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The S&P/ASX 200 Index (ASX: XJO) went up 0.6% today to 7,309 points.

Here are some of the highlights from the ASX:

Westpac Banking Corp (ASX: WBC)

The Westpac share price was flat today – after the other big banks went up around 1% – with the bank telling investors it had uncovered potential fraud.

The potential fraud relates to a portfolio of equipment leases with Westpac customers arranged by Forum Finance, which were referred to Westpac’s institutional bank.

Westpac said that whilst investigations are ongoing and the NSW police, ASIC and APRA have been notified, at this stage it appears no Westpac customer has suffered a financial loss.

The bank has a potential exposure of around $200 million after tax, with the extent of any loss dependent on the outcome of its investigations and recovery actions underway.

Westpac has obtained certain asset freezing and search orders to preserve available assets and relevant information.

The big four ASX 200 bank is continuing to investigate how this occurred, including undertaking an external review.

Westpac CEO Peter King said:

Westpac takes fraud very seriously and will take all necessary actions to protect the interests of the bank and its customers.

This is a complex issue, and we are working at pace to address it, including engaging with the police and regulators. At this preliminary stage, the potential fraud is sophisticated and appears to have been perpetrated externally.

Our new chief executive of the institutional bank, Anthony Miller, is working with our customers to ensure no disruption to their operations.

RPMGlobal Holdings Ltd (ASX: RUL)

The RPMGlobal share price went up almost 5% today in response to its update.

The total contracted value (TCV) derived from software subscriptions sold and software revenue from perpetual license contracts concluded during FY21 which together totalled $52.9 million, $9.5 million of which has been sold since 18 June 2021.

RPMGlobal expects to finish FY21 with software subscription TCV of $47.7 million (up from $34.5 million in FY20), an increase of $7.3 million from 18 June 2021.

The company’s annual recurring revenue (ARR) from software subscription is $21.9 million per annum.

Perpetual software license sold during FY21 finished at $5.2 million (down from $6.9 million in FY20), $2.2 million has been sold since 18 June 2021.

QBE Insurance Group Ltd (ASX: QBE)

The QBE share price dropped 0.6% today after an announcement about some proceedings.

The ASX 200 global insurer was made aware that Strand Fitness and others have filed a representative proceeding against QBE in the Federal Court of Australia.

These proceedings allege that QBE wrongfully denied cover to certain policyholders during the COVID-19 pandemic for losses arising from business interruption.

QBE said the allegations will be defended.

The insurer said the issues raised in these proceedings appear to be substantially similar to those currently before the Australian courts in the second industry test case and QBE’s own Federal Court proceeding against Educational World Travel in liquidation and its liquidator.

QBE stated it’s committed to applying the rulings of the courts in the industry test cases when assessing claims. It’s satisfied that its reserving in respect of business interruption claims remain robust.

The post ASX 200 up, Westpac caught in potential fraud, RPMGlobal rises appeared first on The Motley Fool Australia.

More reading

• Here are the 5 best performing ASX tech shares from FY21
• 3 ASX 200 shares moving on the market today
• ASX blue chips set to unleash buybacks and dividends! But which is better?
• Why BWX, IPH, Novatti, & QBE shares are dropping
• The Afterpay (ASX:APT) share price is slipping today while the ASX 200 gains

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. owns shares of and has recommended RPMGlobal Holdings. The Motley Fool Australia has recommended RPMGlobal Holdings. 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 S&P/ASX 200 Index (ASX: XJO) delivered its biggest year of gains since its creation in 2000. At the final bell for the 2021 financial year on Wednesday evening, the benchmark index had finished 24% higher than it was a year prior. Though, it was no match for the bountiful returns delivered by some ASX tech shares.

While we sometimes look at the best performers of a sector within the ASX 200, today we’re casting the net wider. Below are the 5 best performing tech shares from the broader All Ordinaries Index (ASX: XAO).

5 top-performing ASX tech shares in FY21

Praemium Ltd (ASX: PPS)

Praemium is a provider of portfolio administration, investment platforms, and financial planning tools to the wealth management industry. The company operates in close competition with other financial platform providers such as HUB24 Ltd (ASX: HUB), which took out the fourth spot in our ‘best performing ASX 200 shares’ list.

Looking at the one-year chart on this one, you will see the significant moves to the upside line up with each of the company’s quarterly reports. With each quarterly report, Praemium’s all-important funds under management (FUM) climbed. By its March 2021 update, FUM had reached $37.9 billion, an increase of 96% on the prior year. This was helped along by the acquisition of Powerwrap in October 2020.

Shares in this ASX tech company rose 195% in FY21. At the time of writing, the Praemium share price is fetching $1.03.

Life360 Inc (ASX: 360)

San Francisco-based tech company, Life360 offers a family-orientated mobile application. Through it, parents can have real-time location sharing, crash detection, and messaging with their kids.

The company has recently strengthened its offerings by adding Jiobit to its team for $37 million. Management believes the addition of this wearable location device provider opens up cross-selling opportunities and is supportive in meeting Life360’s growth strategy.

The Life360 share price delivered shareholders a paper profit of 206% in the last financial year.

Weebit Nano Ltd (ASX: WBT)

Weebit Nano is a developer of computer memory technology. The company’s market capitalisation has surged to $220 million in what has been a massive financial year for its shareholders.

Back in August 2020, the Weebit Nano excitement mounted following its success of achieving the “stabilisation” process of its oxide ReRam technology. This milestone indicated the company’s production process is repeatable and consistent. Building off that, further announcements regarding progress towards official production continued to push the share price higher.

Shareholders who managed to hold onto this ASX tech share enjoyed a return of 452% in FY21.

BrainChip Holdings Ltd (ASX: BRN)

Another chip developer, BrainChip holdings is working on producing an artificial intelligence processor for the “Internet of Things” market. Its AKD1000 processor, enabled with BrainChip’s Akida technology, is aimed at solving complex problems with low power usage.

An agreement with VORAGO to support development for a ‘neuromorphic’ processor that meets spaceflight requirements for NASA got investors excited in September of last year. Further catalysts took shape in NASA ordering an Akida Early Access Evaluation Kit and the announcement of volume production by Taiwan Semiconductor Manufacturing Company.

All that excitement translated to a share price return of 470% during the financial year.

Pointerra Ltd (ASX: 3DP)

Finally, taking out the number one spot for the best performing ASX tech share in FY21 is Pointerra. The Australian company offers unique 3D geospatial data technology to solve problems related with digital asset management workflows. This software allows very large, high resolution datasets from any part of the world for instant access.

The initial thrust in Pointerra’s share price followed a strategic investment in the company by serial tech entrepreneur, Bevan Slattery. This investment involved Mr Slattery purchasing 50 million shares for $2.5 million. Given Bevan’s track record with the likes of NextDC Ltd (ASX: NXT), Superloop Ltd (ASX: SLC), and Megaport Ltd (ASX: MP1) – other investors quickly followed suit. More recently, the company’s shares have weakened after announcing the acquisition of a drone-based digital asset management business Airovant LLC.

By the end of the financial year, Pointerra’s share price was far higher than the 5 cents that Mr Slattery snagged it at. Astonishingly, its shares climbed 1067% in FY21, making it a 10-bagger in the space of a year.

The post Here are the 5 best performing ASX tech shares from FY21 appeared first on The Motley Fool Australia.

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• The Afterpay (ASX:APT) share price is slipping today while the ASX 200 gains
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• Here are the 5 best performing ASX All Ords shares from FY21
• ASX 200 up 0.25%: IDP Education rockets, Westpac hit with $87m bill

Motley Fool contributor Mitchell Lawler 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 Hub24 Ltd, MEGAPORT FPO, Pointerra Limited, Praemium Limited, SUPERLOOP FPO, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Life360, Inc. The Motley Fool Australia has recommended Hub24 Ltd, MEGAPORT FPO, Pointerra Limited, and Praemium 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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The S&P/ASX 200 Index (ASX: XJO) finished the day up 0.59% to 7,308.6 points at the closing bell.

Let’s look at the biggest movers and shakers among ASX 200 shares today, based on trading volumes.

The ASX 200 shares that saw the most trading today

Alumina Limited (ASX: AWC)

Alumina was the most heavily traded ASX 200 share on the boards today, with a very heavy 19.96 million shares finding their way around the market.

This aluminium/alumina producer saw a fair level of volatility during today’s session.

Alumina shares opened strongly and were up more than 1.2% at one point. But by close of trade, the company had given up all of those gains to finish at $1.63 — the same closing price as yesterday.

Telstra Corporation Ltd (ASX: TLS)

Telstra was another top volume ASX 200 share today. A substantial 19.25 million shares traded hands but the price only moved 0.8% up to $3.79.

This ASX 200 share has had a heck of a week. Telstra shares rocketed 4.6% on Wednesday to hit a new 52-week high and remain up 5.42% over the past 5 trading days.

Telstra’s Wednesday announcement that it will be selling off half of its mobile towers business seemed to be the underlying catalyst here.

A2 Milk Company Ltd (ASX: A2M)

The A2 Milk share price had a fantastic day, gaining a robust 5.16% to finish the session at $6.52. This is probably why 12.46 million shares were traded.

As my Fool colleague covered this morning, A2 has been the recipient of some broker love recently, which might have contributed to this large trading volume, too.

The A2 Milk share price is still down 43% year to date, but it’s also up more than 27% since its most recent low on 19 May.

A non-ASX 200 honourable mention

Although 88 Energy Ltd (ASX: 88E) is not an ASX 200 share, it is still worth mentioning today. Why? Well, because a mind-boggling 597.7 million 88 Energy shares were traded today.

This probably contributed to the 88 Energy share price shooting up by close to 40%, which I invite you to read all about!

The post 3 ASX 200 shares moving on the market today appeared first on The Motley Fool Australia.

More reading

• ASX blue chips set to unleash buybacks and dividends! But which is better?
• Brokers name 3 ASX shares to buy today
• The Afterpay (ASX:APT) share price is slipping today while the ASX 200 gains
• Why a2 Milk, Chalice Mining, IDP Education, & Imugene are charging higher
• Why the Suncorp (ASX:SUN) share price is on the rise today

Motley Fool contributor Sebastian Bowen owns shares of Telstra Corporation Limited and A2 Milk. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended A2 Milk. 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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One big positive in this low interest rate environment is that the share market is home to shares offering generous yields.

Two such shares are listed below. Here’s why they could be dividend shares to buy:

National Australia Bank Ltd (ASX: NAB)

If you’re looking for exposure to the banking sector, then you might want to look at NAB. While times have been hard for the big four banks in recent years, things are looking very different now.

Thanks to improving trading conditions, a booming housing market, and cost cutting, NAB’s outlook is arguably the most positive it has been in a long time.

It is for this reason that analysts at Goldman Sachs currently have a conviction buy rating and $29.97 price target on the bank’s shares. NAB remains the broker’s preferred sector exposure due to its cost management initiatives, its position as the largest business bank, and its strong capital position.

Combined, the broker believes NAB is in a position to grow its dividend at a solid rate over the coming years. It is forecasting fully franked dividends per share of 124 cents in FY 2021, 133 cents in FY 2022, and $1.38 in FY 2023.

Based on the current NAB share price of $26.23, this will mean yields of 4.7%, 5.1%, and 5.3%, respectively.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Goldman Sachs is also positive on Sydney Airport. Although the airport operator has been hit hard by the pandemic, the broker believes it is worth sticking with it.

The broker notes that the airport operator remains in an effective hibernation and expects it to be a major beneficiary of the Australian domestic inoculation strategy.

And while it isn’t expecting much by way of dividends this year, Goldman believes this will change in the years to come. The broker is forecasting dividends per share of 9 cents in FY 2021, 27 cents in FY 2022, and then 31 cents in FY 2023.

Based on the current Sydney Airport share price of $5.81, this will mean yields of 1.5%, 4.6%, and 5.3%, respectively, over the coming years. Goldman Sachs has a buy rating and $6.73 price target on the company’s shares.

The post Broker names 2 ASX dividend shares to buy appeared first on The Motley Fool Australia.

More reading

• 3 worst ASX travel shares of financial year 2021
• Why the NAB (ASX:NAB) share price remained flat in June
• Is your money safe in Commonwealth Bank (ASX:CBA) shares right now?
• ASX bank shares weigh up $34 billion dosh-dishing decision
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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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The WiseTech Global Ltd (ASX: WTC)’s share price ended the week in the green, recovering from a 4.4% dip into the red after the market open today.

WiseTech shares bounced back to reach an intraday high of $32.06, before ending the day up 0.44% at $31.93.

What happened today?

There was no market-sensitive information specific to the company released today that would have a direct impact to WiseTech’s share price.

Currently, WiseTech shares are trading off a 52-week high of $34.42, but are aloft their 52-week low of $18.91, which occurred back in August 2020.

The company’s share price has gained 62% over the previous 12 months, above the S&P/ASX 200 Index (ASX:XJO)’s return of about 21% over this same time.

However, after a bumpy year to date, WiseTech shares are in the green by 3.8%, lagging the S&P/ASX 200 Index’s return of nearly 11% since January 1.

Over the previous 5 trading sessions, WiseTech finished up by 2.6%, beating the broad index which had only a 0.3% gain over the same time.

Back in June, analysts at Morgan Stanley maintained their overweight rating on the WiseTech shares, assigning a price target of $35.00, which implies an upside potential of 9.6% from the current share price.

The investment bank believes recent secular tailwinds in WiseTech’s end markets will help drive earnings growth into the coming years.

Macquarie Bank also has an outperform rating on the company’s shares, with a price target of $34.00.

WiseTech Global share price snapshot

With a current share price of $31.93, WiseTech has a market capitalisation of $10.3 billion and trades at a price-to-earnings ratio (P/E) of 70.

The company also posted earnings per share of 45.2 cents at its last earnings release, and pays a dividend of 0.4 cents per share, fully-franked.

The current dividend yield is 0.13%, and the company has made good on each dividend payment since March 2017.

The post WiseTech Global (ASX:WTC) share price bounces back to finish in green appeared first on The Motley Fool Australia.

More reading

• ASX 200 up 0.25%: IDP Education rockets, Westpac hit with $87m bill
• Which ASX 200 shares are standing tall after today’s volatile session?
• 2 exciting ASX tech shares that are highly rated
• ASX 200 up 0.3%: CSL downgraded, Zip drops, Charter Hall impresses
• Broker tips WiseTech Global (ASX:WTC) share price as a buy

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended WiseTech Global. The Motley Fool Australia owns shares of and has recommended WiseTech Global. 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 Australian share market is home to a number of quality companies with solid growth prospects.

Two that have been tipped to grow strongly over the long term are listed below. Here’s why analysts think investors should be buying their shares:

ELMO Software Ltd (ASX: ELO)

ELMO could be a growth share to get better acquainted with. It is a cloud-based human resources and payroll software company with operations in the ANZ and UK markets.

It has been a strong performer over the last few years thanks to the shift to the cloud, its expansion, and the acquisition of Breathe and Webexpenses. Pleasingly, its positive form has continued largely unabated during the pandemic.

For example, in May ELMO released a trading update and upgraded its annualised recurring revenue (ARR) guidance for FY 2021 to be between $83 million and $85 million. This will be up 50.5% to 54.2%, respectively, on FY 2020’s ARR of $55.1 million.

Looking ahead, the company still has a very large market opportunity to grow into. Management estimates that it has a $12.8 billion opportunity across just the ANZ and UK markets.

Morgan Stanley currently has an overweight rating and $9.70 price target on its shares. The ELMO share price ended the week at $4.50.

Zip Co Ltd (ASX: Z1P)

Another ASX growth share that is highly rated is Zip. It is a leading buy now pay later (BNPL) provider with operations across several continents.

Thanks to the growing popularity of the payment method, its strong market position, and its international expansion, Zip has been tipped to grow strongly in the coming years. This is particularly the case for its US-based QuadPay business. The latter has been growing at a rapid rate. But given that only an estimated 10% of Americans have tried BNPL, it clearly has a long runway for growth in the $5 trillion market as penetration rates increase.

Shaw and Partners is very positive on the company. The broker has a buy rating and $16.00 price target on its shares. This compares to the latest Zip share price of $7.61.

The post 2 explosive ASX growth shares named as buys appeared first on The Motley Fool Australia.

More reading

• Got Zip (ASX:Z1P) shares? Here’s what the company has in store for FY22
• ASX 200 drops, Zip rises, Cettire up
• Here’s why the Propell (ASX:PHL) share price jumped 76% today
• Afterpay and Zip were among the most traded ASX shares last week
• These are the 10 most shorted shares on the ASX

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 Elmo Software and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Elmo Software. 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 GWR Group Ltd (ASX: GWR) share price went gangbusters today. At close of trade, shares in the mineral exploration company were swapping hands for 36 cents each – up 9.09%.

The positive price movement comes as the company updates investors on recent iron ore production and its gold mining spin-off.

Let’s take a closer look at today’s news.

What’s been driving the rocketing GWR share price?

Iron ore production

In a statement to the ASX, GWR Group told investors of recent developments in its iron ore production.

Last month, the company exported more than 116,000 wet metric tonnes of iron ore, which GWR Group labelled as a “significant milestone”. The average realised price for its iron ore in June was about US$214 a tonne.

In further good news for the GWR share price, the company says it expects to ship more than 1 million tonnes of iron ore by the end of this year.

GWR Group chair Gary Lyons said:

With the financial year coming to a close I am very proud of the entire GWR team and our Alliance partners PRG, with the many challenges we have and continue to overcome. It was a fantastic achievement to export more than 325,000 WMT of iron ore mined from our flagship C4 Iron deposit.

The first month of the new financial year is shaping up to be a rewarding one for GWR shareholders.

…we already secured our first ship for the month of July which is due to commence loading at the Port of Geraldton between 16 and 20 July 2021.

The price of iron ore is 37.5% higher year-to-date.

Gold production spin-off

In other news, the company gave an update on its planned demerger of its gold assets into a new, ASX-listed company.

In what GWR says will “enable” it to focus on its more lucrative iron ore production, the Western Gold Resources (WGR) spin-off will occur on 19 July. Eligible shareholders will receive 1 WGR share for every 8.38 GWR Group shares they own.

In addition, gold projections at the company’s Wiluna West site have been increased to approximately 300,000 ounces of gold.

GWR share price snapshot

Over the past 12 months, the GWR share price has increased by 490%. However, since reaching its 5-year high of 47 cents per share, the company’s value has decreased by 23%.

Given its current valuation, GWR Group has a market capitalisation of about $110 million.

The post Why the GWR Group (ASX:GWR) share price soared 9% today appeared first on The Motley Fool Australia.

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• ASX blue chips set to unleash buybacks and dividends! But which is better?
• Thorn Group (ASX:TGA) share price closes 6% lower as it goes ex-dividend
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The Galaxy Resources Limited (ASX: GXY) share price and the Orocobre Limited (ASX: ORE) share price were on form on Friday.

Both lithium miners finished the day almost 3% higher and within sight of their 52-week highs.

Why did Galaxy and Orocobre shares storm higher?

Investors were buying Galaxy and Orocobre shares on Friday after their mega-merger took a big step forward.

According to a joint announcement, the Supreme Court of Western Australia has made orders for Galaxy to convene a meeting of shareholders to consider and vote on the proposed merger that will see Orocobre acquire all of the shares in Galaxy by way of a scheme of arrangement.

The Court has also approved the dispatch of an explanatory statement providing information about the scheme, together with the scheme meeting notice to Galaxy shareholders.

What are the merger terms?

In April, the two companies agreed to a proposed $4 billion merger of equals, which they believe establishes a new force in the global lithium sector.

Management notes that the merger would create the fifth largest global lithium chemicals company, with a diversified production base and exciting growth platform. It also sees potential to unlock significant synergies and realise value to be shared by all shareholders.

The merger will see Galaxy shareholders receive 0.569 Orocobre shares for each Galaxy share held at the scheme record date. Based on the current Orocobre share price of $6.62, this represents approximately $3.77 per share.

The scheme continues to be unanimously recommended by each director of Galaxy, subject to no superior proposal emerging and the independent expert continuing to conclude that the scheme is in the best interests of shareholders. Each Galaxy director intends to vote in favour of the scheme, subject to those same qualifications.

What now?

Galaxy shareholders will be given the opportunity to vote on the proposed scheme in just over a month on 6 August.

If all goes to plan, the scheme will become effective on 16 August and new Orocobre shares will commence trading on the ASX on 17 August.

The post Galaxy (ASX:GXY) and Orocobre (ASX:ORE) shares rise on merger update appeared first on The Motley Fool Australia.

More reading

• The Mineral Resources (ASX:MIN) share price rose 16% in June. Here’s why
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• Up 63% this month, Australian Strategic Materials (ASX:ASM) share price rockets higher
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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. 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 Thorn Group Ltd (ASX: TGA) share price closed 6.67% lower at 21 cents. This came as shares in the household goods operator went ex-dividend today.

Let’s take a look at what investors can expect with the company’s dividend.

Thorn Group dividend summary

Thorn Group will pay shareholders a fully franked 1 cent per share final dividend on 21 July.

At the current share price of 21 cents, the dividend yield of the 1 cent payment is 4.44%.

The company reinstated the dividend distribution schedule from October 2020, after it was periodically terminated in January 2018.

Prior to this, the company had made good on each payment from December 2012 to January 2018.

Time extension on target statement

Yesterday, Thorn Group released a statement referring to the unsolicited on-market takeover offer made by Somers Limited on 18 June.

Somers has offered to acquire all shares in Thorn that it does not already own for 21 cents per share all cash.

In the statement, Thorn outlined it had received a declaration from the Australian Securities and Investments Commission (ASIC) granting an extension of time to provide its target’s statement in respect of the offer.

Thorn states the extension permits the company to include an independent expert’s report, and the target’s statement shall be made to the ASX, ASIC and Somers and Thorn shareholders on or before Friday 16 July 2021.

Thorn has confirmed it will provide the documentation on or before this date.

In the statement, Thorn said:

Thorn reiterates its previous recommendation that shareholders TAKE NO ACTION in relation to the Offer
until they have received and considered Thorn’s target’s statement.

Thorn Group share price snapshot

The Thorn Group share price is around 13% in the green this year-to-date. Over the previous 1 month, Thorn’s share price has increased 2.38%.

This week, the Thorn share price is 2.27% in the red, and on a current share price of 21 cents, Thorn Group has a market capitalisation of $75.9 million.

The post Thorn Group (ASX:TGA) share price closes 6% lower as it goes ex-dividend appeared first on The Motley Fool Australia.

More reading

• Thorn Group (ASX:TGA) share price jumps 7% on takeover offer

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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ASX investors love a good dividend, that much is certain. With Australia’s unique system of franking credits now entrenched, the benefits of owning dividend paying shares are well known. That might be why some of the most popular ASX shares in the average investors’ portfolio are big, dividend paying blue chips like the ASX banks, BHP Group Ltd (ASX: BHP), Telstra Corporation Ltd (ASX: TLS) and Woolworths Group Ltd (ASX: WOW).

Dividends are returning to the ASX

As most ASX investors would know, 2020 was an absolutely disastrous year for ASX dividends. Last year saw the ASX banks slash their payouts by more than 50%, with Westpac Banking Corp (ASX: WBC) failing to pay a bi-annual dividend for the first time in decades.

But 2021 has seen dividends return, and dramatically so. We’re only half way through the calendar year, but already there are strong signs that ASX 200 dividends are returning to levels ASX investors were used to. But alongside the prospect of increasing dividends, another form of capital return has been growing in discussion, that of share buybacks. Telstra’s recent sale of half of its mobile towers business is one such example. In its market announcement detailing this sale, Telstra CEO Andy Penn said the following:

We then expect to return 50 per cent of net proceeds to shareholders. We anticipate providing further details about the manner in which we will return those proceeds, including a potential share buy-back in FY22, at our full-year results in August.

Buybacks as well?

Further, we also recently discussed the prospects of share buybacks for the ASX banks. The banks’ boards are also considering returning excess capital to shareholders. They might do this with a combination of dividends and buybacks. But, with all of this ‘floating’ going on, investors in these companies might be wondering: which is preferable? Well, that’s a good question.

We probably all know how a dividend works, but here’s a quick refresher. A dividend is a cash payment made by a company to its shareholders. As we touched on before, many ASX shares’ dividends also come with franking credits. These credits further enhance shareholder returns by essentially attaching a tax deduction to the dividends, which investors can use to offset other taxable income. Or else claim as a cash refund. For most people, dividend income is assessed as normal income on your tax return.

A share buyback works in a completely different way though. Instead of sending cash out the door as a dividend, a company instead uses the cash to ‘buy back’ its own shares on the share market. This obviously reduces the number of shares in circulation, which gives existing shareholders increased ownership of the company. All other things being equal, this buyback will increase the earnings per share (EPS) of the company, seeing as earnings (and potential dividends) are divided between fewer shares.

As such, a share buyback will normally result in a proportionate increase in the price of each share (under the laws of supply and demand, less supply means higher prices). As such, a share buyback also benefits existing shareholders.

But which is better?

But share buybacks have a distinct advantage here. They increase the wealth (at least on paper) of existing investors, without increasing said investors’ tax liability. The same can’t be said of a dividend. It’s for this reason that the legendary investor Warren Buffett has always preferred to give his investors a share buyback rather than a dividend. Indeed, Berkshire Hathaway Inc. (NYSE: BRK.A)(NYSE: BRK.B) hasn’t even paid a dividend since the 1960s. But then again, some investors would be happier with cash in their pocket.

So long story short, when it comes to dividends and buybacks, the investor wins either way. These two mechanisms just take different roads to get there.

The post ASX blue chips set to unleash buybacks and dividends! But which is better? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen owns shares of Telstra Corporation Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Berkshire Hathaway (B shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended Berkshire Hathaway (B shares). 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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