continued customer growth, fundraising and new business origination a feature across all of our businesses.

Speaking about the company’s outlook, Wikramanayake adds:

Macquarie remains well-positioned to deliver superior performance in the medium term with its diverse business mix across annuity-style and markets-facing businesses; deep expertise across diverse sectors in major markets with structural growth tailwinds; patient adjacent growth across new products and new markets; ongoing technology and regulatory spend to support the Group; a strong and conservative balance sheet; and a proven risk management framework and culture.

The Macquarie share price is now down 6% over the last 12 months.

The post Macquarie share price sinks on ‘substantially’ lower profits appeared first on The Motley Fool Australia.

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More reading

• 2 rejuvenated ASX 200 stocks with ‘strong brands’ ready to roar again
• I think this ONE factor gives ASX shares a huge chance to make big returns
• 2 sizzling-hot ASX stocks to buy right now
• CBA could be eyeing record profits if first-half results echo the past
• Brokers say these 3 ASX dividend shares are buys

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 Macquarie Group. 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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Lynas Rare Earths Ltd (ASX: LYC) shares could be in the bargain bin.

That’s the view of analysts at Goldman Sachs, which believe the ASX 200 mining stock is undervalued at current levels.

What is Goldman saying about this ASX 200 mining stock?

Goldman has been looking at the rare earths market and has updated its supply/demand model to reflect Chinese production quotas and the latest electric vehicle (EV) and wind demand.

While this has resulted in the broker reducing its rare earths price forecasts and Lynas’ earnings estimates, it still remains very positive.

This is largely because it believes there will be deficits coming in the medium term. It explains:

Our view of long run deficits and ex-China refining, metal and magnet bottlenecks underpins our unchanged long run NdPr price of ~US$83/kg (real $, from 2028), which we believe is the minimum price required to incentivize new refinery developments and expansions based on our economic assessments of the higher quality global rare earth deposits.

In light of this, the broker has retained its conviction buy rating on the ASX 200 mining stock with a trimmed price target of $7.20. This implies potential upside of approximately 25% for investors from current levels.

‘Undervalued’

Commenting on Lynas’ shares, the broker said:

Undervalued: the stock is trading at ~0.75x NAV (A$7.65/sh) and pricing in ~US$65/kg NdPr vs. spot at ~US$55/kg and our long run US$83/kg (real $, from 2028) NdPr price forecast.

The broker also highlights its strong production growth potential as a reason to buy. It said:

NdPr ramp-up is underway with production to more than double from ~3.6ktpa in the Dec Q to ~9ktpa by end of CY24. While the current 2025 target implies more than doubling of production (from FY24 levels) to ~12ktpa at capex of ~A$1.8bn on our estimates, the high grade Mt Weld RE deposit (54.5Mt of ore @ 5.3% TREO and a reserve of 18.3Mt of ore @8.3% TREO with resource upside) could support further expansions beyond 12ktpa NdPr in our view.

The post This ASX 200 mining stock is ‘undervalued’ and could rise 25% appeared first on The Motley Fool Australia.

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More reading

• 6 oversold ASX shares to buy in February 2024
• Here are the top 10 ASX 200 shares today
• Down 47%: 2 ASX mining shares that could be on the way back up
• Lynas shares rise on US merger talks
• 5 things to watch on the ASX 200 on Monday

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.

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The ASX dividend stock Shaver Shop Group Ltd (ASX: SSG) has been paying investors a huge dividend yield. It’s predicted to keep doing so, which is one of the reasons I think it’s undervalued.

This business is a specialist retailer of hair removal products for men and women. A number of the products that it sells are exclusive, which is useful for encouraging customers to come to Shaver Shop.

Huge dividend yield expected

The business trades on a low price/earnings (P/E) ratio, which helps it have a large dividend yield (combined with a generous dividend payout ratio).

It has grown its dividend per share each year since 2017 when it first started paying cash to shareholders.

In FY23 it paid an annual dividend per share of 10.2 cents, which translates into a grossed-up dividend yield of 12.1%.

The estimate on Commsec suggests the business could pay an annual dividend per share of 10.3 cents in FY24 and 10.4 cents per share in FY25. The FY24 – this year’s – grossed-up dividend yield could be 12.25% and and FY25 could see a grossed-up dividend yield of 10.4%.

Looking further ahead, the FY26 grossed-up dividend yield is forecast to be 13%, but that’s quite a long way away.

Remember, these are all just forecasts. The level of the dividend is dictated by the profit generation of the ASX dividend stock and the board of directors’ discretion.

How cheap is the ASX dividend stock?

Shaver Shop’s earnings per share (EPS) are expected to fall in FY24, but it may only drop to 11.9 cents. That means Shaver Shop is valued at 10x FY24’s estimated earnings.

I’d say that’s a very low P/E ratio considering this year may be the low point of Shaver Shop’s earnings during this earnings cycle.

A business with a good earnings growth outlook should arguably trade on a higher P/E ratio because the valuation is meant to take into account longer-term profit generation potential, not just the current financial year. That’s why ASX growth shares normally trade on a higher earnings multiple than large ASX blue-chip shares that have limited long-term growth potential.

It’s projected to grow EPS by 6.7% to 12.7 cents in FY25 and then rise another 7.9% in FY26 to 13.7 cents. Those are forward P/E ratios of 9.4 and 8.75, which looks really undervalued to me.

I don’t know precisely what the earnings will be in the next few years, no-one does, but there are a number of factors that I think can help Shaver Shop’s earnings continue to climb higher.

It can keep opening new stores across Australia and New Zealand, it can grow online sales, it can expand further in other beauty and wellness categories (such as oral care) and it could deliver higher profit margins from greater scale.

The post With a 12% yield, I think this potentially undervalued ASX dividend stock is amazing appeared first on The Motley Fool Australia.

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More reading

• Should you buy this ASX dividend stock for its 12% yield?

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.

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Westpac Banking Corp (ASX: WBC) shares will be in focus next week.

That’s because the banking giant is scheduled to release its first quarter update on Monday 19 February.

Ahead of the release, let’s take a look to see what the market may be expecting from Australia’s oldest bank.

Westpac Q1 update preview

While brokers haven’t laid out the first quarter expectations for Westpac, we know what they are looking for in FY 2024.

As a result, we can use next week’s update to see if the bank is performing in-line, ahead, or below expectations.

But firstly, let’s have a quick reminder of Westpac’s outlook commentary for the first half. Goldman Sachs said:

On the outlook into 1H24, WBC noted: i) Persistent inflation, ii) Software amortisation headwind, iii) Risk & reg spend to remain elevated, iv) Focus on cost reset, and v) Sustained investment of A$2 bn pa over the next four years.

It also warned that its net interest margin (NIM) could be under pressure again. Goldman adds:

Management highlighted that competition on mortgages will translate to continued NIM deterioration.

What to look out for?

Three things for investors to look out for with the update are its costs, profits, and NIM.

In respect to costs, Goldman Sachs expects Westpac’s costs growth to accelerate in FY 2024. It is expecting expenses to be up 9% for the full year due largely to staff costs, operating expenses, and software amortisation.

This is expected to lead to its cash profit falling 8.3% to $6,618 million for the year.

Finally, as for its NIM, Goldman expects it to fall from 195 basis points to 187 basis points over the year.

So, if the bank is run-rating better than these metrics and showing signs of outperforming expectations over the course of the year, this could give Westpac’s shares a big boost.

Stay tuned for that update.

The post Westpac shares at a 52-week high ahead of results: What’s the market expecting? appeared first on The Motley Fool Australia.

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More reading

• 3 top ASX bank shares hit 52-week highs today: Is there still value to be found?
• ASX dividend shares: What’s better, growth or consistency?
• Which Big Four ASX bank share will pay the biggest dividend this year?
• Why has the Westpac share price just hit a 52-week high?
• Want to buy ASX 200 bank shares? You need to read this

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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.

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There are plenty of quality ASX 200 dividend shares to choose from on the Australian share market.

But which ones are buys?

Two that have been tipped as best ideas by analysts at Morgans in February are listed below. Here’s why they could be worth a look:

QBE Insurance Group Ltd (ASX: QBE)

Insurance giant QBE could be an ASX 200 dividend share to buy according to the broker.

Morgans believes that the company is well-placed for earnings and dividend growth thanks to strong rate increases and its cost cutting plans. It explains:

With strong rate increases still flowing through QBE’s insurance book, and further cost-out benefits to come, we expect QBE’s earnings profile to improve strongly over the next few years. The stock also has a robust balance sheet and remains relatively inexpensive overall trading on 8x FY24F PE.

Morgans expects this to support dividends per share of 98.5 cents in FY 2023 and 136 cents in FY 2024. Based on the current QBE share price of $16.64, this will mean yields of 5.9% and 8.2%, respectively.

Morgans has an add rating and $17.56 price target on its shares.

Treasury Wine Estates Ltd (ASX: TWE)

Another ASX 200 dividend share that Morgans rates as a buy is wine giant Treasury Wine.

The broker sees significant value in its shares at the current level. And that’s not including the additional value that could be unlocked if its $1.4 billion acquisition of DAOU Vineyards delivers the goods. The broker explains:

The acquisition is in line with TWE’s premiumisation and growth strategy and will strengthen a key gap in Treasury Americas (TA) portfolio. Importantly, DAOU has generated solid earnings growth and is a high margin business. It consequently allowed TWE to upgrade its margins targets. While not without risk given the size of this transaction, if TWE delivers on its investment case, there is material upside to our valuation. The key near term share price catalyst is if China removes the tariffs on Australian wine imports.

For now, Morgans expects Treasury Wine to pay fully franked dividends of 37 cents in FY 2024 and 45 cents in FY 2025. Based on its current share price of $11.14, this equates to yields of 3.3% and 4%, respectively.

The broker has an add rating and $14.15 price target on the company’s shares.

The post Morgans names the best ASX 200 dividend shares to buy in February appeared first on The Motley Fool Australia.

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More reading

• 3 ASX dividend shares with 5%+ yields to buy now
• 2 rejuvenated ASX 200 stocks with ‘strong brands’ ready to roar again
• Brokers name 3 ASX shares to buy now
• The market is undervaluing this ASX 200 stock: Goldman Sachs
• Morgans names more of the best ASX 200 shares to buy in February

Motley Fool contributor James Mickleboro has positions in Treasury Wine Estates. 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 Treasury Wine Estates. 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 CSL Ltd (ASX: CSL) share price will be on watch this morning.

That’s because the biotechnology giant has just released its half-year results.

Let’s see how the company performed during the six months ended 31 December.

CSL share price on watch following half-year results

• Revenue up 11% in constant currency to US$8.05 billion
• Net profit after tax in constant currency up 20% to US$1.94 billion
• Net profit after tax before amortisation (NPATA) in constant currency up 13% to $2.06 billion
• Interim dividend up 12% to A$1.81 per share
• Guidance reaffirmed for FY 2024

What happened during the half?

During the first half, CSL reported an 11% lift in constant currency revenue to US$8.05 billion.

This was driven by a 14% increase in CSL Behring revenue to US$5,238 million, a 2% increase in CSL Seqirus revenue to $1,804 million, and a US$1,011 million contribution from the new CSL Vifor business.

In respect to the key CSL Behring business, its growth was underpinned primarily by strong demand for immunoglobulins (Ig). Management notes that Ig product sales increased 23% to US$2,757 million thanks to strong growth across all geographies driven by global plasma supply and patient demand.

The good news is that plasma collection conditions remain strong, and the cost of collections have continued to trend down following a post-COVID spike. In addition, a new roll out plan for the RIKA plasmapheresis devices has been developed. Deployment across its US fleet is expected over the next 18 months.

CSL continued to invest in its research and development (R&D) during the half. It advised that its R&D expenses were US$669 million, up 11% year on year.

Management commentary

CSL’s CEO and managing director, Dr. Paul McKenzie, was pleased with the “strong” half. He commented:

Our strong first-half result for the 2024 financial year was driven by CSL Behring’s exceptional performance across its portfolio, especially immunoglobulins. The plasma initiatives we have implemented are starting to drive gross margin recovery. CSL Seqirus achieved solid growth in a challenging season. Its portfolio of differentiated products outperformed the market. For CSL Vifor we are well prepared for the transitioning iron market.

Outlook

The good news for the CSL share price is that management has reaffirmed its guidance for FY 2024. Dr. McKenzie said:

For FY24, I am pleased to reaffirm our previous guidance. CSL’s underlying profit, NPATA is expected to be in the range of approximately $2.9 billion to $3.0 billion at constant currency, representing growth over FY23 of approximately 13-17%6

The company’s CEO also remains very positive on the future, highlighting that “CSL is in a strong position to deliver annualised double-digit earnings growth over the medium term.”

The CSL share price is down 5% over the last 12 months.

The post CSL share price on watch amid 20% profit jump appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• CSL shares could pop 9% on surprising results if history repeats itself
• Why CSL, Fletcher Building, Skycity, and Wildcat shares are falling today
• CSL share price sinks 6% on major trial failure
• 3 things ASX investors should watch this week

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. 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.

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When building a retirement portfolio, it’s can be a good idea to find defensive options with long-term growth potential.

But which ASX 200 shares could fit the bill right now?

Two retirement shares that analysts at Goldman Sachs are feeling very positive about are listed below. Here’s what they are saying about them:

Telstra Group Ltd (ASX: TLS)

Goldman thinks that telco giant could be an ASX 200 share to buy right now.

It highlights that its low risk earnings growth is what it finds most attractive about the company.

We believe the low risk earnings (and dividend) growth that Telstra is delivering across FY22-25, underpinned through its mobile business, is attractive.

In addition, the broker sees opportunities for the company to unlock value through asset divestments. It adds:

We also believe that Telstra has a meaningful medium term opportunity to crystallise value through commencing the process to monetize its InfraCo Fixed assets – which we estimate could be worth between A$22-33bn.

In the meantime, Goldman is expecting the company to pay fully franked dividends per share of 18 cents in FY 2024 and 19 cents in FY 2025. Based on the current Telstra share price of $3.98, this will mean yields of 4.5% and 4.75%, respectively.

Goldman has a buy rating and $4.70 price target on its shares.

Woolworths Limited (ASX: WOW)

The broker also thinks that this supermarket giant and Big W owner could be an ASX 200 share to buy for a retirement portfolio.

As well as its defensive qualities, Goldman rates the company highly due to its leadership position and the stickiness and loyalty of its customers. It explains:

We are Buy rated on the stock as we believe the business has among the highest consumer stickiness and loyalty among peers, and hence has strong ability to drive market share gains via its omni-channel advantage, as well as pass through any cost inflation to protect its margins, beyond market expectations.

And while its growing dividend yields are not as generous as Telstra’s, Goldman still expects them to be in the region of 3% over the medium term.

The broker has a conviction buy rating and $42.30 price target on Woolworths’ shares.

The post Will these ASX 200 shares help you retire rich? appeared first on The Motley Fool Australia.

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More reading

• Transform $50 into monthly income: The best ASX dividend stocks under $50
• 3 ASX 200 dividend shares to buy with great yields
• 3 things ASX investors should watch this week
• 10 time-wasters that could destroy your ASX investments
• 5 ASX shares to buy and hold forever in your investment portfolio

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 Telstra Group. 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 on the lookout for some new additions to your income portfolio, then read on.

Listed below are three ASX dividend shares that brokers have recently been named as buys.

Here’s what sort of dividend yields you can expect from them:

Accent Group Ltd (ASX: AX1)

Bell Potter think that Accent Group would be a top option for income investors. It is the owner of store brands including The Athlete’s Foot, Stylerunner, and HYPEDC.

The broker is forecasting fully franked dividends per share of 12 cents in FY 2024 and then 14.1 cents in FY 2025. Based on the current Accents share price of $2.22, this represents dividend yields of 5.4% and 6.4%, respectively.

Its analysts currently have a buy rating and $2.50 price target on its shares.

Dalrymple Bay Infrastructure Ltd (ASX: DBI)

Another ASX dividend share that could offer an attractive yield is Dalrymple Bay Infrastructure. It is the long-term operator of the Dalrymple Bay Coal Terminal (DBCT).

Citi is positive on the company and believes it is well-positioned to pay dividends per share of 20.6 cents in FY 2023 and 22 cents in FY 2024. Based on the latest Dalrymple Bay Infrastructure share price of $2.78, this will mean yields of 7.4% and 7.9%, respectively.

Citi has a buy rating and $3.00 price target on its shares.

QBE Insurance Group Ltd (ASX: QBE)

Over at Goldman Sachs, its analysts believe that insurance giant QBE could be an ASX dividend share to buy. This is due largely to favourable tailwinds and strong premium increases in the insurance market.

Goldman expects this to allow the company to pay a 59 US cents (90.4 Australian cents) per share dividend in FY 2024 and a 61 US cents (93.5 Australian cents) per share dividend in FY 2025. Based on the current QBE share price of $16.64, this equates to yields of 5.4% and 5.6%, respectively.

Goldman has a buy rating and $18.52 price target on the company’s shares.

The post 3 ASX dividend shares with 5%+ yields to buy now appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 recommended Accent Group. 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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Investors in ASX lithium shares have had a headache for a year now as global prices for the battery ingredient have nosedived.

According to TradingEconomics, the lithium carbonate price was nearing 600000CNY per tonne 15 months ago but can now barely reach six figures.

And this has meant a classic cyclical downturn as is common in the mining industry.

ASX lithium stocks have plunged as some lithium mines have been forced to stop production because they had become uneconomical to keep running.

Like other minerals, most experts predict that the lithium price will eventually recover, especially with its importance in the transition to a lower carbon future.

But this environment has meant that only some lithium producers have had the financial resources to endure this tough part of the cycle.

So if you were to buy some lithium stocks right now while they’re cheap, which ones are the best to go for?

A couple of fund managers had some ideas this week:

‘Ability to remain profitable throughout the cycle’

Bell Potter advisor Christopher Watt has been impressed with Pilbara Minerals Ltd (ASX: PLS)’s resilience.

“The December 2023 quarterly activities update demonstrated Pilbara’s ability to remain profitable throughout the cycle,”  Watt told The Bull.

He reckons Pilbara Minerals could absorb even more punishment.

“The lithium miner maintains a strong balance sheet to withstand any further declines in lithium prices.

“We expect the lithium market to recover in the long term and believe recent share price weakness in Pilbara presents a buying opportunity.”

The Pilbara share price has lost about 26% over the past year, while paying out a fully franked 6.9% dividend yield.

Unfortunately, Pilbara shares are currently the most shorted stock on the ASX. However, this means that any revival could trigger a massive surge in price as short sellers seek to quickly cover their positions.

The lithium shares with a catalyst coming in June

Meanwhile, Baker Young analyst Toby Grimm’s buy right now is Mineral Resources Ltd (ASX: MIN).

He admits the business is feeling the effects of low lithium prices, but one particular mine is providing much hope for the future.

“While still under pressure from falling lithium prices, we’re encouraged by the company’s recent update regarding the development of the Onslow iron ore project,” he said.

“The project is on track to deliver [its] first ore-on-ship in June 2024.”

And once this happens, it will deliver much needed funds to help it endure the tough conditions.

“It will provide excellent cash flow ahead of what we expect will be an eventual lithium market recovery.”

MinRes shares have plunged 37% over the past 12 months. They are paying a 3.3% dividend yield, fully franked.

The post ‘Buying opportunity’: 2 ASX lithium shares with cash to ride out the current depression appeared first on The Motley Fool Australia.

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More reading

• These are the 10 most shorted ASX shares
• Shares vs. property: Beginner investors choosing Aussie shares, ASX ETFs and rentvesting
• Morgans names more of the best ASX 200 shares to buy in February
• Here are the top 10 ASX 200 shares today
• Why Cettire, Dexus Industria, Pilbara Minerals, and Zip shares are jumping today

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 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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