Tag: Motley Fool

Do you own ANZ Group Holdings Ltd (ASX: ANZ) shares? You might have noticed talk about ‘neutralisation’ from the bank lately.

It relates to its upcoming interim dividend. Specifically, the dividend reinvestment plan (DRP) offered to investors.

Under a DRP, investors can opt to receive their dividends in the form of shares, rather than in cash.

So, what does it mean and how might it impact shareholders? Let’s take a look.

Right now, ANZ shares are trading for $23.99, 1.48% higher than its previous close.

Comparatively, the S&P/ASX 200 Index (ASX: XJO) is up 0.7% at the time of writing.

ANZ embarks on ‘neutralising’ shares issued through DRP

ANZ is about to embark on a mission to buy back a number of its new shares. Approximately $327 million worth, in fact, as the ASX 200 bank revealed today.

But it’s not a means to return capital to shareholders, like most on-market share buybacks.

Instead, ANZ’s new buyback will aim to neutralise the impact of shares handed to investors engaging with the company’s DRP for its upcoming interim dividend.

That means no new shares are expected to be created for the purpose, therefore the bank will avoid diluting its earnings over additional stocks.

That’s good news for investors. A fitting visualisation of share dilution for a Friday afternoon is one offered by my Fool colleague Mitch earlier this week. He wrote:

Like enjoying a bottle of red among friends… if another glass turns up, that means less red going into yours …

If an ASX stock you own continuously increases the share count over time, your share of earnings will grow smaller and smaller. And, where earnings per share (EPS) goes, the share price will eventually be sure to follow.

ANZ has appointed UBS Australia to execute its planned $327 million on-market buyback.

Further, the pricing period for the DRP has kicked off today. The ANZ share price over the 10 trading days ended 1 June will determine how many shares an investor receives in return for their dividends.

ANZ declared its 81 cents per share, fully franked, interim dividend earlier this month. It’s expected to hit shareholders’ accounts from 3 July.

The post Neutralised? What it means for ANZ shares and their reinvested dividends appeared first on The Motley Fool Australia.

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More reading

• With interest rates rising, why have ASX 200 bank shares been pummelled in 2023?
• Why ANZ shares are Citi’s top banking pick
• Investing in ANZ shares? Here’s what’s happening with the bank’s $3.5 billion Suncorp acquisition
• Citi says these ASX 200 dividend shares are buys for passive income
• Warren Buffett is dumping bank stocks. Should you?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It looks as though the S&P/ASX 200 Index (ASX: XJO) is heading for a pleasant end to what has been a bumpy week. So far today, the ASX 200 has added a healthy 0.63%.

But the same can’t be said of the Newcrest Mining Ltd (ASX: NCM) share price. Newcrest shares are having a shocker today. In early trade, the ASX 200 gold miner hit a low of $26.82.

Not only is that a significant slump, but it drags the Newcrest share price to a six-week low. Yep, the last time Newcrest was under $7 a share was back in early April. Right now, Newcrest shares have clawed back a little ground but are still down 1.71%, trading at $27.04 a share.

Since Newcrest’s latest 52-week high, which occurred only just last month, Newcrest shares have lost around 10%.

So what’s going on with this gold miner that has caused such a change of sentiment? After all, it has only been a few days since investors were buoyed by the news that Newcrest’s takeover by the US gold mining giant Newmont got the green light.

Why is the Newcrest share price at a six-week low?

Well, it seems the culprit is a falling gold price. Earlier this month, gold looked like it was about to break its all-time record high of US$2,075 an ounce. Gold topped out at around SU4,050 an ounce in early May. But it has been falling steadily ever since. Today, the yellow metal is asking just over US$1,970 an ounce.

It appears that the prospect of higher interest rates in the United States might be to blame for this fall in value.

This explains why the Newmont bid isn’t coming to the Newcrest share price’s rescue. The deal is an all-scrip one, which will see Newcrest shareholders given 0.4 shares of Newmont for every Newcrest share owned. Since the Newmonth share price also depends on the gold price itself, both companies have been losing value in recent weeks.

Even so, Newcrest shares still remain up a pleasing 29.75% year to date, despite the near-10% drop we have seen recently.

The post Why is the Newcrest share price sitting at 6-week lows? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• 12 ASX exchange-traded funds (ETFs) smashing new 52-week highs today
• Here’s the latest on the US debt ceiling and what it means for ASX 200 shares

Motley Fool contributor Sebastian Bowen has positions in Newcrest Mining. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The share price for AMP Ltd (ASX: AMP) is climbing Friday, in spite of the Federal Court handing down a massive penalty against the financial giant.

On Friday afternoon AMP shares were up 1.39%, trading at $1.10.

This was all while the Federal Court found four businesses within the AMP group had illegally charged life insurance premiums and advice fees from the superannuation accounts of 2,000 dead customers.

The court ordered two of those entities, AMP Life and AMP Financial Planning, to pay a fine totalling $24 million.

According to Australian Securities and Investments Commission deputy chair Sarah Court, the “misconduct represents a fundamental breach of trust between a customer and their financial services provider”.

“Customers, and their beneficiaries, expect financial services providers to have the proper systems in place to ensure, once notified, deceased customers are no longer charged,” she said.

“These systems were inadequate, and customers were let down.”

Dead customers were ‘vulnerable’

AMP, in an announcement to the ASX, acknowledged the court’s decision.

“AMP apologises to all beneficiaries of those affected by this matter,” said AMP group general counsel David Cullen.

“We have made strong progress in becoming a customer-focused and purpose-led organisation, and this historical matter is not reflective of the AMP we are today.”

He added that “significant changes” had been made to the company’s systems to avoid such an incident.

The ASIC investigation found that AMP received more than $500,000 in insurance premiums and more than $100,000 in advice fees from deceased customers.

Both AMP Life and AMP Financial Planning admitted the revenue was accepted even though there were “reasonable grounds” to believe that services could not be provided.

The court found all four AMP businesses had failed to act “efficiently, honestly and fairly”, as required by their financial services licences.

Justice Lisa Hespe described AMP’s behaviour as “serious, wrongful”.

“The deceased members affected were vulnerable, obviously unable to monitor their accounts and were entirely reliant on the representatives of their estates,” she said.

“The beneficiaries of those estates involved individuals who may be expected to have been emotionally vulnerable and unlikely to be familiar with the terms of a policy not issued to them or on their behalf.”

The wrongdoing did little to improve company performance anyway. AMP shares have sunk a horrific 72% over the past five years.

The post AMP share price rockets despite scandal triggering massive fine appeared first on The Motley Fool Australia.

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More reading

• If I’d invested $8,000 in AMP shares in June here’s how much passive income I’d be earning today
• How did the AMP share price manage to surge 8% in April?
• AMP shares are finally heading upwards, but will it last?

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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BHP Group Ltd (ASX: BHP) shares have recouped their morning losses and are up 0.2% at the time of writing.

The S&P/ASX 200 Index (ASX: XJO) iron ore miner is currently trading for $44.32 per share. That’s up 1.9% from last Friday’s closing price.

That’s the latest price action for you.

Now, here’s why BHP shares made our headlines this week.

What’s been happening with BHP shares?

The ASX 200 iron ore giant popped into The Motley Fool headlines on Monday after Ben Cleary, portfolio manager for the Tribeca Global Natural Resources Fund, said BHP shares could trade for $100 apiece over the longer term. That’s 126% higher than the current price.

Cleary said that supply constraints for industrial metals were looming, despite fears of a global recession and some slower-than-expected short-term demand from China.

He noted that there’s been a “decade of underinvestment in new projects, while demand is continuing to build amid the transition to a decarbonised world”.

And he pointed to ongoing strong credit growth in China as likely to fuel demand for iron ore.

“We just think it’s a great time to be adding exposure to the sector, and we have been, despite the uncertain environment we’re in,” Cleary said.

Indeed, on Thursday BHP shares were back in our headlines as the miner outpaced the ASX 200, closing the day up 1.2%.

That came on the back of a 2.8% overnight increase in the price of iron ore, to US$110 a tonne.

Why did the price of the steel-making metal lift-off?

Well, mostly thanks to China, where new home prices increased 0.3% across 70 cities in April.

“The market is hoping this is a harbinger to a pick-up in steel output,” ANZ economist John Bromhead said.

“Optimism was further fuelled after China’s NDRC pledge to keep boosting loans to the manufacturing sector,” he added.

Let’s not forget the juicy BHP dividends

BHP shares also made our headlines this week thanks to the miner’s fully franked dividends.

The ASX 200 miner currently trades on an 8.8% trailing yield.

And Goldman Sachs believes BHP shares will continue to deliver above-average dividend yields over the next two years.

The broker is forecasting the miner will pay dividends of $3.08 in FY23 and $2.45 in FY24.

At the current share price, that comes out to a yield of 7% in FY23 and 5.5% in FY24.

Goldman also has a $49.90 12-month price target on BHP shares. That’s 12.6% above the current price.

The post Why BHP shares made our headlines this week appeared first on The Motley Fool Australia.

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More reading

• Buy these ASX shares with big dividend yields: Goldman Sachs
• Why is the BHP share price outpeforming the ASX 200 today?
• How does the Fortescue dividend stack up against BHP and Rio?
• Why the BHP dividend forecast has caught my attention!
• This fund manager thinks the BHP share price could reach $100!

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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 APA Group (ASX: APA) share price is up today after the ASX energy infrastructure business announced some promising news relating to its hydrogen endeavours.

APA currently has a national network of natural gas pipelines around Australia, transporting half of the nation’s natural gas usage.

The business has been looking to future-proof itself by considering the possibility of transporting hydrogen through its pipelines. Today’s announcement revealed a promising development.

Successful hydrogen experiment

APA announced that its first potential conversion of a gas transmission pipeline to a pure hydrogen service is a “step closer”. It successfully completed laboratory testing of Parmelia gas pipeline materials in a pressurised hydrogen environment.

This research is testing the ability of a 43km section of the Parmelia gas pipeline in Western Australia to carry up to 100% hydrogen.

The research, partly funded by the WA Government’s renewable hydrogen fund, showed that the existing 43km section of steel transmission pipeline can “technically transport pure or blended hydrogen through the pipeline without reducing the operating pressure.”

The main reason for the research is to “understand and quantify the effect of hydrogen on a section of Parmelia gas pipeline material, so the safety and operating efficiency of the pipeline can be adequately assessed.”

APA has developed a screening tool for its pipelines that provides a high-level assessment of the pipeline’s readiness for hydrogen, based on “key pipeline material and operating characteristics.”

What could this mean for APA’s gas pipeline network?

APA believes that it shows potential for its existing gas transmission pipeline network to “play an important role in connecting hydrogen production hubs to industrial sites across the nation.”

Adam Watson, the APA CEO, said:

Our research indicates that it’s technically feasible, safe and efficient to convert the 43-kilometre section of the Parmelia Gas Pipeline into a 100% hydrogen service – this would be an Australian first.

APA’s 15,000 kilometres of gas pipelines are linked and adjacent to some of Australia’s best geographical areas for both blue and green hydrogen production. This research provides us with the knowledge that can be used to assess the potential future role they could play in providing a hydrogen supply service.

For the remainder of APA’s pipelines, which consist largely of high strength steel pipelines operating at higher pressure, further research and materials testing will be required to determine if any changes in operating pressure are needed to maintain pipeline integrity whilst transporting hydrogen.

Following the application of the Pipeline Screening Tool, detailed assessment and testing would then need to be undertaken of each specific asset, as well as the equipment of our customers.

The research can now move onto stage three, which includes “detailed safety studies and conversion plans, ahead of moving to the delivery phase.”

Progress with Wesfarmers Ltd (ASX: WES)

APA also gave a small update about its progress with Wesfarmers.

A year ago, APA and Wesfarmers chemicals, energy and fertilisers (WesCEF) signed an agreement to undertake a pre-feasibility study to assess the viability to produce and transport green hydrogen through the Parmelia gas pipeline to WesCEF’s production facilities in Kwinana.

APA said the pre-feasibility studies are “promising”, with the results demonstrating that the Parmelia gas pipeline study area “likely to be suitable for green hydrogen development. APA and WesCEF are now considering whether to progress to a feasibility study.”

The post ‘Technically feasible’: This ASX energy giant is preparing to be a hydrogen highway appeared first on The Motley Fool Australia.

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More reading

• 2 ASX 300 shares I’d buy for long-term dividend income
• 2 ASX dividend income beasts with impressive payout records
• 6 excellent ASX 200 dividend shares that aren’t banks or miners

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 positions in and has recommended Apa Group and 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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Shares in All Ordinaries Index (ASX: XAO) company AUB Group Ltd (ASX: AUB) are back on the move once more.

Stock in the insurance broker exited a single-session trading halt this morning on news the company successfully raked in $150 million.

Right now, the AUB share price is $27.67, 7% higher than it was at Wednesday’s close.

Let’s take a closer look at all that’s been going down with the All Ords share this week.

ASX All Ords share soars on oversubscribed placement

The AUB share price is roaring ahead of the All Ords on Friday after the company’s $150 million placement received strong support from institutional shareholders.

Investors had the opportunity to snap up a portion of 6.25 million new shares offered for $24 apiece. That represented a 7.2% discount on the stock’s Wednesday close.

Proceeds from the capital raise will replace $100 million of cash in flow previously expected to come from a joint venture between AUM’s Tysers UK Retail business and PSC Insurance Group Ltd (ASX: PSI). The proposed venture was binned earlier this week.

AUB CEO Mike Emmett commented that the company was “very pleased” with the outcome of the oversubscribed placement, saying “it is a testament to the strong performance of both AUB and the Tysers business”. Emmett continued:

We continue to focus on delivering our strategy by combining strong organic performance with executing accretive M&A. This raising provides us the financial flexibility required to capitalise on our attractive M&A pipeline, so we thank our investors for their continued support.

And retail investors need not fret. They’ll get their chance to join in on the capital raise under a share purchase plan (SPP).

The plan is expected to raise $15 million. It will allow shareholders to secure up to $30,000 of new securities in the All Ords company for $24 apiece.

An offer booklet for the SPP is expected to be released to the ASX in around a week’s time.

AUB share price snapshot

Today’s gain is just the latest to boost the AUM share price higher.

The ASX All Ords share has been outperforming the benchmark index lately. It’s gained 23% since the start of 2023 and 43% since this time last year.

Meanwhile, the All Ords has risen 5% year to date and 2% over the last 12 months.

The post This ASX All Ords share is surging 5% after securing $150 million appeared first on The Motley Fool Australia.

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More reading

• Why is everyone talking about AUB shares on Thursday?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended PSC Insurance Group. The Motley Fool Australia has recommended Aub Group and PSC Insurance 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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The Austal Ltd (ASX: ASB) share price is sailing at full steam ahead today, up 25.4%.

Shares in the ASX shipbuilder closed yesterday trading for $1.60. At the time of writing, Austal shares are changing hands for $2.00 apiece.

This follows the company’s announcement this morning of a contract potentially worth $4.8 billion.

What did the ASX shipbuilder report?

The Austal share price is flying higher after the company reported the United States Navy has awarded Austal USA some lucrative contracts.

Those comprise a US$113.9 million fixed-price incentive (firm target) and firm-fixed-price contract for detail design of the Auxiliary General Ocean Surveillance Ship T-AGOS 25 Class.

According to the release, the contract includes options for detail design and construction of up to seven T-AGOS 25 Class ships.

Helping lift the Austal share price today is the company’s report that if that option is exercised, the cumulative value of the contract comes to US$3.2 billion (AU$4.8 billion).

The 110m steel-hulled T-AGOS ships support anti-submarine missions for the US Atlantic and Pacific Fleets by providing a platform capable of passive and active anti-submarine acoustic surveillance.

Management commentary

Commenting on the contract sending the Austal share price up today, CEO Paddy Gregg said Austal USA was “honoured to be selected to deliver this critical capability for the Navy”.

Gregg said the contract would take advantage of the company’s “advanced manufacturing processes, state-of-the-art steel shipbuilding facilities”, and growing team of shipbuilders.

He added:

The T-AGOS contract is a clear acknowledgment of Austal’s capabilities in steel naval shipbuilding, that includes the Navy’s Towing, Salvage and Rescue (T-ATS) ships, an Auxiliary Floating Drydock Medium (AFDM), and the US Coast Guards’ Offshore Patrol Cutters.

Gregg said these four steel naval shipbuilding projects were “positioning Austal USA exceptionally well to meet the growing demands of the US Navy and Coast Guard”.

Austal share price snapshot

With today’s big intraday boost factored in, the Austal share price is back in the green over the full year, up 2.4%.

The post Why the Austal share price is sailing 25% higher today appeared first on The Motley Fool Australia.

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More reading

• Broker urges investors to buy the dip in the Beach Energy share price for a 50% return
• 4 ASX 200 shares trading ex-dividend next week
• 3 reasons to buy Westpac shares now: broker
• Dusk share price sinks 16% today as cost of living weighs
• Back to 100%: The deal driving Qantas shares into the green on Friday

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Austal. 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 Beach Energy Ltd (ASX: BPT) share price is recovering on Friday after taking a tumble yesterday.

At the time of writing, the energy producer’s shares are up 1% to $1.37.

Why did its shares tumble on Thursday?

Investors were selling down Beach Energy shares yesterday amid news that the company has abandoned its target schedule and capital estimates for the Waitsia Stage 2 project.

Beach Energy made the move in response to the tight labour market in Western Australia, which has impacted construction progress and created a range of uncertain outcomes.

Why is the Beach Energy share price rebounding?

Today’s gain may have been driven by a reasonably bullish broker note out of Bell Potter this morning.

According to the note, the broker has responded to yesterday’s news by retaining its buy rating with a slightly trimmed price target of $2.05.

Based on the current Beach Energy share price, this implies potential upside of approximately 50% for investors over the next 12 months. The broker also expects a 3% dividend yield to sweeten the deal even further.

While disappointed with the news, Bell Potter remains positive. It said:

Waitsia Stage 2 is a key component of BPT’s near-term production growth, adding around 7.8MMboe/year net capacity (for context FY23 production guidance is 19.0-20.5MMboe). Delays to the project will mostly impact FY24 production and earnings estimates and make providing FY24 guidance problematic for BPT. However, the impact on valuation is less pronounced with production deferred to later periods. BPT has a strong balance sheet to withstand capital cost pressures.

The broker then concludes:

BPT has a strong, fully funded production growth outlook, diversified across five energy basins and across four separate gas markets, including LNG. BPT is rolling-off peak capex into a step-change in production and free cash flow in FY24, has a strong balance sheet, and has a capital management framework with franked dividends a key component. With a positive view on Australian east coast gas and LNG markets, and BPT’s strong earnings growth outlook, we maintain a Buy recommendation.

The post Broker urges investors to buy the dip in the Beach Energy share price for a 50% return appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Why Aristocrat, Beach Energy, Bowen Coal, and Virgin Money shares are falling today
• ASX 200 energy share tumbles 7% as ‘key’ project guidance scrapped
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It’s set to be a big week for ASX 200 dividend investors next week. That’s because we have not one, not two, but four ASX 200 shares set to trade ex-dividend.

When an ASX 200 share goes ex-dividend, it draws a line between the shareholders who are eligible for an upcoming dividend and those who are not. Anyone who owns a company before the day its sales trade ex-dividend is eligible to receive the said dividend. But if an investor buys the shares on or after the ex-dividend date, they miss out on the current round.

That’s why we tend to see the value of a share that goes ‘ex-div’ fall on the day – it reflects this loss of value for new shareholders.

So let’s get into the four ASX 200 shares that will go through this experience next week.

4 ASX 200 shares that will trade ex-dividend next week

Elders Ltd (ASX: ELD)

ASX 200 agricultural share Elders is first up. This farming supplies and services company will fork out an interim dividend of 23 cents per share, partially franked at 30%, on 22 June. But investors will be quick if they wish to receive it, with the ex-dividend date set for next Tuesday, 23 May.

This interim dividend is a bit of a step back for Elders, who paid out 28 cents per share in May 2022. At the current Elders share price, this ASX 200 share has a dividend yield of 7.42%.

Amcor CDI (ASX: AMC)

Next up is ASX 200 cardboard and packaging share Amcor. Amcor shares are also scheduled to trade ex-dividend on Tuesday 23 May. Amcor is a rare ASX 200 share that pays out quarterly dividends, so this latest one will be worth an unfranked 12.25 US cents per share (18.43 cents).

That’s the same amount as investors bagged back in March. But it also represents a decent increase over last year’s commensurate dividend of 12 US cents.

Pay date for Amcor is set for 20 June. Right now, Amcor shares offer a trailing yield of 4.58%.

Orica Ltd (ASX: ORI)

Explosives manufacturer Orica is our third ASX 200 share worth a look today. We’re back to a bi-annual dividend with this one, with Orica preparing to dole out its latest interim dividend on 3 July.

This will be worth 18 cents per share, unfranked – a pleasing increase over the 13 cents per share investors were paid last July. Orica’s ex-dividend date is set for next Thursday, 25 May. The company has a trialling dividend yield of 1.76% right now.

CSR Limited (ASX: CSR)

Rounding out our list today is ASX 200 building and construction supplies share, CSR. Earlier this month, CSR declared that its latest final dividend would be worth a fully-franked 20 cents per share. The payment day is set for 3 July, while the ex-dividend date is next Friday, 26 May.

This 20-cent payout is one of CSR’s highest ever. It beat out both last July’s final dividend of 29 cents and December’s interim dividend of 16.5 cents per share.

On current pricing, CSR shares offer a dividend yield of 6.8%.

The post 4 ASX 200 shares trading ex-dividend next week appeared first on The Motley Fool Australia.

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More reading

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Amcor Plc. The Motley Fool Australia has recommended Elders. 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 a reason to buy Westpac Banking Corp (ASX: WBC) shares, then read on.

The team at Goldman Sachs doesn’t just have one reason to invest in the banking giant’s shares, it has three big reasons to do so.

Three reasons to buy Westpac shares

The first reason to buy Westpac shares is its net interest margin (NIM) management. Goldman explains:

[W]e view WBC’s NIM management in the half as a positive relative to peers, in particular having achieved an exit NIM that was flat versus 2Q23 average in contrast with peers who saw continued deterioration,

Another reason is its cost outlook. Although it was disappointed that Westpac has walked away from its cost reduction target, the broker still expects its costs to be largely flat. This is a decent outcome in the current inflationary environment. Goldman adds:

[D]espite WBC walking away from its FY24E cost target of A$8.6 bn, we expect a broadly flat cost trajectory over the next two years, which will see WBC outperform peers in this relatively difficult inflationary environment.

Finally, the broker highlights the discount that Westpac shares trade at as a reason to buy. It concludes:

[T]he stock is trading at a notable discount to peers, versus the historical average discount of 3%.

What is fair value?

According to the note, the broker has a conviction buy rating and $24.67 price target on Westpac’s shares. Based on its current share price of $21.17, this implies potential upside of 16.5% for investors over the next 12 months.

In addition, the broker is expecting fully franked dividend yields of approximately 6.2% in FY 2023 and FY 2024.

All in all, this makes Westpac the broker’s “preferred exposure to the A&NZ Financials.”

The post 3 reasons to buy Westpac shares now: broker appeared first on The Motley Fool Australia.

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More reading

• With interest rates rising, why have ASX 200 bank shares been pummelled in 2023?
• Could buying Westpac shares around $21 make me rich?
• These are the best ASX 200 bank shares to buy now: analysts
• Broker warns that ‘our conviction has waned’ on Westpac shares
• How to invest $10,000 in ASX dividend shares in May

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