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On Friday the S&P/ASX 200 Index (ASX: XJO) was sold off amid concerns over a new strain of COVID-19. The benchmark index sank 1.7% to finish the week at 7,279.3 points.

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

ASX 200 expected to sink again

The Australian share market looks set to start the new week the same way as it ended the last one. According to the latest SPI futures, the ASX 200 is expected to open the day 104 points or 1.4% lower this morning. This follows a selloff on Wall Street on Friday which saw the Dow Jones fall 2.5%, the S&P 500 drop 2.3%, and the Nasdaq tumble 2.2%. The Dow had its worst day of the year.

Oil prices crash

Energy producers such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) are likely to start the week deep in the red after oil prices crashed on Friday night. According to Bloomberg, the WTI crude oil price sank 13.05% to US$68.15 a barrel and the Brent crude oil price has dropped 11.55% to US$72.72 a barrel. Oil had its worst day of the year amid concerns the new omicron strain of COVID-19 could hit demand just as supply increases.

ANZ shares rated as a buy

The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price could be in the buy zone according to the team at Bell Potter. This morning the broker retained its buy rating and $31.00 price target on the banking giant’s shares. Bell Potter notes that there are significant opportunities from decarbonising the economy and the bank is well positioned to facilitate to net zero emissions.

Gold price rises

Gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could start the week on a positive note after the market selloff boosted safe haven assets. According to CNBC, the spot gold price rose 0.45% to US$1,792.30 an ounce.

Iron ore prices fall

BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) shares could start the week in the red after iron ore prices tumbled on Friday night. According to Metal Bulletin, the benchmark 62% fines fell US$5.68 or 5.5% to US$96.67 per tonne. Things were even worse for low grade iron ore, which dropped US$5.31 or 7.1% to US$69.60 per tonne.

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

More reading

• Why are BHP (ASX:BHP) shares more shorted right now than ever before?
• Morgans rates these ASX 200 shares as buys
• When might Fortescue (ASX:FMG) Future Industries become profitable?
• Leading broker names 2 ASX energy shares to buy
• These were the best performing ASX 200 shares last 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 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 Bruce Jackson.

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If you have room for some new portfolio additions, then it could be worth considering the three ASX shares listed below.

Here’s why analysts at Morgans are bullish on these shares:

QBE Insurance Group (ASX: QBE)

Morgans is feeling positive about this insurance giant’s shares. It currently has an add rating and $13.70 price target on them.

The broker believes QBE’s shares are trading at an attractive level. Particularly given its balance sheet and the outlook for premium increases.

It said: “We see QBE as likely having positive underlying momentum into next year. QBE has been putting through top-line rate increases of around 9%, which should assist margin expansion into FY22. With QBE’s balance sheet recently reset, pricing tailwinds evident and the stock relatively inexpensive trading on ~12.9x FY22F PE.”

ResMed Inc (ASX: RMD)

Morgans is a fan of ResMed. Its analysts currently have an add rating and $40.80 price target on its shares.

The broker likes ResMed due to its very positive medium to long term outlook, which is being underpinned by its digital platform.

Morgans commented: “While we believe the next few quarters will likely be volatile, as COVID-related demand for ventilators continues to slow and core sleep apnoea volumes gradually lift, nothing changes our medium/longer term view that the company remains well-placed as it builds a unique, patient-centric, connected-care digital platform that addresses the main pinch points across the healthcare value chain.”

Sonic Healthcare (ASX:SHL)

Finally, this healthcare share is another that Morgans rates highly. The broker currently has an add rating and $47.05 price target on its shares.

Morgans is positive on Sonic due largely to its belief that COVID testing will remain strong for the foreseeable future. It also notes that its strong balance sheet opens up M&A opportunities.

Its analysts explained: “We see COVID-19 testing continuing into the foreseeable future, with growth potential in COVID serology testing. SHL’s global base business is increasingly resilient, benefitting from geographical diversity. Strong B/S (gearing 21.6x; A$1.3bn headroom) opening the door to acquisitions, contracts and JVs [joint ventures].”

The post Why a leading broker is bullish on these 3 ASX shares appeared first on The Motley Fool Australia.

More reading

• Analysts name 2 fantastic ASX 200 shares to buy
• Analysts name 3 ASX shares to buy now
• Top brokers name 3 ASX shares to buy today
• Could it be time to consider buying QBE (ASX:QBE) shares in November?
• 2 ASX 200 shares that could be top buys for growth

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 ResMed Inc. and Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It is getting closer to Christmas. Could the Woolworths Group Ltd (ASX: WOW) share price be an opportunity in the leadup to the festive season?

Woolworths has been through a fairly volatile period over the last couple of years. There was the pantry stocking at the start of the COVID-19 pandemic. Long lockdowns in Victoria and NSW also led to elevated demand for supermarket food.

What do analysts think of the Woolworths share price?

Some analysts are felling pretty negative about the business at the moment.

A few weeks ago, Woolworths released its trading update for the first quarter of FY22.

Both Credit Suisse and UBS rate the supermarket business as a sell after seeing that update.

UBS thinks that there is a slowing down of conditions for the supermarket giants in Australia.

Both Credit Suisse and UBS thinks that costs are going to increase and this could impact profitability.

Price targets on the Woolworths share price

Of the two bearish brokers I’ve mentioned, UBS has a price target of $37 on Woolworths.

Credit Suisse is much more negative. Its price target is just $31.84 – that implies a possible decline of around 20% over the next year if the broker is right.

But not every broker is so negative on the business. Some brokers have price targets that are higher than where it’s currently trading at.

One of the most positive is Ord Minnett, which has a price target of $43 on the Woolworths share price – more than 6% higher than today. The broker still feels the medium-term looks solid for the company.

Differences in profit expectations

How much profit Woolworths is expected to make can lead to a big difference to how much analysts are prepared to say it is worth today and what the price target is.

Using those profit projections, Credit Suisse reckons that the Woolworths share price values it at 34x FY22’s estimated earnings and 31x FY23’s estimated earnings.

But Ord Minnett is much more optimistic, the broker puts Woolworths shares at 30x FY22’s estimated earnings and 26x FY23’s estimated earnings.

FY22 first quarter

We’ve heard what analysts think, but it’s a good idea to know about the actual numbers that Woolworths is reporting and what the company is saying.

In the 14 weeks to 3 October 2021, group sales were up 7.8% to $6.07 billion, whilst total e-commerce sales were up 53.5% to $1.88 billion.

There was quite a large difference in performance between the main divisions.

Australian food saw sales growth of 3.9% year on year. Australian ‘B2B’ (business to business) saw growth of 196.4%, which included the acquisition of PFD Food Services as well as the recognition of Endeavour Group (ASX: EDV) partnership revenue. New Zealand food, in Australian dollars, was up 12.9% and Big W sales were down 17.5%.

In October, Australian food sales had “slowed” as lockdown restrictions eased, but Big W sales had improved.

The post Is the Woolworths (ASX:WOW) share price a buy in the lead up to Christmas? appeared first on The Motley Fool Australia.

More reading

• What is the current Woolworths (ASX:WOW) dividend payout ratio?
• The Woolworths (ASX:WOW) share price is up 20% so far in 2021. Here’s why
• Why is the Woolworths (ASX:WOW) share price growing greener today?
• New report says Woolworths (ASX:WOW) ‘not taking climate risks seriously’
• These ASX 200 shares could be set to face fresh pressure over climate action

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 Bruce Jackson.

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A record number of investors are shorting BHP Group Ltd (ASX: BHP) shares following the company’s upcoming structural change. The world’s second-largest miner has seen its shares tank around 30% from an all-time high of $54.55 in August.

At Friday’s market close, BHP shares added further pain to investors finishing the day down 1.53% to $38.03.

Short-sellers weigh in on BHP shares

Short-sellers are cashing in on quick money as BHP is finding itself caught between the group’s dual-listed company structure.

As reported by the Australian Financial Review (AFR), investors are taking advantage of the company’s recently announced plan to end its United Kingdom-listed PLC (public limited company) shares.

The 20-year-old dual-listed company structure began when BHP Ltd merged with Billiton PLC. The corporate structure enabled both companies to amalgamate without legally acquiring or merging, creating a tax-efficient business structure.

Between the pair, the shares are not transferable. The dividend payment amount and voting rights are equal. However, the ASX and UK-listed shares trade differently. The Australian shares command a higher price. This is because of Australia’s much-loved franking credits available to BHP Ltd shareholders.

Since August, hedge funds have heavily shorted the ASX-listed BHP shares and picked up the group’s cheaper PLC shares. In fact, almost 210 million BHP shares, or 7.1% of its entire issued capital, are shorted.

The dual-listing company structure will eventually collapse, leading to a 1-for-1 swap of PLC shares to BHP shares. Undoubtedly, big firms such as UBS, Morgan Stanley and Credit Suisse will be booking huge profits following repatriation day.

About the BHP share price

Since the beginning of the year, results have been disappointing for BHP shareholders, the share price falling by more than 10%. The company’s share price trekked higher until August before plummeting to 2020 lows this month.

BHP presides a market capitalisation of roughly $113.93 billion, and has approximately 2.95 billion shares outstanding.

The post Why are BHP (ASX:BHP) shares more shorted right now than ever before? appeared first on The Motley Fool Australia.

More reading

• Morgans rates these ASX 200 shares as buys
• Is the BHP (ASX:BHP) share price great value today?
• Are BHP (ASX:BHP) shares a compelling opportunity in the decarbonisation era?
• Top brokers name 3 ASX shares to buy today
• These top brokers say the BHP (ASX:BHP) share price is a bargain buy

Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

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The Rio Tinto Limited (ASX: RIO) share price could be one to watch in the near term. This comes as the mining giant’s CEO, Jakob Stausholm, attended a meeting with Mongolia’s Prime Minister Oyun-Erdene Luvsannamsrain.

At the closing bell on Friday, Rio Tinto shares finished down 2.25% to $94.46 apiece.

What happened?

In an effort to smooth tensions over Rio Tinto’s Oyu Tolgoi copper and gold mine, the 2 heads met together this week. The project has suffered major setbacks and cost overruns which have resulted in production delays.

Construction on the mine commenced back in 2010, touted as one of the world’s safest and most sustainable mines. The company leveraged new technologies and mechanical equipment to carry out more efficient mining operations.

First production was originally forecast to begin in late 2020, but geotechnical difficulties and COVID-19 pushed this date back. Rescheduled for October 2022, Rio Tinto has again moved the timeline to January 2023 because of cost blowouts.

The Mongolian government threatened to tear up the 2009 investment agreement, in which it has a considerable stake. An independent review rejected Rio Tinto’s explanation for the project’s delays and climbing costs.

Canadian-listed Turquoise Hill Resources, the other major shareholder in the project, advised it needed US$3.6 billion in further funding. Rio Tinto holds a 50.8% interest in the mineral exploration and development company.

However, the Mongolian government’s stance is that Rio Tinto should cover any additional costs.

Some believe that concessions could be made to the Mongolian government to reset relations and complete the project.

Once online, the mine will produce around 560,000 tonne of copper resources per year at full operational capacity. This is forecasted to occur sometime no earlier than 2025.

Should everything run according to plan, the Oyu Tolgoi project could be the world’s fourth-largest copper mine by 2030.

Rio Tinto share price summary

Over the past 12 months, Rio Tinto shares have fallen 8% despite hitting a 52-week low of $87.28 in mid-November. When looking at 2021 alone, its shares have plummeted by almost 20%.

Rio Tinto commands a market capitalisation of roughly $35.87 billion with approximately 371.22 million shares outstanding.

The post Own Rio Tinto (ASX:RIO) shares? Why the CEO met with the Mongolian Prime Minister this week appeared first on The Motley Fool Australia.

More reading

• 2 high quality ASX 200 blue chip shares with major upside potential
• 5 things to watch on the ASX 200 on Thursday
• Here’s why Macquarie sees 39% upside in the Rio Tinto (ASX:RIO) share price
• Only a few ASX 200 companies have received this honour and Scentre (ASX:SCG) just joined them
• Why this mining analyst is upbeat on the iron ore price forecast

Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

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If you’re looking to bolster your portfolio with some new ASX 200 shares in December, then you may want to consider the two listed below.

Both have recently been named as buys by the team at Morgans. Here’s what they have to say about these ASX 200 shares:

BHP Group Ltd (ASX:BHP)

If you’re happy to invest in the resources sector, then BHP could be an ASX 200 share to consider according to Morgans. Its analysts believe the company is a relatively low risk option in the sector and see a lot of value in its shares at the current level.

Morgans has an add rating and $45.70 price target on BHP’s shares.

The broker commented: “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,” it added.

Treasury Wine Estates (ASX:TWE)

Another ASX 200 share to consider is Treasury Wine. Morgans believes the wine giant’s shares are undervalued, particularly given its recent restructuring. And while it acknowledges that it will take time to recover its lost earnings in China, the broker remains positive on the future.

Morgans has an add rating and $14.06 price target on the company’s shares.

It commented: “TWE has the China reallocation risk and it will take 2-3 years to recover these earnings in new markets. However, outside of China, its key markets, particularly the US, are recovering faster than expected from COVID.”

“The new business units centred around the brands, are now fully in place and we are excited to see what they can earn with TWE effectively creating the benefits of a demerger without the extra costs. It also demonstrates that the SOTP is worth materially more than the whole. It shines a light on Penfolds and its best-in-class margins and may ultimately lead to corporate activity in some form in the future. We rate this management team highly,” it concluded.

The post Morgans rates these ASX 200 shares as buys appeared first on The Motley Fool Australia.

More reading

• Is the BHP (ASX:BHP) share price great value today?
• Are BHP (ASX:BHP) shares a compelling opportunity in the decarbonisation era?
• Top brokers name 3 ASX shares to buy today
• These top brokers say the BHP (ASX:BHP) share price is a bargain buy
• Cheers! Morgans tips Treasury Wine (ASX:TWE) share price to rise 19%

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 Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Investors in the BetaShares Asia Technology Tigers ETF (ASX: ASIA) would be fairly used to getting a performance that bests the S&P/ASX 200 Index (ASX: XJO). After all, this is an ASX ETF that has managed to give investors an average return of 24.4% per annum over the past 3 years. In contrast, the iShares Core S&P/ASX 200 ETF (ASX: IOZ), an index fund that tracks the ASX 200, has returned an average of 22.8% per annum over the same period.

Over November thus far, the ASX 200 has gone backwards by roughly 0.6%. So we can see this trend continuing somewhat, seeing as the ASIA ETF has given its investors a return of 1.42% over the same period. But it hasn’t all been smooth sailing. ASIA spent the first half of the month giving its investors the kind of returns they might be used to, shooting up more than 7% by 17 November.

But since then, it has been a different story. At the end of that particular Wednesday, ASIA units closed at a price of $10.55. On Friday, those same units ended the day at $9.99. That’s a slide of around 5.3%. So it’s fair to say this ETF has spent a good chunk of November on struggle street.

So what might we blame this performance on?

ASIA ETF struggles in November

Well, to dig into that question, let’s check out what kind of investments underpin ASIA’s investing portfolio. Like all share-based ETFs, ASIA is a fund that invests in underlying shares. Unlike an index fund though, this ETF holds a relatively concentrated portfolio of 50 companies. According to BetaShares, these are selected to give investors exposure to “the 50 largest technology and online retail stocks in Asia (ex-Japan).”

So ASIA’s current largest holdings (and their fund weightings) are as follows:

1. Taiwan Semiconductor Manufacturing Company Ltd, with a weighting of 10.9%
2. Samsung Electronics, with a weighting of 10.1%
3. Tencent Holdings Ltd, with a weighting of 9.8%
4. Alibaba Group Holding Ltd, with a weighting of 8.7%
5. Meituan, with a weighting of 6.7%

As you can see, even though ASIA already has a relatively concentrated portfolio, its 5 largest holdings make up almost half (46.2%) of this ETF’s portfolio. That means they have a massive influence on how this ETF performs.

So, let’s check out how these stocks have been travelling over November so far.

Taiwan Semiconductors has put on roughly 3% since the end of October.

Samsung is up 3.58%.

Tencent is down 3.66%.

Alibaba has lost a nasty 19.15%.

And Meituan has lost 2.2%.

As you can gather, it’s the Chinese e-commerce giant Alibaba that we can probably blame for ASIA’s struggles over November (particularly the back half of the month). A near-20% decline of an ETF’s fourth-largest holding is going to put a dent in its performance, especially if the other major holdings don’t have an explosive month of gains to make up for it. This is the most probable reason why ASIA has had such a lukewarm month.

The BetaShares Asia Technology Tigers ETF charges a management fee of 0.67% per annum.

The post Why is the BetaShares Asia Technology Tigers ETF (ASX:ASIA) struggling this month? appeared first on The Motley Fool Australia.

More reading

• 3 ETFs for ASX investors to buy now
• 2 fantastic ETFs for ASX investors in 2022
• Here’s why the ASIA (ASX:ASIA ETF share price is in focus on Thursday
• 2 excellent ETFs for ASX investors to buy today
• Here’s a highly rated tech ETF for ASX investors in November

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you’re looking for an easy way to invest your hard-earned money, then exchange traded funds (ETFs) could be worth considering.

Rather than deciding on which individual shares you should put your money into, ETFs will allow you to invest in a large group of shares through just a single investment.

With that in mind, here are three ETFs that are popular with investors right now:

BetaShares Global Cybersecurity ETF (ASX: HACK)

The first ETF for investors to look at is the BetaShares Global Cybersecurity ETF. This fund provides investors with exposure to the leaders in the global cybersecurity sector. BetaShares notes that this is heavily under-represented on the ASX, making this ETF particularly attractive for local investors. Especially given how the sector is forecast to grow materially in the future due to the increasing importance of cybersecurity. Among the companies in the fund are cybersecurity giants Accenture, Cloudflare, Crowdstrike, Okta, and Palo Alto Networks.

BetaShares NASDAQ 100 ETF (ASX: NDQ)

Another ETF to consider is the BetaShares NASDAQ 100 ETF. This is one of the most popular ETFs around and it isn’t hard to see why. The BetaShares NASDAQ 100 ETF gives investors a slice of the 100 largest non-financial shares on the famous NASDAQ index. This means you’ll be buying a stake in tech giants including Alphabet, Amazon, Apple, Facebook, Microsoft, Netflix, and Tesla, to name just a few.

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

A final ETF to look at in December is the VanEck Vectors Video Gaming and eSports ETF. This ETF gives investors access to a portfolio of the largest companies involved in video game development, hardware, and esports. Among the companies you’ll be buying a slice of are giants such as Nvidia, Roblox, Take-Two, and Electronic Arts. VanEck notes that these companies are in a position to benefit from the increasing popularity of video games and eSports. It also highlights that it gives investors the opportunity to diversify their portfolio by providing tech options outside FAANG stocks.

The post 3 excellent ETFs for ASX investors in December appeared first on The Motley Fool Australia.

More reading

• 2 top ASX growth shares that could be worth buying
• Why Zip (ASX:Z1P) and this ASX tech share could be buys
• 2 fantastic ETFs generating strong returns for ASX investors
• 3 ETFs for ASX investors to buy now
• 2 excellent ETFs for ASX investors to buy in 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. owns shares of and has recommended BETA CYBER ETF UNITS and BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of and has recommended BETA CYBER ETF UNITS and BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended VanEck Vectors ETF Trust – VanEck Vectors Video Gaming and eSports ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that investors might want to be aware of are summarised below.

Here’s why brokers think investors ought to buy them next week:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of Citi, its analysts have retained their buy rating and lifted their price target on this infant formula company’s shares to $7.30. Citi lifted its price target after upgrading its earnings estimates slightly for the coming years. Outside this, the broker has been encouraged by the improvement in A2 Milk’s inventory position, restructured distributor agreements, and the strength of the brand in China. The A2 Milk share price ended the week at $6.00.

Adairs Ltd (ASX: ADH)

A note out of UBS reveals that its analysts have retained their buy rating and lifted their price target on this homewares retailer’s shares to $5.90. This follows news that the company has agreed to acquire furniture retailer Focus on Furniture for $80 million. UBS is a fan of the deal and notes that it means Adairs now has a complete home furnishing offering. It expects the acquisition to support strong earnings growth over the coming years and has upgraded its forecasts to reflect this. The Adairs share price was fetching $3.64 at the end of the week.

Domain Holdings Australia Ltd (ASX: DHG)

Another note out of Citi reveals that its analysts have recommenced coverage on this property listings company’s shares with a buy rating and $6.50 price target. Citi is positive on Domain due to its belief that listings volumes will remain elevated in the near term. In addition, the broker is a fan of Domain’s recent investments in property data solutions to create a property ecosystem and believes its shares trade at a more attractive valuation compared to REA Group Limited (ASX: REA). The Domain share price was trading at $5.38 on Friday.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

More reading

• 2 ASX dividend shares expected to pay BIG income
• Could ASX 200 retail shares deliver some dividend surprises in 2022?
• Are A2 Milk (ASX:A2M) and this beaten down share bargain buys?
• Why Adairs, EML, Fisher & Paykel Healthcare, and NRW are storming higher
• ASX retail shares in focus as CBA forecasts bumper Black Friday weekend

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. owns shares of and has recommended ADAIRS FPO. The Motley Fool Australia owns shares of and has recommended ADAIRS FPO. The Motley Fool Australia has recommended A2 Milk and REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Is it possible that Bank of Queensland Limited (ASX: BOQ) shares are really going to pay a 10% dividend yield in the next couple of years?

BOQ is one of the larger banks on the ASX outside of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and Macquarie Group Ltd (ASX: MQG).

It runs a few different brands including the BOQ brand, as well as Virgin Money Australia and ME Bank after acquisitions.

But what about this large dividend yield?

BOQ’s potential 10% dividend yield

The possible 10% dividend yield refers to the projected annual dividend for the 2023 financial year with analysts giving their best guess as to what the shareholder payment will be for that year.

The broker Morgans currently has a full year dividend estimate of $0.55 per share for FY23.

At the current BOQ share price, that translates into a future grossed-up dividend yield of 10.1%.

That dividend is based off the regional bank generating $0.91 of earnings per share (EPS), which means that the bank would only have a dividend payout ratio of 60%.

Why is Morgans positive about the future?

The broker thinks that the bank is going to make higher returns in the future for shareholders and points out that there are expectations for growth in FY22.

BOQ says that it’s focused on achieving sustainable profitable growth. In FY22 it’s expecting at least 2% jaws, driven by above system growth in its BOQ and Virgin Money Australia brands, and by returning ME Bank to around system growth by the end of year.

The net interest margin (NIM) is expected to decline mid to high single digit basis points in FY22 because of the ongoing low interest rates and the amount of competition in the space.

What about the FY22 BOQ dividend?

The current financial year isn’t expected to be quite as big as 10%.

Each broker has a different projection, but we’ll stick with what Morgans is thinking.

The broker has pencilled in an annual dividend of $0.49 per share for the 2022 financial year.

At the current BOQ share price, that would represent a grossed-up dividend yield of 9%.

Current focus

BOQ is focused on business growth as well as the integration of ME Bank, which is “well progressed”. Management say the bank is executing against the strategic transformation roadmap.

Over the next year, the second phase of the Virgin Money Australia digital bank will be available to customers and will include home loans and additional deposit products.

Work is also “well progressed” on the first phase of the BOQ digital bank which leverages the investment in Virgin Money.

The post Are Bank of Queensland (ASX:BOQ) shares really going to pay a 10% dividend yield? appeared first on The Motley Fool Australia.

More reading

• Here’s why Morgans tips 30% upside for the Bank of Queensland (ASX:BOQ) share price
• What is Bank of Queensland (ASX:BOQ) doing to compete with BNPL rivals?
• The Bank of Queensland (ASX:BOQ) dividend is being paid today. Here’s what you need to know
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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 recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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