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Wesfarmers Ltd (ASX: WES) shares have been on a strong run in recent weeks.

So much so, the conglomerate’s shares have risen 13% since the start of December.

Clearly, the market is feeling very positive about the company’s prospects in FY 2024.

But what is it actually pricing in for the first half? Let’s find out.

First half results preview

According to a note out of Morgans, its analysts aren’t expecting an overly strong result from Wesfarmers later this month.

This is due to its WesCEF business, which the broker expects to act as a drag on its performance during the first half and offset growth across other segments. The broker commented:

WesCEF is expected to be a drag on earnings. We forecast group 1H24 EBIT to be down 5% mainly due to materially lower WesCEF earnings reflecting weaker global ammonia prices and higher gas costs. All other segments are expected to deliver higher earnings.

What about the full year?

Looking further ahead, Goldman Sachs expects Wesfarmers’ EBIT to be largely flat for FY 2024.

Once again, the WesCEF business is expected to weigh on its profitability for the period. Goldman expects the business to report a 24.2% decline in EBIT to $449 million in FY 2024.

This is expected to offset a solid 5.1% increase in EBIT to $2,343 million from the key Bunnings business.

Should you buy Wesfarmers shares?

Goldman believes it will be onwards and upwards for Wesfarmers’ earnings after FY 2024.

In light of this, it sees value in Wesfarmers shares at the current level and recently put a buy rating and $62.90 price target on them.

This implies an 8% annual return for investors before dividends and an 11% return including them.

The post Own Wesfarmers shares? Here’s your half-year results preview appeared first on The Motley Fool Australia.

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More reading

• Would I be crazy to buy Wesfarmers shares at $58?
• Beginner investors: 5 top Aussie stocks I’d buy for 2024
• Where I’d invest $2,000 in ASX 20 shares today
• Why I prefer buying ASX shares over bonds
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. 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 some names in the S&P/ASX 200 Index (ASX: XJO) that used to be staples in many investor portfolios, but have fallen out of favour in recent years.

However, at least one expert reckons there’s an opportunity to buy some of those for cheap right now with a long horizon to make some reasonable money.

Here are the two picks that Shaw and Partners portfolio manager James Gerrish has in mind:

Could the victim of geopolitics now become the beneficiary?

In 2020, COVID-19 seemingly had the whole world locked down without any vaccination or protection.

The Australian government then called for an independent enquiry into the origins of the pandemic.

While it was a reasonable suggestion, the Chinese Communist Party took great offence and started to place punitive economic measures against Australian businesses.

One of the biggest victims was Treasury Wine Estates Ltd (ASX: TWE), which instantly lost its biggest export market.

Four years later, the brutal fact is that the share price has still not recovered to its pre-COVID high.

However, Gerrish indicated in his Market Matters newsletter that his team was convinced the outlook looked positive from here for the winemaker.

“This week saw Wine Australia announce that Dec 23 export growth had improved significantly against the previous quarter,” he said.

“Strong demand from Hong Kong was the standout, with the over-$10-a-bottle category remaining stronger than the discount end.”

He pointed out that “Hong Kong is a major trading hub”, so wines could be distributed to the rest of Asia from there.

Gerrish’s analysts are “long and bullish” for Treasury Wine shares.

“We remain optimistic towards Treasury Wine Estates, based on our ongoing confidence in its Penfold distribution and pricing growth, plus the positive risk from the potential removal by China of duties on Australian wine, which we don’t believe is reflected in the share price.”

The team already holds Treasury in its active growth portfolio.

The ASX 200 healthcare outfit dispelling the doubters

Notwithstanding a recent rally, Resmed CDI (ASX: RMD) is still 12% lower than where it was in late July.

Gerrish loved the January business update.

“ResMed rallied strongly in late January after reporting better-than-expected 2Q earnings, primarily driven by better margins — a welcome relief after the stocks plunge on demand fears courtesy of Ozempic and other weight loss ‘wonder drugs’.”

His team already holds ResMed shares, but will continue to back it for further growth.

“The stock’s strength over the last fortnight is encouraging, but we aren’t tempted to cut this position even after it bounced ~38%,” said Gerrish.

“We can see ResMed trading well above $30 through 2024.”

ResMed closed Monday at $29.53.

The post ‘Long and bullish’: 2 classic ASX 200 shares to buy while they’re still cheap appeared first on The Motley Fool Australia.

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More reading

• Don’t look now, but these 3 ASX shares look poised for a nice rally
• ‘Appealing outlook’: 2 ASX 200 shares that just started their latest rally
• 3 top ASX 200 blue chip shares to buy in February
• Hoping to bag the ResMed dividend? You better be quick!
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor Tony Yoo has positions in ResMed. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed. 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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Nobody knows when the lithium rout will end. But one thing that we do know is that there is likely to be some bargain buys when it does.

But which ASX lithium shares could be good options when the tide finally turns? Two that brokers rates as buys are listed below. Here’s what they are saying about them:

IGO Ltd (ASX: IGO)

The first ASX lithium share that could be a buy is IGO.

That’s the view of analysts at Goldman Sachs, which believes its low costs and free cash flow (FCF) generation make it a great option in the current environment. It commented:

We rate IGO a Buy, where on valuation IGO is trading on <0.9x NAV (<1x excl. Ni) and pricing ~US$1,010/t spodumene, at a discount to peers (~1.05x NAV and ~US$1,200/t), with near-term FCF yields remaining >5% and attractive vs. peers (<0% on average) and supporting ahead of peer capital returns.

Goldman has a buy rating and $8.85 price target on IGO’s shares. This implies 28% upside for investors over the next 12 months.

Liontown Resources Ltd (ASX: LTR)

Another ASX lithium share that could offer big returns is lithium developer Liontown Resources.

Its shares have been hammered since its takeover collapsed late last year. While this is disappointing, Bell Potter sees it as a buying opportunity for investors with a high risk tolerance.

It believes the company’s Kathleen Valley lithium project is a valuable asset. The broker explains:

LTR owns the Kathleen Valley (KV) lithium project in Western Australia. KV is in development and set to commence production in mid-2024, supplying into Ford, Tesla and LG Energy Solution offtake agreements. The company is funded to complete KV and has a strong cash buffer over and above remaining development and working capital requirements. We expect lithium market sentiment to improve into 2024 as EV supply chain inventories normalise. KV is highly strategic in terms of being large scale and located in a stable mining jurisdiction.

Bell Potter has a speculative buy rating and $1.60 price target on its shares. This suggests potential upside of almost 80% for investors.

The post 2 dirt cheap ASX lithium shares to buy when the rout is over appeared first on The Motley Fool Australia.

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More reading

• 5 ASX mining shares with projects being spruiked by the Australian Federal Government
• Where will the bottom be for the scorched lithium price?
• Buy this ASX lithium share with “highly compelling” economics
• Uh oh! Does this spell more bad news for ASX 200 lithium shares?
• Liontown share price slips as plunging lithium price outweighs pending maiden production

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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If you’re wanting some exposure to small cap ASX shares, then it could be worth checking out the two below that Bell Potter has named as buys today.

Here’s what the broker is saying about them:

LGI Ltd (ASX: LGI)

The first small cap ASX share that has been named as a buy is LGI.

It is the local market leader in the recovery of biogas from landfill, and the subsequent conversion into renewable electricity and saleable environmental products.

Bell Potter was pleased with news that the company has signed a long-term gas management agreement with Bingo Industries, and its subsidiary Dial A Dump, covering the Eastern Creek Landfill site in Western Sydney. The broker commented:

In our view, a contract of this significance further validates LGI’s position as an industry leader in biogas recovery, which we view as a significant growth market to facilitate the transition to net-zero. The net result of our changes are minor downgrades to our FY24 estimates but more substantial upgrades to our long-term forecasts based on increased biogas flows from the new Eastern Creek Landfill project, which drives our upgrade to a BUY recommendation.

Bell Potter has upgraded its shares to a buy rating with an improved price target of $2.55. This implies potential upside of 23% for investors.

Nexted Group Ltd (ASX: NXD)

Another small cap ASX share that has been named as a buy is Nexted. It is a provider of tertiary education services to international and domestic students.

Bell Potter notes that Nexted has just released a trading update and guidance for FY 2024. The broker concedes that the update was modestly softer than it was expecting. It explains:

NXD expects to report 1H24 revenue +36% YoY to $59.2m (vs. BPe $59.8m) which is at the lower end of the guidance range as previously flagged ($59.0m-$63.0m).

Nevertheless, its analysts remain very positive on the company due to its exposure to the rebounding international student market. It said:

The re-opening of Australia’s international borders and removal of COVID restrictions, has prompted a strong recovery in international students in Australia. NextEd has significant exposure to this market with international students accounting for >75% of the total student and revenue mix. This recovery has (1) driven unprecedented demand for NextEd English language courses and (2) provided a subsequent cross-selling opportunity of progressing English students into other NextEd courses.

Bell Potter has retained its buy rating and $1.05 price target on its shares. This suggests 52% upside for investors.

The post 2 small cap ASX shares to buy for 20% to 50% returns appeared first on The Motley Fool Australia.

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More reading

• Morgans names the best ASX 200 stocks to buy in February
• 50% down: 2 ‘world leader’ ASX 200 shares ready to bounce back
• Down 47%: 2 ASX mining shares that could be on the way back up
• 3 ASX dividend shares for income investors to buy now
• 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 positions in and has recommended LGI Limited. The Motley Fool Australia has recommended LGI 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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When cyclical stocks are discussed, one cannot go past ASX mining shares.

Because of the brutal nature of commodity prices, the resources sector is highly liable to cycle up and down over the years.

That’s why, even if you intend to buy only the highest quality mining companies, grabbing them at a low point is critical.

Some experts this week named two stocks precisely in that position right now:

‘First commodity to bottom and then the first to recover’

Lynas Rare Earths Ltd (ASX: LYC) shares are in some strife.

The minerals stock is 47% down from its April 2022 peak. That’s a halving of value over just 22 months.

According to Catapult Wealth portfolio manager Tim Haselum, the market’s latest worry was the financial figures.

“Revenue of $112.5 million in the second quarter of fiscal year 2024 was down [in] the first quarter in response to lower production levels and weaker rare earths prices,” Haselum told The Bull.

However, all that matters is what happens from here, and Haselum is bullish.

“First feed of material from Mt Weld was introduced to the Kalgoorlie rare earths processing facility.

“The company’s amended operating licence in Malaysia is valid to March 2, 2026.”

He added that in the mining industry, rare earths tended to be “the first commodity to bottom and then the first to recover”.

Haselum is far from the only professional loving Lynas as a bargain buy right now.

CMC Invest shows that 10 out of 12 analysts rate the mining shares as a buy, with nine of them recommending strongly.

13% dividend yield!

New Hope Corporation Ltd (ASX: NHC) shares have had a similar journey to Lynas stocks, diving 28.7% since October 2022.

Even since October, the thermal coal miner has shaved 18.2% from its valuation.

Seneca Financial Solutions investment advisor Tony Langford reckons the numbers look fine from here.

“The company delivered a net profit after tax of $1.087 billion in fiscal year 2023, up 11% on the prior corresponding period. 

“New Hope finished the year with a healthy $731 million in net cash.”

The slump in the New Hope stock price has meant the dividend yield is now at a stunning 13.2%.

“Continuing demand for quality thermal coal makes New Hope particularly attractive for investors searching for yield at value.”

The post Down 47%: 2 ASX mining shares that could be on the way back up appeared first on The Motley Fool Australia.

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More reading

• Lynas shares rise on US merger talks
• 5 things to watch on the ASX 200 on Monday
• Here’s why I’d snap up this 13% yielding ASX 200 dividend stock in a heartbeat!
• Here are the top 10 ASX 200 shares today
• Goldman Sachs says these ASX 200 mining shares can rise 20%+

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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Are you looking for ASX dividend shares for your income portfolio?

If you are, then you could check out the three listed below that have been tipped as buys.

Here’s what analysts are saying about these shares:

Accent Group Ltd (ASX: AX1)

Accent Group could be an ASX dividend share to buy this month.

It is the company behind a large number of footwear focused retail store brands such as The Athlete’s Foot, Stylerunner, HYPEDC, and Sneaker Lab.

The team at Bell Potter is bullish on the company and has a buy rating and 2.50 price target on its shares.

As for income, 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 Accent share price of $2.09, this represents dividend yields of 5.75% and 6.75%, respectively.

Aurizon Holdings Ltd (ASX: AZJ)

Another ASX dividend share that has been given the thumbs up by analysts is Aurizon.

It is Australia’s largest rail freight operator, moving more than 250 million tonnes of Australian commodities each year across its network.

Analysts at Ord Minnett are positive on the company and have an accumulate rating and $4.70 price target on its shares.

As for dividends, the broker is forecasting partially franked dividends of 17.9 cents per share in FY 2024 and then 20.4 cents per share in FY 2025. Based on the latest Aurizon share price of $3.76, this will mean yields of 4.75% and 5.4%, respectively.

Healthco Healthcare and Wellness REIT (ASX: HCW)

A final ASX dividend share that could be a buy is the Healthco Healthcare and Wellness REIT.

It is a leading health and wellness focused real estate investment trust with exposure to attractive megatrends.

Bell Potter is feeling positive about the company’s outlook. It has a buy rating and $1.75 price target on its shares.

In respect to income, it is forecasting dividends per share of 8 cents in FY 2024 and 8.3 cents in FY 2025. Based on the current Healthco Healthcare and Wellness REIT unit price of $1.35, this will mean yields of 5.9% and 6.15%, respectively.

The post 3 ASX dividend shares for income investors to buy now appeared first on The Motley Fool Australia.

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More reading

• Are Accent shares a good buy right now?
• Brokers say these ASX dividend shares are buys next week
• The ASX dividend dream: 18% returns to fuel your income goals
• Morgans says these ASX dividend shares are buys this month
• ASX domination: The 5.5% dividend stock to watch

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 recommended Accent Group and Aurizon. 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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On Monday, the S&P/ASX 200 Index (ASX: XJO) started the week deep in the red. The benchmark index sank 0.95% to 7,625.9 points.

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

ASX 200 expected to fall again

The Australian share market is expected to fall again on Tuesday following a poor start to the week on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 30 points or 0.4% lower. In late trade in the United States, the Dow Jones is down 0.6%, the S&P 500 is down 0.25%, and the NASDAQ is 0.2% lower.

RBA meeting

All eyes will be on the Reserve Bank of Australia (RBA) today when the central bank holds its cash rate meeting. While the RBA is not expected to cut rates at this meeting, the market is likely to be looking for confirmation that the rate hike cycle is now over.

Oil prices charge higher

ASX 200 energy shares including Beach Energy Ltd (ASX: BPT) and Karoon Energy Ltd (ASX: KAR) could have a great session after oil prices charged higher overnight. According to Bloomberg, the WTI crude oil price is up 1.3% to US$73.22 a barrel and the Brent crude oil price is up 1.25% to US$78.30 a barrel. Middle East tensions gave prices a boost.

Fletcher Building remains a buy

Goldman Sachs believes that investors should be snapping up Fletcher Building Ltd (ASX: FBU) shares following yesterday’s tumble. In response to its update, the broker has retained its buy rating with a trimmed $4.65 price target. Goldman said: “[W]e believe cyclical risks are more than adequately reflected in FBU’s current valuation.”

Gold price falls

ASX 200 gold shares including Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) could have a subdued session after the gold price fell overnight. According to CNBC, the spot gold price is down 0.55% to US$2,042.6 an ounce. Higher bond yields put pressure on the precious metal.

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

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More reading

• History shows 2024 could be a big year for ASX 200 shares. Here are 3 to look at now
• Here are the top 10 ASX 200 shares today
• Why Core Lithium, Fletcher Building, Silver Lake, and Silver Mines shares are sinking
• Stocks on the rocks: Why the ASX 200 is backtracking from record highs today
• 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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If you’re looking for some new exchange traded funds (ETFs) to add to your portfolio, then read on.

That’s because listed below are three excellent ASX ETFs that could be top options for investors in February and beyond.

Here’s what you need to know about them:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

It’s almost the Lunar New Year, so what better time to check out the BetaShares Asia Technology Tigers ETF. This ASX ETF gives investors easy access to the best tech stocks in the Asian region (but excluding Japan). This means you’ll be buying a slice of world class companies such as e-commerce giant Alibaba, search engine leader Baidu, iPhone manufacturer Taiwan Semiconductor Manufacturing Company, and WeChat owner Tencent.

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

If you’re a fan of Warren Buffett and his investment style, then the VanEck Vectors Morningstar Wide Moat ETF could be for you. This hugely popular ASX ETF has been designed to provide investors with access to a portfolio of approximately 40 high-quality shares that have sustainable competitive advantages and fair valuations. These are the type of qualities that the Oracle of Omaha looks for when making investments.

Vanguard MSCI Australian Small Companies Index ETF (ASX: VSO)

If small caps are your thing then the Vanguard MSCI Australian Small Companies Index ETF could be worth considering. Especially with many analysts tipping small caps to boom this year if interest rates fall. This ASX ETF gives investors access to almost 200 quality mid and small-caps and not just the tail end of the stock market. Among its holdings are companies such as online travel agent Webjet Limited (ASX: WEB) and metal detector company Codan Limited (ASX: CDA).

The post Don’t miss out on these 3 excellent ASX ETFs in February appeared first on The Motley Fool Australia.

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More reading

• How I’m investing in ASX shares for my child
• The ultimate ASX growth shares I’d buy with $7,000 right now
• 3 excellent ASX ETFs to buy and hold in February
• Got $5,000? These are 2 of the best ASX growth stocks to buy right now
• Here are 10 ASX shares I’d buy in 2024

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 Baidu, Taiwan Semiconductor Manufacturing, and Tencent. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Alibaba Group. The Motley Fool Australia has recommended Betashares Capital – Asia Technology Tigers Etf and VanEck Morningstar Wide Moat ETF. 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’s nothing sweeter in investing than buying ASX shares before they’ve had the majority of their rally.

The great news is that, at any given time, opportunities abound for such thrilling rides.

Right now, here are three ASX shares I think are well placed to head upwards:

Internal and external factors lining up nicely

Lovisa Holdings Ltd (ASX: LOV) shares had an up-and-down 2023.

And it’s no wonder, with 13 interest rate rises deliberately distressing consumers and the consumer discretionary sector.

Through all this though, the budget jewellery retail business has been expanding.

Only a couple of months ago, the company revealed that its first stores in mainland China and Vietnam respectively were imminent.

Rates could stabilise this year and even come down, providing much-needed relief for cash-strapped consumers.

So after spending the middle majority of last year not knowing which way to go, it seems Lovisa shares are ready to trend upwards again.

The shares have now gained close to 30% since the start of November, as they inch closer back to their all-time highs achieved last May.

Professional investors are bullish on Lovisa from this point on.

According to CMC Invest, eight out of 12 analysts rate the stock as a buy.

The ASX shares that haven’t yet broken out

Over in the mining sector, Firefly Metals Ltd (ASX: FFM) is grabbing the attention of many fund managers.

Argonaut dealer Harrison Massey explained the excitement last week.

“FireFly, formerly known as AuTECO Minerals, completed the acquisition of the Green Bay Copper-Gold project in Newfoundland, Canada, in October 2023,” Massey told The Bull.

“The asset includes a significant ready-to-go underground copper deposit, which, in our view, offers considerable upscale potential amid a history of high-grade copper production.”

Aside from Massey’s team, CMC Invest indicates all three of Canaccord Genuity, Euroz Hartleys, and Shaw & Partners analysts believe Firefly shares are a strong buy.

This is why, after a flat period over December and January, the stock could break out for a rally soon.

Calming market fears

Healthcare stock Resmed CDI (ASX: RMD) looks poised for a bullish 2024 after putting last year’s Ozempic market panic behind it.

The concern was that such GLP-1 type of weight loss drugs could reduce obesity substantially around the world, thereby cutting down a major precursor of sleep apnoea.

ResMed makes devices that treat respiratory issues during sleep, so investors sold off in droves last reporting season.

But after a boom quarterly update last month that showed the worries were overstated, the ResMed share price is already 15% up this year.

Plenty of pros are backing a 2024 rally for the stock, with 18 out of 25 analysts surveyed on CMC Invest recommending buying right now.

The post Don’t look now, but these 3 ASX shares look poised for a nice rally appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has positions in Lovisa and ResMed. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa and ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool Australia has recommended Lovisa. 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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Shaver Shop Group Ltd (ASX: SSG) is a compelling ASX dividend stock that is expected to pay big dividends in the coming years. Those payouts could lead to a grossed-up dividend yield, which includes franking credits of more than 10%.

Considering the global share market has returned an average of around 10% per annum, getting that level of return from just the dividends could be very appealing (if the share price doesn’t go down over the long term).

How big is the Shaver Shop dividend going to be?

Shaver Shop paid an annual dividend per share of 10.2 cents in FY23. It has increased its dividend each year since 2017 when it first started paying a dividend.

The current estimate on Commsec suggests the business could pay an annual dividend per share of 10.3 cents, which would be a cash yield of 8.7% or a grossed-up dividend yield of 12.5%. That would be a huge yield, but at this stage, it’s just a forecast.

The dividend per share is forecast to be 10.4 cents in FY25, which would be a grossed-up dividend yield of 12.6%.

Shaver Shop’s dividend per share is forecast to jump in FY26 to 10.9 cents, which would be a grossed-up dividend yield of 13.2%!

Let me reiterate, analyst estimates are not guaranteed to happen.

Why is the ASX dividend stock’s yield so big?

I’d point to two reasons why this company is projected to pay such a large yield.

First, the dividend payout ratio is high, in FY24 it’s expected to be 86.5%. While that’s generous, it would also leave a little bit of profit in the business to re-invest for growth and/or improve the balance sheet.

Second, the business trades on a low multiple of its earnings, with a low price/earnings (P/E) ratio. While a low P/E ratio isn’t necessarily a good sign, it does have the effect of boosting the dividend yield. Retail businesses tend to trade on lower earnings multiples, compared to other sectors like ASX tech shares.

According to the estimate on Commsec, the Shaver Shop share price is valued at 10 times FY24’s estimated earnings.

Can the payout be maintained and keep growing?

I believe that demand for shaving products could remain fairly consistent – our body hair keeps growing, whether we want it to or not.

Pleasingly, a large amount of Shaver Shop’s earnings come from exclusive products, which means customers have to shop there if they want that particular product.

The ASX dividend stock can keep growing its network of stores, which can support total sales, even if same-store sales are challenged during 2024.

It is also growing its digital presence, with an expanded social media presence and a recent launch on TikTok. In the first four months of FY24, just over a fifth of its total sales were online.

If the profit can be stable and grow over time, then there’s a good chance the dividend can rise as well.

The post Should you buy this ASX dividend stock for its 12% yield? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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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