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The Australian share market is home to some of the largest mining companies in the world.

But which ASX 200 mining shares would be great options right now? Listed below are two that analysts at Goldman Sachs are tipping as buys. Here’s what they are saying about them:

Allkem Ltd (ASX: AKE)

The first ASX 200 mining share for investors to look at is Allkem. It is one of the world’s largest lithium miners with projects across Argentina, Australia, and North America.

From these projects, the company is aiming to grow its production in a way that allows it to command a 10% share of global lithium supply over the long term.

It is for this reason that Goldman believes its shares are a buy even though it is bearish on lithium prices. The broker commented:

Allkem has one of the best production outlooks in our lithium coverage, with broad-based growth optionality, second only to Mineral Resources on an LCE basis when including downstream hydroxide production on an equity basis. This drives our forecast for the company’s equity LCE production growth of >4x over five years to FY28E, supporting earnings rebounding to near current record levels despite the declining lithium price environment.

Goldman has a buy rating and $12.90 price target on Allkem’s shares.

Rio Tinto Ltd (ASX: RIO)

Another ASX 200 mining share that could be a buy is Rio Tinto. This mining behemoth has a diverse portfolio of operations and projects spanning a number of commodities including aluminium, copper, iron ore, and lithium.

Goldman Sachs is a big fan of the miner due to its valuation, strong free cash flow generation, and production growth outlook, to name just three reasons. It summarised:

We are Buy rated (on CL) on RIO due to: (1) compelling relative valuation vs. peers, (2) Strong FCF and dividend yield with our bullish view on iron ore, aluminium and copper prices, (3) Strong production growth in 2023 & 2024, (4) Pilbara turnaround (~50% of group NAV), (5) Compelling high margin low emission aluminium exposure.

The broker has a buy rating and $136.20 price target on its shares.

The post Want to buy ASX 200 mining shares? Goldman Sachs says these are top buys appeared first on The Motley Fool Australia.

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More reading

• Why are ASX lithium shares powering higher today as the resource sector bleeds?
• Is the Rio Tinto share price a buy at under $120?
• Top brokers name 3 ASX shares to buy next week
• Why Bank of Queensland, Lithium Power, Piedmont Lithium, and Rio Tinto are falling
• Brokers name 3 ASX shares to buy now

Motley Fool contributor James Mickleboro has positions in Allkem. 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 S&P/ASX 200 Index (ASX: XJO) shares I’m going to cover in this article have been named by a fund manager called Contact Asset Management as businesses that could perform soundly during any uncertainty in 2023.

Contact’s ex-50 fund targets “quality Australian companies” that aren’t one of the 50 biggest businesses in Australia. It looks to invest in founder-led businesses and “tomorrow’s leaders”. At the end of March 2023, it owned 28 stocks, so the fund’s managers have a fair amount of conviction with an average position size of more than 3%.

Here are the two ASX 200 shares that Contact picked out:

Kelsian Group Ltd (ASX: KLS)

Over the last year, the Kelsian share price has dropped over 20%. Kelsian describes itself as Australia’s largest land and marine transport service provider and tourism operator, with established operations in London and Singapore.

The fund manager noted the recent acquisition of All Aboard America! Holdings, which it described as a US-based bus business providing “contract and charter coach passenger services.” The cost of this was almost A$500 million for the ASX 200 share.

Contact said that the transaction “opens the door for significant growth in the US”. It noted that All Aboard America! Holdings is the fourth largest motorcoach operator in the US with 1,069 vehicles.

The fund manager pointed out that the Kelsian Australian bus segment has around 3,000 buses. However, while the US market is large (over $30 billion according to Contact), it’s a fragmented market.

Contact noted that the business has a “high degree of recurring revenue and solid earnings before interest, tax, depreciation and amortisation (EBITDA) margins of 25%.” The fund manager also pointed out that the majority of the management team, including the founders, continue to remain with the business.

Charter Hall Group (ASX: CHC)

Over the past year, the Charter Hall share price has dropped 26%. Charter Hall is a property fund manager which manages a property portfolio spread across around 1,700 “high-quality properties, spanning everything from industrial properties, retail centres and premium office buildings”.

The ASX 200 share also owns 50% of the listed shares fund manager Paradice Investment Management.

Group funds under management (FUM) is now $88 billion when adding the property FUM and shares FUM together.

Contact noted the recent negative sentiment about the commercial real estate sector after the recent bank issues in the US. The fund manager also pointed out the “air of negativity on the outlook for office building valuations.”

The fund manager said:

We believe that Charter Hall will be better placed than peers, given its portfolio is higher-quality and its balance sheet is robust. Its revenue stream is more resilient than peers from the fees generated on funds management.

The post 2 ASX 200 shares this fund manager is backing for good returns appeared first on The Motley Fool Australia.

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More reading

• Are Santos shares worth buying following the oil giant’s latest results?
• 2 ‘undervalued’ ASX 200 shares to ‘beat market’ before everyone else wakes up
• Bought $2,000 of Bank of Queensland shares five years ago? If so, here’s how much dividend income you’ve earned
• These ASX 200 growth shares could generate big returns: broker
• Own Westpac shares? What to expect from its half-year results

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

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Santos Ltd (ASX: STO) shares are down 7% over the past six months. Sometimes a lower share price can open up a ‘buy the dip’ opportunity for investors. So, Is this a good chance to buy the ASX energy share?

The thing with oil and gas ASX shares is that they’re heavily dependent on the commodity price to make more profit in the short term. A higher energy price means new revenue largely adds to profit, while a fall in the commodity price means the reduction in revenue mostly comes from the net profit after tax (NPAT).

Fall in production and revenue

In the first quarter of 2023, production was 13% lower and sales revenue was 13% lower than in the last quarter of 2022. There was lower production because of reduced domestic gas volumes in Western Australia, supported by extended production from the Bayu-Undan field.

Sales revenue came in at US$1.6 billion in the 2023 first quarter, while production was 22.2 million barrels of oil equivalent (mmboe).

The quarter saw the business generate free cash flow of around US$720 million in the first quarter. It also said that it had completed US$466 million of the announced US$700 million share buyback, at the end of March 2023.

Looking at the average realised price, Santos said that the LNG price was US$14.46, down from US$16.92 in the fourth quarter of 2022. The crude oil price had reduced from US$94.71 in the 2022 fourth quarter, down to US$87.59 in the 2023 first quarter.

Santos also told investors that it is making progress with its efforts to decarbonise the energy supply chain. This includes the Moomba carbon capture and storage (CCS) project, which is 60% complete, with the first injection expected in early 2024.

Is the Santos share price a buy?

I’m generally cautious about backing ASX oil and gas shares because it seems to me that demand could reduce in future years as the world moves to decarbonisation.

The spike in energy prices a year ago was certainly a boost for the business, but energy prices certainly seem to be settling down now. But, Santos is still making a lot of cash flow.

I think there is uncertainty thrown up by the intense focus on new gas projects, such as Barossa. A change to the petroleum resources rent tax (PRRT) could mean less future profit for producers like Santos.

Using Commsec earnings estimates, the Santos share price is valued at 9x FY23’s estimated earnings. That’s pretty cheap, so it may be able to achieve some outperformance in the short to medium term. However, it’s not one on my own watchlist to buy. There are other ASX resource shares that I’d rather invest in, such as miners involved with copper.

The post Are Santos shares worth buying following the oil giant’s latest results? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Top brokers name 3 ASX shares to buy next week
• Santos shares slide amid falling oil and gas prices
• 5 things to watch on the ASX 200 on Thursday
• Bought $6,000 of Santos stock in 2018? If so, here’s how much dividend income you’ve earned

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

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The last 18 months has demonstrated that it’s now more important than ever to ignore short-term volatility and instead focus on the long-term prospects of a business.

There are no better examples of that thinking than these two S&P/ASX 200 Index (ASX: XJO) examples, which Seneca Financial Solutions investment advisor Arthur Garipoli rates as buys:

‘Positive view’ on health devices giant

Healthcare is one of those industries that don’t fare too badly even through times of economic stress.

That’s because people will, understandably, prioritise their physical and mental wellbeing over other goods and services.

As such, a leader in its field like Resmed CDI (ASX: RMD) makes a sensible buy.

“This manufacturer of medical devices for respiratory disorders recently reported results that beat market expectations,” Garipoli told The Bull.

“Revenue of US$1.0337 billion for the three months ending on December 31, 2022 was up 16% on the prior corresponding period.”

The hardware company did encounter some roadblocks to growth last year as a global computer chip shortage hampered its own production.

But that short-term issue, Garipoli feels, is now past it.

“We retain a positive view on RedMed, given an improving supply chain,” he said.

“It will enable ResMed to meet additional demand for respiratory units, leading to revenue growth.”

The ResMed share price is 8.9% up over the past year.

Excellent dividend yield plus cheap share price

Deterra Royalties Ltd (ASX: DRR) is a mining royalty company, meaning it’s almost like a landlord collecting rent from sites where resource companies are operating.

This model has some advantages over directly owning mining shares, according to Garipoli.

“Deterra holds a 1.232% royalty in BHP Group Ltd (ASX: BHP)’s Mining Area C (MAC) involving iron ore operations in the Pilbara region of Western Australia,” he said.

“It gives Deterra price and volume exposure to a world class asset without taking on mining risk.”

Garipoli noted that the first half update showed BHP increasing production at the MAC site.

“We believe the stock is undervalued due to the quality of the asset, its discount to peers and providing investors with a forecast fully franked dividend yield of 6.6%.”

The Deterra share price has remained flat over the past year and so far in 2023.

The post 2 ‘undervalued’ ASX 200 shares to ‘beat market’ before everyone else wakes up appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• These world-class ASX 200 growth shares are buys according to brokers
• Capital deities and destroyers: The best and worst at putting money to work among ASX 200 shares
• CSL shares dip despite new FDA approval
• ‘Resilient earnings’: Buy 3 ASX 200 shares to win through troubled times

Motley Fool contributor Tony Yoo has positions in ResMed. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Bank of Queensland Ltd (ASX: BOQ) shares have suffered through a rocky five years, falling 38% in that time.

Looking back, an investor who sunk $2,000 into the S&P/ASX 200 Index (ASX: XJO) bank stock in April 2018 likely would have received 206 shares, paying $9.67 apiece.

Today, that holding would be worth $1,240.12. The Bank of Queensland share price last traded at $6.20.

For comparison, the ASX 200 has gained 23% over the last five years.

But have the not-quite-big-four bank’s dividends made up for its share price’s disappointing performance? Let’s take a look.

Dividends paid to holders of Bank of Queensland shares since 2018

Here are all the dividends paid to those invested in Bank of Queensland shares since April 2018:

BOQ dividends’ pay date	Type	Dividend amount
November 2022	Final	24 cents
May 2022	Interim	22 cents
November 2021	Final	22 cents
May 2021	Interim	17 cents
November 2020	Final	12 cents
November 2019	Final	31 cents
May 2019	Interim	34 cents
November 2018	Final	38 cents
May 2018	Interim	38 cents
		$2.38

That’s right, each Bank of Queensland share has yielded $2.38 of dividend income over the last five years. That means our figurative parcel has likely borne $490.28 of passive income over its lifetime.

Considering both share price movements and dividends, the return on investment (ROI) offered by the bank stock since April 2018 comes to a 13% loss.

Though, it’s also worth noting that all dividends provided to Bank of Queensland investors in that time have been fully franked. Thus, they may have brought additional benefits for some shareholders come tax time.

The company’s next dividend will be worth 20 cents per share and is set to be paid in early June. The stock will trade ex-dividend on 10 May.

Right now, Bank of Queensland shares trade with a notable 7.64% dividend yield.

The post Bought $2,000 of Bank of Queensland shares five years ago? If so, here’s how much dividend income you’ve earned appeared first on The Motley Fool Australia.

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More reading

• Lowest ASX bank yield: Are CBA shares still worth it?
• Are Bank of Queensland shares a buy following the latest results?
• Why Bank of Queensland, Lithium Power, Piedmont Lithium, and Rio Tinto are falling
• Why Bank of Queensland, Link, Silk Laser, and Zip shares are pushing higher
• Everything you need to know about the latest Bank of Queensland dividend

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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Looking for a growth share or maybe two to buy? If you are, you may want to look at the two listed below that have been named as buys by Morgans.

Here’s why the broker believes they are buys:

Corporate Travel Management Ltd (ASX: CTD)

Corporate Travel Management could be an ASX growth share to buy right now according to Morgans. It is a provider of innovative and cost-effective travel management solutions to the corporate market.

Morgans has been positive on the company for a while and recently boosted its valuation to reflect a major contract win. The broker expects this to support its organic growth and margin profile. It commented:

This material win for CTD is a strong endorsement of the quality of its service offering and its ability to manage complex travel requirements. Importantly it underpins strong organic growth and should increase CTD’s margins and return profile. Following forecast upgrades and applying slightly higher multiples, our blended valuation has risen to A$24.00 from A$21.90. We maintain an Add rating on CTD and see the next catalysts for the stock being trading updates via broker conferences in May and hopefully retaining the Whole of Australian Government (WoAG) contract, which expires on 30 June 2023 and is currently up for tender.

Morgans has the company’s shares on its best ideas list with an add rating and $24.00 price target. This suggests potential upside of almost 15% from current levels.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Another ASX growth share that could be in the buy zone right now according to Morgans is pizza chain operator, Domino’s.

Although the broker was very disappointed with the company’s performance during the first half of FY 2023, it feels that investors should stick with it. Particularly given its attractive valuation and strong long-term growth potential, which is being underpinned by its store expansion plans. It commented:

Despite the evident disappointment of the 1H23 result, we had anticipated this result could be a negative one for sentiment. We didn’t expect the shares to fall as much as they did, however, and even with significantly lower earnings estimates for FY23 and FY24 and a significantly lower target price, there is enough upside to our target to keep us on an Add. But our faith is shaken.

Morgans has an add rating and $70.00 price target on its shares. Based on the current Domino’s share price of $51.72, this implies potential upside of 35% for investors.

The post These ASX 200 growth shares could generate big returns: broker appeared first on The Motley Fool Australia.

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More reading

• A bull market is coming and I’m desperate to buy cheap ASX 200 stocks before they rocket
• Leading brokers name 3 ASX shares to buy today
• Here are the top 10 ASX 200 shares today
• Brokers name 3 ASX shares to buy now
• 11 times your money? Yes, it’s possible (we did it)

Motley Fool contributor James Mickleboro has positions in Domino’s Pizza Enterprises. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Domino’s Pizza Enterprises. The Motley Fool Australia has recommended Corporate Travel Management and Domino’s Pizza Enterprises. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Westpac Banking Corp (ASX: WBC) shares will be worth watching closely next month.

That’s because the banking giant is scheduled to release its half-year results on 8 May.

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

What is expected from Westpac’s half-year results

There will be three key metrics for investors to look out for when Westpac releases its results. These are its cash earnings, dividend, and its net interest margin (NIM).

In respect to the former, analysts at Goldman Sachs are expecting Westpac to report cash earnings (before one-offs) of $3,781 million. While this will be a touch short of the consensus estimate of $3,788 million, it will still be a sizeable 22.2% increase on the prior corresponding period.

As for its dividend, the broker has pencilled in a fully franked interim dividend of 72 cents per share. This will be an 18% increase from FY 2022’s interim dividend of 61 cents per share.

Finally, all eyes will be on the bank’s NIM. Goldman spoke at length about its margins and revealed that it expects Westpac’s NIM to increase to 2.03% for the half. It said:

WBC’s 2H22 NIM was up 5 bp hoh to 1.90% (ex Treasury & Markets at 1.80%) and we note that WBC’s exit NIM (ex Treasury & Markets) for the month of Sep-22 was 1.85%. WBC expects the 1H23 NIM (ex-Treasury and Markets) to be higher than the Sep-22 exit and higher again in 2H23 albeit with a moderating hoh increase. With deposit competition currently being a key area of focus, we will be keen to get an update on how current levels of deposit repricing have impacted mix shifts, and what WBC’s expectations are around competition going into 2H23. We currently forecast 1H23E NIMs to increase +13 bp hoh to 2.03%.

Are Westpac shares good value?

Goldman sees plenty of value in Westpac shares at the current level. It currently has a conviction buy rating and $25.86 price target on them.

So, with the bank’s shares trading at $22.25, this implies potential upside of 16% for investors over the next 12 months.

In addition, the broker expects an attractive dividend yield. It is forecasting a fully franked full-year dividend of $1.44 per share. This implies a 6.5% yield for investors, boosting the total potential return from Westpac shares to beyond 22%.

The post Own Westpac shares? What to expect from its half-year results appeared first on The Motley Fool Australia.

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More reading

• Goldman Sachs says buy these ASX 200 shares for passive income
• Lowest ASX bank yield: Are CBA shares still worth it?
• Building wealth through dividend investing: 5 ASX shares to boost your income
• Brokers name 3 ASX shares to buy now
• Can Westpac shares really deliver 15% upside AND a 6% dividend yield?

Motley Fool contributor James Mickleboro has positions in Westpac Banking. 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. 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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Now could be the time to snap up Telstra Group Ltd (ASX: TLS) shares.

That’s the view of analysts at Goldman Sachs, which have just reiterated their buy rating on the telco giant’s shares with an improved price target.

According to the note, the broker has lifted its valuation to $4.70, which implies potential upside of 9.3% for investors over the next 12 months.

It is also forecasting a 4% dividend yield in FY 2023, boosting the total potential return beyond 13%.

What did Goldman say about Telstra shares?

Goldman Sachs highlights that Telstra’s mobile pricing across prepaid and JB Hi-Fi Limited (ASX: JBH) has been lifted meaningfully ahead of its postpaid pricing review.

It believes this is a sign that the telco will increase its prices by the full CPI rate, which is more than it was expecting. And while this won’t be good news for consumers, the broker expects it to give Telstra’s earnings a boost. It explains:

Following recent (and significant) mobile prices changes from Telstra (Prepaid, JB-HiFi), we now believe they are more likely to fully utilize CPI (GSe +7% in Mar-23) at the upcoming postpaid mobile price review – raising plan pricing by c.$4-6/m. This is ahead of our prior forecast for a c.$2-3/m, so drives our FY24-25E EBITDA +1.6%/+1.1% and EPS +4%/+2% (higher pricing, partly offset by lower postpaid sub growth).

Ahead of the July price rise, Telstra needs to ensure that its postpaid/prepaid premium is correctly managed, to prevent significant ‘spin-down’ to prepaid (noting stronger prepaid SIO growth in 1H23). Hence the announced $5 increase on Prepaid plans in July provides scope to increase postpaid plans by $4/m (or CPI), while keeping the postpaid/prepaid premium below its historical +41% average (+$4 increase results in +38% premium).

In light of the above, Goldman Sachs believes that the market is underestimating the company’s mobile earnings growth. As a result, it sees the upcoming price increase announcement as a potential catalyst to driving Telstra shares higher. It concludes:

Ultimately, we continue to believe consensus mobile forecasts look conservative, and now sit +3% ahead of FY24 postpaid ARPUs. We expect updated mobile pricing expected to be announced in coming weeks (to give sufficient notice to the Jul-23 introduction), which should be positively received. We re-iterate our Buy rating on Telstra, and increase our 12m TP to $4.70, in-line with earnings.

The post Here’s why Goldman Sachs just became even more bullish on Telstra shares appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Better ASX blue-chip share to buy for safe returns: CBA vs. Telstra
• Building wealth through dividend investing: 5 ASX shares to boost your income
• Own Telstra shares? Here are 3 things you might have missed in the last 30 days
• Here are the 3 most heavily traded ASX 200 shares on Friday

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 positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Jb Hi-Fi. 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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After a hectic 2022, the energy industry is expected to enjoy continued hot demand this year.

The war in Europe is still going, and the transition to renewable energy requires years for infrastructure to be built and brought online.

That means ASX shares of existing energy producers will cash in.

Marcus Today equity analyst Damien Shaw this week helpfully picked out two S&P/ASX 200 Index (ASX: XJO) energy stocks he would buy into right now:

‘Optimistic’ this gas producer will meet its targets

Shaw is a fan of Beach Energy Ltd (ASX: BPT) even though the company’s third-quarter production dropped 5%.

“The decrease can be attributed to planned and unplanned outages,” Shaw told The Bull.

“Guidance remains on target. Progress is continuing at the Waitsia gas plant, with first gas targeted by the end of 2023.”

The balance sheet is “robust”, he added.

“We remain optimistic that Beach Energy will achieve its full year production targets, supported by expanding existing projects and a new gas plant.”

The Beach Energy share price has fallen 5.4% year to date, while paying out a 2% dividend yield.

Shaw’s peers seem to largely agree with his bullishness for the gas producer.

According to CMC Markets, 13 out of 19 analysts currently rate Beach as a buy.

‘It’s presented a buying opportunity’

Karoon Energy Ltd (ASX: KAR) has also experienced recent hardships, seeing its stock price dive more than 11% over the past 10 days or so.

“The oil and gas producer recently suspended production at its Bauna project in Brazil. Also, the Brazilian Government announced a tax increase on oil exports,” said Shaw.

“These events caused the stock price to marginally slip.”

But for those investing with a long-term horizon, the dip is an incentive to dive in right now.

“In our view, it’s presented a buying opportunity, as Karoon Energy offers strong management and high growth potential.”

The short-term crash hasn’t impacted longer-term performance too badly. Karoon is only down 1.8% year to date, and has actually gained 5.9% over the past 12 months.

Again, many other professionals also reckon Karoon is headed up. Nine out of 11 analysts currently surveyed on CMC Markets rate it as a buy.

The post ‘High growth potential’: 2 ASX 200 energy shares to buy this week appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Friday
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday

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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Flight Centre Travel Group Ltd (ASX: FLT) shares were known as an attractive ASX dividend share before the COVID-19 pandemic occurred and smashed the global travel sector. Could the good times return for passive income?

The signs are certainly looking positive for the ASX travel share, with Flight Centre generating $95 million of underlying earnings before interest, tax, depreciation and amortisation (EBITDA) in the first half of FY23, beating its initial target of between $70 million to $90 million.

That represented a $280 million turnaround from the FY22 first-half loss.

The company reported that its first-half total transaction value (TTV) increased by 203% to $9.9 billion and tracked at 80% of the record FY20 first-half result. The corporate business is delivering record TTV and was “set to top $10 billion during FY23”.

Flight Centre has targeted a 2% underlying profit before tax (PBT) margin by the end of FY25 and said there were positive margin trends.

Is this good news for Flight Centre dividends?

The ASX travel share didn’t declare an interim dividend. Flight Centre said:

The company has initiated a review of its capital structures ahead of an anticipated uplift in earnings and cash generation. The review will consider the business’ cash requirements to fund growth, shareholder returns and debt structures, including FLT’s convertible notes.

Commsec estimates currently suggest that there will be no dividend from the company in 2023.

But, in the 2024 financial year, projections on Commsec indicate that Flight Centre might pay an annual dividend per share of 30.8 cents.

Then, in the following year (FY25), it might pay an annual dividend per share of 64.5 cents per share. Now, that payment would be lower than what was paid per share in FY10, so there’s a long way to go for the business’ payouts to get back to former heights.

Will earnings keep rising?

Projections are just an educated guess, but the forecasts on Commsec suggest that earnings per share (EPS) could be 30.9 cents in FY23 and by FY25, it could be $1.23.

The company suggested that through its “diverse global leisure and corporate networks, Flight Centre is also well placed to capitalise on pent-up demand as travel continues to recover towards pre-pandemic levels.”

In FY23, Flight Centre is targeting underlying EBITDA of between $250 million to $280 million. It’s expecting improving profit margins and will consider acquisitions to fast-track growth in sectors that it is under-represented in or to secure new models, revenue streams, systems or technology.

When it announced its result on 22 February 2023, the company said it continued “to monitor trading conditions globally but has not seen any noticeable impacts on customer trading patterns as a result of changing macroeconomic dynamics”.

Things are looking promising for the ASX travel share over the next couple of years.

The post When will my Flight Centre shares start paying income again? appeared first on The Motley Fool Australia.

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More reading

• These are the 10 most shorted ASX shares this week
• Is the Flight Centre share price handing ASX 200 investors a buying opportunity?
• 11 ASX shares to buy with 4 on-trend qualities right now
• These are the 10 most shorted ASX shares this week
• Flight Centre shares are up 30% in 2023. Can it last?

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 Flight Centre Travel 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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