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The share price of Silk Laser Australia Ltd (ASX: SLA) is soaring on the back of a $169 million bid from S&P/ASX 200 Index (ASX: XJO) giant Wesfarmers Ltd (ASX: WES).

As The Motley Fool Australia reported earlier, a subsidiary of the Bunnings owner offered to pay $3.15 per share to take over the company – one of Australia and New Zealand’s largest non-surgical aesthetics clinic operators.

The Silk Laser share price has rocketed 25.2% on the news to trade at $3.03 at the time of writing. That marks a new 52-week high for the stock.

Meanwhile, the Wesfarmers share price has risen 0.6% to trade at $51.905 in early Thursday trade. That compares to the ASX 200’s 0.01% slump.

Let’s dive into the key details of the acquisition proposal put to the ASX small cap stock.

Wesfarmers bids $169 million for Silk Laser

The Silk Laser share price is leaping after the company revealed a $3.15 per share, all cash acquisition offer – a 30% premium to the stock’s previous close.

The bid comes from Australian Pharmaceutical Industries (API). API was itself acquired by Wesfarmers a little over 12 months ago.

The Silk Laser board seems to think the $3.15 bid is fair. It’s granted API access to its books to conduct due diligence.

It also intends to recommend shareholders vote in favour of the takeover, subject to an independent expert finding it’s in shareholders’ best interests.

Silk Laser founder and managing director Martin Perelman commented on the bid, saying:

SILK has grown from a single store in South Australia, to listing on the ASX a few short years ago, growing the network to more than 140 stores today. The SILK Board has determined that it is in the best interests of shareholders to engage with API.

WAM Capital Limited (ASX: WAM) – which holds 9.3% of the takeover target – has shaken on a conditional agreement with API to vote its stake in favour of the deal.

Silk Laser share price snapshot

The bid comes in nearly 4% higher than the Silk Laser share price’s new 52-week high.

However, it will still see those who jumped on board the company at its 2020 initial public offering (IPO) out of pocket.

It sold around 5.8 million shares for $3.45 apiece prior to floating on the ASX in December that year.

The stock has more than halved since peaking at $5.20 in March 2021. It’s gained 27% so far this year and has fallen 14% over the last 12 months.

The post Silk Laser share price rockets 25% following Wesfarmers takeover bid appeared first on The Motley Fool Australia.

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More reading

• Wesfarmers share price on watch amid $169m Silk Laser takeover offer
• If house prices have bottomed, should I buy property-related ASX shares?
• No savings at 40? I’d invest $5 a day in ASX shares for passive income of $7,800 a year
• Why did the Wesfarmers share price just smash a new 52-week high?
• 5 steps to bring in $1,000 per month in passive income

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 positions in and has recommended Wesfarmers. The Motley Fool Australia has recommended Silk Laser Australia. 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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Coles Group Ltd (ASX: COL) shares have done better than the S&P/ASX 200 Index (ASX: XJO) in 2023 to date. I think the supermarket business could continue to outperform and it may deliver strong passive income.

Coles shares have risen 9.5%, while the ASX 200 has only climbed 6%.

The supermarket company has managed to grow its earnings and dividends over the last few years.

I think earnings growth can be a key driver for both improving the Coles share price and growing the dividend.

One of the simplest drivers of Coles’ earnings is population growth in Australia. The more potential customers there are in the country, the more items that can go through Coles checkouts. The return of immigration to Australia is likely to help the business, in my view.

But, I think the projections are very promising for the Coles share price and dividend.

Growth expected

Commsec numbers suggest that Coles could generate earnings per share (EPS) of 81 cents in FY23. This would put the Coles share price at just over 22 times FY23’s estimated earnings.

The supermarket business could then generate 83.6 cents of EPS in FY24, which would be a valuation of under 22 times FY24’s estimated earnings.

Finally, the current projections suggest a larger jump in profit in FY25, with EPS forecast to rise to 95.5 cents. This would put the company at 19 times FY25’s estimated earnings.

The dividend is also expected to keep growing.

The two dividends from the business in FY22 amounted to 63 cents per share. Commsec suggests that the FY23 dividend per share could be 65 cents, which would be a grossed-up dividend yield of 5.15%.

The dividend could rise to 67 cents per share in FY24, which would be a grossed-up dividend yield of 5.3%.

Commsec numbers suggest that Coles could grow its dividend to 76 cents per share, which would be a grossed-up dividend yield of 6%. That’s good passive income and it could keep growing nicely from there.

Why I think Coles shares can outperform

Coles continues to grow revenue, which can be a useful driver for earnings before interest, tax, depreciation and amortisation (EBITDA), earnings before interest and tax (EBIT) and net profit after tax (NPAT).

The company’s profit margins are currently being boosted by the reduction of COVID-19 costs, as well as the cumulative $1 billion of benefits from its ‘smarter selling’ program.

Smarter selling benefits include better checkouts, energy reductions, measures to stop theft, and using advanced analytics and store-specific data to optimise markdown rates.

The business is also working on its automated distribution centres, which can help the business become more efficient and profitable.

When we combine the prospect of good passive dividend income, rising profit and re-investment into better technology, I think the outlook is bright.

The post Could Coles shares be a market-beating buy for passive income right now? appeared first on The Motley Fool Australia.

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More reading

• Here are the ASX 200 dividend shares to buy: analysts
• 5 things to watch on the ASX 200 on Monday
• What’s next for Wesfarmers shares after cashing out $700 million from Coles?
• How much would you need to invest in Coles shares to generate a $100 monthly passive income?
• How much do you need to invest to give up work and live only off dividend income?

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 Coles 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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While most ASX tech shares have rebounded from their lows, that doesn’t mean there aren’t any bargains out there.

For example, the two tech shares listed below could have huge upside potential if Goldman Sachs is on the money with its recommendations.

Here’s what its analysts are saying about these ASX tech shares:

Life360 Inc (ASX: 360)

Goldman Sachs currently has a buy rating and $7.90 price target on this location technology company’s shares. Based on the current Life360 share price of $4.90, this implies potential upside of 61% over the next 12 months.

The broker believes Life360 is on the verge of becoming a profitable growth machine. Something which it feels the market underappreciates. As a result, it sees significant value in its shares at the current level. It commented:

Life360 is executing well on its pricing strategy as the company moves to a profitable growth model, and we believe management’s targets regarding underlying/statutory EBITDA margin expansion should help the market quantify the operating leverage we believe Life360 can generate in coming years. The company is well capitalised, will be cash flow positive from 2Q23, and stands to generate significant earnings growth in coming years; all of which look underappreciated by the market as implied by the current share price.

Readytech Holdings Ltd (ASX: RDY)

Another ASX tech share that Goldman Sachs sees plenty of value in is Readytech. It is a provider of mission-critical software-as-a-service (SaaS) solutions for the education, employment services, workforce management, government and justice sectors.

Goldman currently has a buy rating and $4.40 price target on its shares. Based on the current Readytech share price of $2.95, this suggests potential upside of 49% for investors.

The broker is very positive on Readytech’s long term growth potential and its defensive earnings. It said:

RDY remains a tech value play within our coverage universe, trading at a >50% discount to peers when accounting for its robust growth outlook. Government software has been a pocket of strength and resilience within TMT (~3/4 of RDY’s earnings) and we are positive on RDY’s ability to deliver mid-teens organic growth at an expanding profit margin through the cycle.

The post Buy these cheap ASX tech shares offering huge potential returns: Goldman Sachs appeared first on The Motley Fool Australia.

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More reading

• Analysts say buy these ASX 200 tech shares before it’s too late
• Goldman Sachs says these ASX growth shares are market-thumping buys
• 2 high-risk, high-reward ASX tech shares to buy now: analysts
• My top 5 ASX shares to buy and hold forever in anticipation of the bull market
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360 and ReadyTech. The Motley Fool Australia has recommended ReadyTech. 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 dividend shares to buy, then you could do a lot worse than the ASX 200 shares listed below.

Both of these shares have been named as buys with above-average forecast dividend yields. Here’s what you need to know:

QBE Insurance Group Ltd (ASX: QBE)

The first ASX 200 dividend share that has been named as a buy is insurance giant QBE.

Analysts at Morgans are positive on the company. This is due partly to its belief that “strong rate increases [are] still flowing through QBE’s insurance book.” In addition, the broker highlights that the insurer’s shares are trading on lower than average multiples and appear “inexpensive” at current levels.

As for dividends, Morgans expects QBE to pay an 82 cents per share dividend in FY 2023 and then a 93 cents per share dividend in FY 2024. Based on the latest QBE share price of $14.89, this equates to yields of 5.5% and 6.25%, respectively.

Morgans has an add rating and $16.96 price target on QBE’s shares.

Rio Tinto Ltd (ASX: RIO)

Another ASX 200 dividend share for income investors to consider buying is mining giant Rio Tinto.

Goldman Sachs believes it is a great option for investors that are looking for mining sector exposure. This is due to its “compelling valuation” and “return to production growth in 2023.”

The broker expects the latter to underpin fully franked dividends per share of US$5.39 in FY 2023 and then US$4.76 in FY 2024. Based on current exchange rates and the latest Rio Tinto share price of $123.19, this will mean yields of 6.5% and 5.8%, respectively.

Goldman Sachs has a buy rating and lifting its price target to $138.30.

The post 2 ASX 200 dividend shares to buy now: brokers appeared first on The Motley Fool Australia.

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More reading

• The latest Rio Tinto dividend is being paid today. Here’s what you need to know
• Why are ASX 200 mining shares like Fortescue smashing the index today?
• Here’s how much I would need to invest in Rio Tinto shares to generate a $100 monthly income
• Leading brokers name 3 ASX shares to buy today
• Lithium, iron ore, and copper: Experts say these ASX 200 mining shares are buys

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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Fidelity portfolio manager James Abela has observed a curious — but welcome — change in the share market over the last six months.

“The market has shifted from focusing on value styles, valuations and short-term earnings to long-term realities of business models, as well as market structures,” Abela said on the Fidelity blog.

The revised focus seen in February’s reporting season would “likely continue into 2023”, he added.

“Operating margins, earnings growth, persistency of returns, cash generation, debt levels, market structures within industries, competition intensity levels, consumer confidence experience by companies, top-line sales outlook, and the visible level of certainty in management presentations.”

Meanwhile, Australian consumer sentiment remains ambiguous. Optimism seems to be mixed with worries about the second half of this year.

“Post-COVID, we have seen an increase in consumer spending,” said Abela.

“However, this flies in the face of the data reflecting consumer confidence, which is at low levels due to the flow-through impact of housing costs and cost of living, which is impacting the consumer psyche as spending concerns are emerging, but not yet visible in retail sales trends.”

So how does this translate to which ASX shares to buy right now?

4 attributes to look for in the best ASX shares to buy

The Fidelity team has deduced that the market revolution would trigger higher demand for four types of stocks: quality, momentum, transition, and value.

“The fund maintains a strategic tilt toward quality and transition or value with the intention of providing a higher-than-average growth outlook with a low valuation premium to navigate the beginning of 2023.”

Abela’s definition of quality takes in sectors such as software, health, consumer services, defensives, and insurance brokers.

Value shares come from industries such as real estate, airports, travel, global industrials, and gold.

To be precise, he named 11 specific stocks that his fund holds that are standard bearers of these desirable categories:

Type	Abela’s description	ASX shares
Quality	“higher returns, higher growth, long duration, quality accounts and management teams”	Altium Limited (ASX: ALU) WiseTech Global Ltd (ASX: WTC) Steadfast Group Ltd (ASX: SDF)
Momentum	“moderate returns with an upward trend, sentiment strong, cyclicals themes are favourable”	Orica Ltd (ASX: ORI) Evolution Mining Ltd (ASX: EVN) IGO Ltd (ASX: IGO)
Transition	“in recovery mode with some milestones or positive sentiment shift, but market still feeling uncertain about the outlook”	Flight Centre Travel Group Ltd (ASX: FLT) Auckland International Airport Limited (ASX: AIA) Collins Foods Ltd (ASX: CKF)
Value	“sentiment weak, valuations near lows relative to replacement cost or attractive in the eyes of industry participants”	Vicinity Centres (ASX: VCX) Ampol Ltd (ASX: ALD)

Australian conditions remain strong

Abela reckons the valuation of ASX shares generally — in terms of price-to-earnings (P/E) ratios — continues to chug along at the “lower range compared to history” because of the dark economic clouds.

“The dispersion range between high-growth and low-growth companies has begun to expand as the scarcity of earnings growth, certainty, sustainable margins and confidence in management has narrowed.”

Employment numbers have remained strong in Australia, indicating the country is not yet “experiencing any material economic weakness”.

“However, the drift toward softer business investment or employment is likely to create downward pressure in the current positive economic circumstances.”

The post 11 ASX shares to buy with 4 on-trend qualities right now appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• Here’s the latest forecast for ASX 200 lithium stocks from UBS
• 4 ASX 200 shares going gangbusters in high inflation (and what they have in common)
• 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 positions in and has recommended Altium, Collins Foods, Steadfast Group, and WiseTech Global. The Motley Fool Australia has positions in and has recommended Steadfast Group and WiseTech Global. The Motley Fool Australia has recommended Collins Foods and 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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The BHP Group Ltd (ASX: BHP) share price has proven resilient in the past, bolstered by a large and diverse portfolio of assets. Yet, the company’s shares are still in the dirt compared to a year ago.

At their last closing price, shares in BHP commanded a $47.27 price tag — roughly 10% lower than their going price a year prior. It appears investors are cooling their jets on the mining giant as commodity prices are dialled down to a gentle simmer.

Is it a chance to add this formidable Australian miner to the shareholding cabinet? Or is it better to leave it in the dust? We asked two of our Foolish writers to provide the bull and bear argument for one of the largest companies on the ASX — enjoy!

What’s to like about BHP shares now? 

By Monica O’Shea: I am positive about the BHP share price in the long term.

The iron ore price is a major factor that weighs on BHP shares on a regular basis. While the commodity has been volatile recently amid China’s plan to cap domestic output on steel, it is still far higher than its one-year low of $81.50 in November.

At the time of writing, iron ore is fetching US$121 a tonne. Late last week, ANZ commodity strategists Daniel Hynes and Soni Kumari said China’s commodity imports for March were surprisingly strong, commenting “Steel production is recovering, which could keep iron ore imports relatively steady.”

On another note, I believe BHP’s takeover of OZ Minerals Ltd (ASX: OZL) will broaden the company’s earnings base from copper. The conductive commodity accounted for US$2.8 billion of BHP’s underlying EBITDA in the first half of FY23, while iron ore contributed US$7.6 billion.

BHP has also recently received positive coverage from brokers. Macquarie has placed an “outperform” rating on BHP shares with a $52 price target. Meanwhile, Goldman Sachs has a hold rating on BHP with a $50.40 price target.  

Another recent good sign for BHP is insider buying. BHP director Gary Goldberg has recently lifted his stake in the company, which could indicate he is seeing positive signs for the BHP share price going forward.

Finally, I believe BHP could be worth holding for its dividend. Despite the BHP dividend falling in March 2023, overall, the company pays a very reasonable dividend yield when you look across ASX 200 shares.

Goldman is tipping BHP to pay a final dividend of US$1.21 a share in FY23, up from 90 cents in the first half of the financial year. This equates to $3.14 Australian dollars and represents a dividend yield of 6.6% based on the current share price.  

Motley Fool contributor Monica O’Shea does not own shares in BHP Group Ltd.

What’s not to dig about this mining giant?

By Tristan Harrison: I think the best time to buy an ASX mining share like BHP is when the share price is at a cyclical low when the commodity price has fallen.

No one can know what commodity prices are going to do next month or even next year, but I don’t think BHP is at a low point.

When we look at the BHP share price over the past six months, it has risen by around 16%. Since the middle of March, BHP shares have been flat. Yet, the iron ore price has dropped several dollars per tonne to around US$120 per tonne.

Iron ore has been the key earnings generator for BHP over the last few years, but China’s demand may not be enough to push the iron ore price any higher from here. In fact, it wouldn’t surprise me if the iron ore price fell by another US$10 per tonne over this year.

There’s also the new China Minerals Resources Group (CMRG) which is looking to do much of the Chinese purchasing of iron ore. This means CMRG could have a lot of buying power and will try to negotiate a lower iron ore price with the ASX mining shares, like BHP. Time will tell how much of an effect this has on the iron ore price.

BHP shares could continue to pay decent dividends over the longer term, but Commsec numbers suggest that the company’s dividend is going to be cut in FY23 to $3 per share.

With the company having a market capitalisation of $228 billion according to the ASX, I think it will be tricky for the business to grow strongly because of its enormous size.

Motley Fool contributor Tristan Harrison does not own shares in BHP Group Ltd.

The post BHP shares: Bull vs. Bear appeared first on The Motley Fool Australia.

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More reading

• Why this broker just upgraded BHP shares to a buy rating
• Top brokers name 3 ASX shares to buy today
• Why are ASX 200 mining shares like Fortescue smashing the index today?
• How much to invest in ASX shares to get $500 in dividends every month
• Here’s the forecast for popular ASX 200 mining shares from UBS

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 Wesfarmers Ltd (ASX: WES) share price will be one to watch closely on Thursday.

Why is the Wesfarmers share price on watch?

The Wesfarmers share price will be on watch on Thursday after the company identified its next takeover target.

Just a matter of days after selling down its stake in Coles Group Ltd (ASX: COL), the company is ready to put the funds to work to acquire Australia’s largest specialist clinic networks, Silk Laser Australia Ltd (ASX: SLA).

According to the release, Wesfarmers Health has tabled a non-binding offer of $3.15 cash per share. This represents a 30% premium to its last close price and values Silk Laser’s equity at $169 million. It is, however, worth noting that the offer is below the Silk IPO price of $3.45 per share.

The indicative proposal also provides for the payment of a fully franked dividend of up to a maximum of 10 cents per share. However, the cash component of any such dividend will reduce the cash consideration accordingly.

Wesfarmers notes that Silk is one of the largest non-surgical aesthetics clinic operators in Australia and New Zealand with a network of over 140 clinics. If the takeover is successful, it will become part of the Wesfarmers Health division. Management expect it to complement the division’s existing presence in the sector through its ownership and operation of Clear Skincare Clinics.

What’s next?

The release notes that Silk Laser has granted Wesfarmers up to 30 business days to undertake exclusive due diligence, with potential to extend the exclusivity period for a further 10 business days in certain circumstances.

As things stand, the Silk board of directors intends to unanimously recommend to its shareholders that they vote in favour of the scheme of arrangement. Each director intends to vote any shares they control in favour of the scheme.

Both are subject to the parties agreeing a scheme implementation deed on terms no less favourable than in the indicative proposal, the independent expert’s report, and there being no superior proposal.

One of the company’s largest shareholders, WAM Capital Limited (ASX: WAM), which owns 9.3% of Silk’s outstanding shares, has confirmed its support for the indicative proposal. So much so, it has entered into a voting agreement which is subject to there being no superior proposal and the independent expert’s report.

Silk Founder and Managing Director, Martin Perelman, was “pleased” with the news and believes “it is in the best interests of shareholders to engage” with Wesfarmers.

The post Wesfarmers share price on watch amid $169m Silk Laser takeover offer appeared first on The Motley Fool Australia.

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More reading

• If house prices have bottomed, should I buy property-related ASX shares?
• No savings at 40? I’d invest $5 a day in ASX shares for passive income of $7,800 a year
• Why did the Wesfarmers share price just smash a new 52-week high?
• Why this fund manager thinks these 2 outperforming ASX shares can keep beating the market
• 5 steps to bring in $1,000 per month in passive income

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 Coles Group and Wesfarmers. The Motley Fool Australia has recommended Silk Laser Australia. 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 banking sector has been having a tough time of late after a number of high profile collapses across the globe.

While this is disappointing for bank shareholders, it could be a buying opportunity for those that don’t already have exposure to the sector.

But which ASX 200 bank shares should you buy now?

Two that have recently been named as top picks by analysts are named below. Here’s why they rate these bank shares as buys:

ANZ Group Holdings Ltd (ASX: ANZ)

ANZ could be the ASX 200 bank share to buy according to analysts at Citi. The broker believes it is performing ahead of expectations during the first-half of FY 2023 based on its recent quarterly update. It commented:

Likely a strong quarter for institutional ANZ’s 1Q23 disclosures exhibited strong trends in both lending growth and asset quality. No earnings disclosure was provided, but we think that after backing out RWA movements from capital, it comfortably implies above market earnings. […] ANZ remains our top pick in the sector, and we expect the lending momentum, particularly in institutional, to continue to differentiate vs peers.

Citi currently has a buy rating and $29.25 price target on its shares and is forecasting a fully franked 166 cents per share dividend in FY 2023. Based on the latest ANZ share price of $24.14, the latter will mean a sizeable 6.9% dividend yield.

Westpac Banking Corp (ASX: WBC)

Over at Goldman Sachs, its analysts believe that Westpac is the ASX 200 bank share to buy right now.

Its analysts like Australia’s oldest bank due to its cost reduction plans and strong leverage to rising interest rates. The broker explained:

We are Buy-rated (on CL) and continue to see WBC as our preferred exposure to the A&NZ Financials reflecting: i) its strong leverage to rising rates, ii) despite WBC revising its FY24E cost target to A$8.6 bn (from A$8.0 bn), the bank’s performance on cost management remains strong in this inflationary environment with a 9% step down in costs expected over the next two years, iii) the business is still investing effectively in its franchise, and iv) we note the stock is trading at a notable discount to peers, versus the historical average discount of 2%.

Goldman has a conviction buy rating and $27.74 price target on its shares and is forecasting a 147 cents per share dividend in FY 2023. Based on the current Westpac share price of $22.23, the latter will mean a fully franked 6.6% dividend yield for investors.

The post These are the best ASX 200 bank shares to buy: brokers appeared first on The Motley Fool Australia.

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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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There are some amazing dividend yields on offer out of the ASX at the moment.

But many of those stocks are expensive. 

For example, JB Hi-Fi Limited (ASX: JBH) and Rio Tinto Ltd (ASX: RIO) are handing out mouth-watering 7.7% and 8.6% yields at the moment but cost around $45 and $122 per share respectively.

So are there any cheapies out there that could net you a tidy income?

Here’s a cheap ASX stock pumping out dividends

Adairs Ltd (ASX: ADH) is a homewares retailer with a $377 million market capitalisation.

The stock is currently paying out an awesome dividend yield of 8.2%.

And the great thing is that investors can grab the shares for under $10. The Adairs stock price closed Wednesday at $2.18, to be down around 3% year to date.

The retailer stock is trading at around a bargain-basement price-to-earnings ratio of 7.7.

At an 8.2% yield, the income from Adairs shares would easily pay for the typical mortgage repayments, which currently hover just around 5% to 6% per annum. 

Then you’d have money left over for a nice holiday, or reinvestment.

Even with just a $50,000 investment, Adairs will provide a tidy $342 of passive income each month. The dividend is 100% franked, so that amount could be even more depending on your tax circumstances.

How reliable is the business though?

The worry with a small cap paying out such handsome payouts might be that it could be a trap. Is the share price or dividend level at risk of collapse?

According to The Motley Fool’s Sebastian Bowen, Adairs is “far from” a dividend trap.

“It has recently declared an interim dividend of 8 cents per share, matching last year’s payout,” he said.

“Adairs just reported sales growth of 34.1% and an increase in net profit after tax of 23.9% to $21.8 million. This indicates its business model is growing healthily, which means the dividends should keep flowing.”

Among the professional community, the sentiment is mostly positive on Adairs. 

According to CMC Markets, four out of nine analysts currently rate the stock as a buy, while the rest reckon it’s a hold.

The platform also forecasts a dividend yield of 7.3% and 7.6% for each of the coming two years.

The post 1 under-$10 ASX dividend stock to buy for monthly passive income appeared first on The Motley Fool Australia.

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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 positions in and has recommended Adairs. The Motley Fool Australia has positions in and has recommended Adairs. 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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The Xero Limited (ASX: XRO) share price has been on fire this year. Since the start of the year, the cloud accounting platform provider’s shares have risen an impressive 31%.

The good news for investors is that the team at Goldman Sachs believes it isn’t too late to jump on the Xero bandwagon.

In fact, the broker believes the Xero share price is only warming up and sees plenty more upside ahead for investors.

What is Goldman Sachs saying about the Xero share price?

According to the note, Goldman has reiterated its conviction buy rating on the company’s shares with an improved price target of $126.00.

Based on the current Xero share price of $92.00, this implies potential upside of approximately 37% for investors over the next 12 months.

What’s new?

The broker has been looking at high-frequency data, Xero’s pricing power, and its expectations for its FY 2023 results next month.

In respect to the former, Goldman highlights that high frequency data supports an improvement in the UK. It notes that app downloads imply +76,000 second half net adds, which is consistent with company guidance for a similar/better performance than the prior corresponding period. It is also ahead of consensus estimates.

Another positive is that its visitation and Google search shares continue to improve. And while North America is mixed, it sees the recent partnership with Allinial Global a positive. In addition, the ANZ region continues to track positively.

In addition, Goldman notes that Xero’s cost reduction program is coming along nicely, with its workforce reducing meaningfully since the announcement. It points out that since March it has “seen Xero’s Linkedin workforce decrease by c.14% to 5.1k.”

Finally, its analysts highlight that “despite recent price increases, Xero is still inline with peers, with no historical impact on churn.”

All in all, the broker believes Xero is a great option for investors and well-placed to grow into its NZ$76 billion addressable market.

The post Conviction list: Goldman Sachs says Xero share price can rise 37% appeared first on The Motley Fool Australia.

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More reading

• Supercharge your portfolio with these 3 ASX growth shares: brokers
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• The ASX 200 tech stock to buy now before a massive revival
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Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. 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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