Tag: Motley Fool

It looks as though interest rates are going to remain at low levels for many years to come. But don’t worry because dividend shares remain a great way to earn a passive income.

But which dividend shares should you buy? Two quality options are listed below:

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

With the outlook for the banks improving greatly, now could be a good time to invest in ANZ if you don’t already have exposure to the sector.

Especially with the booming housing market and the relaxing of responsible lending rules. This should support mortgage loan growth in the near term.

Another positive is the removal of dividend payment restrictions by APRA. This is likely to lead to some generous dividend payments over the coming years. Especially given ANZ’s strong capital position.

Morgans is a fan of the banks and expects this to be the case. Last week it named ANZ its preferred pick in the sector and put an add rating and $33.50 price target on its shares.

The broker is forecasting a $1.54 per share dividend in FY 2021 and a $1.75 per share dividend in FY 2022. Based on the current ANZ share price of $28.95, this represents fully franked yields of 5.3% and 6%, respectively.

Wesfarmers Ltd (ASX: WES)

Another dividend option to consider is this conglomerate. Wesfarmers has been a very positive performance during the pandemic, with the majority of its businesses reporting sales and profit growth.

This led to a very strong first half performance, which saw Wesfarmers deliver a 16.6% increase in revenue to $17,774 million and a 25.5% jump in net profit after tax to $1,414 million.

Goldman Sachs was pleased with this result and appears to be expecting more of the same in the second half.

As a result, the broker has put a buy rating and $59.70 price target on its shares. Goldman is also forecasting a fully franked dividend of $1.88 per share in FY 2021 and $1.98 per share in FY 2022.

Based on the latest Wesfarmers share price of $54.60, this represents attractive 3.45% and 3.6% yields, respectively.

More reading

• What’s going on with the Wesfarmers (ASX:WES) share price today?
• ASX bank shares best placed to ride the $1bn+ provisioning profit boost this reporting season
• What could APRA’s climate guidance mean for ASX bank shares?
• Is the Commonwealth Bank (ASX:CBA) share price a buy at $90?
• Is the CBA (ASX:CBA) share price a buy for a recovery of dividends?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers 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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If you want to construct a balanced portfolio, having a few blue chip ASX shares in there would be a smart move.

But with so many to choose from, it can be hard to decide which ones to buy. To narrow things down for you, I have highlighted two ASX blue chip shares that come highly rated:

BHP Group Ltd (ASX: BHP)

The first blue chip ASX 200 share to look at is BHP. The Big Australian is one of the world’s largest miners and owns a diverse portfolio of world class and low cost operations.

While BHP has exposure to a wide range of commodities, the key commodity right now is iron ore. Incredibly, the spot iron ore price is currently trading above US$190 per tonne and is threatening to break through the US$200 level in the near future. This bodes very well for BHP and is thanks largely to this that the company is being tipped to deliver a bumper profit result in FY 2021.

In light of this, it will come as no surprise to learn that a number of brokers are bullish on BHP. One of those is Macquarie, which has an outperform rating and $57.00 price target on its shares. This compares to the latest BHP share price of $48.38.

CSL Limited (ASX: CSL)

Another blue chip ASX 200 share to look at is CSL. It is one of the world’s leading biotechnology companies, manufacturing and developing a portfolio of leading therapies and vaccines. This includes flu vaccines, immunoglobulins, and countless other plasma-based products.

Given its reliance on plasma for many of its products, the company has built a wide-reaching plasma collection network. Unfortunately, COVID-19 has hit its collection hard due to social distancing initiatives and stimulus payments. The latter has stopped some people from donating for an extra source of income.

The good news is that analysts at Citi believe the worst could be behind the company now. Last week the broker put a buy rating and $310 price target on its shares. It believes that collection volumes will improve now that ~40% of the US population have received their first vaccination.

The CSL share price is currently trading notably lower than this target price at $268.37.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 falls, BHP rises, Afterpay sinks
• Is the BHP Group (ASX:BHP) share price worth a buy today?
• 2 fantastic ASX 200 dividend shares rated as buys
• What’s behind the rising BHP (ASX:BHP) share price today?

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 CSL Ltd. 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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On Tuesday the S&P/ASX 200 Index (ASX: XJO) was out of form and dropped lower. The benchmark index fell 0.2% to 7,033.8 points.

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

ASX 200 expected to rise

It looks set to be a decent day of trade for the Australian share market on Wednesday. According to the latest SPI futures, the ASX 200 is expected to open the day 15 points or 0.2% higher this morning. This is despite a reasonably poor night of trade on Wall Street, which saw the Dow Jones and S&P 500 trade flat and the Nasdaq fall 0.35%.

Oil prices jump

It could be a good day for energy producers such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) on Wednesday after oil prices rebounded. According to Bloomberg, the WTI crude oil price is up 2.1% to US$63.22 a barrel and the Brent crude oil price has risen 1.6% to US$66.71 a barrel. Traders were buying oil amid optimism that OPEC will not increase production due to rising COVID cases.

Coles third quarter update

The Coles Group Ltd (ASX: COL) share price will be one to watch this morning when it releases its third quarter update. According to a note out of Goldman Sachs, it expects Coles to report a 3% decline in comparable food sales for the quarter but a 2% increase in liquor sales. This is expected to lead to total sales of $9,039.6 million, comprising food sales of $7,960.4 million and liquor sales of $802.5 million.

Gold price falls

Gold miners Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Limited (ASX: NCM) will be on watch after the gold price edged lower overnight. According to CNBC, the spot gold price is down 0.25% to US$1,775.60 an ounce. Traders appear nervous ahead of the next US Federal Reserve meeting.

Iron ore price continues to rise

BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) shareholders will be pleased to see that the iron ore price has continued its rise. According to Metal Bulletin, the spot iron ore price rose a further 0.9% to US$195.31 per tonne. This is a record high for the steel making ingredient.

More reading

• ASX 200 falls, BHP rises, Afterpay sinks
• Up 12% in April – what’s driving the Rio Tinto (ASX:RIO) share price?
• 2 high-quality ASX 200 shares to buy today
• Is the BHP Group (ASX:BHP) share price worth a buy today?
• Peter Warren Automotive (ASX:PWR) share price jumps 20% after IPO

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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 Afterpay Ltd (ASX: APT) share price has found itself sliding 7% this week in stark contrast to its buy now, pay later (BNPL) rival in the United States.

The performance of US-listed Affirm Holdings Inc (NASDAQ: AFRM) is going gangbusters, with the Affirm share price up ~20% in the last four trading sessions to US$77.97.

Despite BNPL shares largely moving hand-in-hand, here’s why the Affirm share price might be coming out ahead this week.

Why the Affirm share price is outperforming 

Recent acquisition targeting online returns 

The Affirm share price is likely being propped up this week by the company’s $300 million acquisition of Returnly on 21 April.

Returnly allows eligible consumers to receive an instant merchant credit upon initiating a return, allowing them to order a new or replacement item immediately. The company takes on the product return risk and settles the order in real-time, making the return and exchange process seamless and helping merchants drive higher repurchase rates.

Affirm observes that an estimated $428 billion in merchandise was returned to retailers in 2020.

Affirm is still playing catch up against the Afterpay share price 

Taking a look at the bigger picture, Affirm’s shares have slipped more than 45% from its February highs of US$146.90 and are down 15% since its first day of listing, where it closed at US$91.10.

By comparison, the Afterpay share price is down 25% since its all-time record high of $159.00.

Markets aren’t made equal 

The broader market could be a driving force behind Affirm’s rebound. 

The tech-heavy NASDAQ-100 (INDEXNASDAQ: NDX) has significantly outperformed the S&P/ASX 200 Index (ASX: XJO) in almost any time frame. The Nasdaq has increased 2.60% in the past four trading sessions, up ~9.60% year-to-date and up ~44% since its pre-COVID high. 

By comparison, the ASX200 is ~0.25% higher in the past four trading sessions, up ~5.25% year-to-date and down 2.25% since its pre-COVID highs. However, the ASX200 may not be a good representation or a driving force for Afterpay, given its weighting towards financials and mining. 

The S&P/ASX200 Info Tech (INDEXASX: XIJ) is down 4.50% year-to-date and up 32% since its pre-COVID highs, highlighting an underperformance in both a shorter and longer time frame. 

This outperformance and more rich valuation of US-listed shares is also a driving factor of why the Afterpay share price is eyeing a US listing. 

Afterpay still fetches a higher valuation 

With a market capitalisation of $33 billion, the Afterpay share price is still the most richly valued BNPL stock, trading at approximately 67 times FY20 revenue compared to the 39 times of Affirm. 

More reading

• ASX 200 falls, BHP rises, Afterpay sinks
• Your handy guide to 5 top ASX BNPL shares
• Is it time to sell Afterpay (ASX:APT) shares?
• 2 highly rated ASX growth shares for May
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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) fell 0.2% today to 7,034 points.

Here are some of the highlights from the ASX today:

Afterpay Ltd (ASX: APT) and other BNPL

The Afterpay share price was among the worst performers in the ASX 200 today, dropping by around 6%.

Many of the other buy now, pay later operators also dropped today. The Zip Co Ltd (ASX: Z1P) share price fell 6%, the Sezzle Inc (ASX: SZL) share price declined 2%, the Splitit Ltd (ASX: SPT) share price dropped 2.6% and the Laybuy Holdings Ltd (ASX: LBY) share price dropped over 4%.

BHP Group Ltd (ASX: BHP) and other iron miners

The iron ore continues to remain elevated with strong demand from China. This is helping the big iron ore miners’ profit stay higher for longer than what was expected by analysts.

The BHP share price went up more than 1% as investors remain bullish on the miners.

Looking at the other two big players, the Rio Tinto Limited (ASX: RIO) share price went up around 1% and the Fortescue Metals Group Limited (ASX: FMG) share price rose more than 1% as well.

Bingo Industries Ltd (ASX: BIN)

The Bingo share price went up more than 6% today in reaction to an agreed takeover.

Bingo revealed that it has entered into a scheme implementation deed with Macquarie Infrastructure and Real Assets and its managed funds (MIRA).

The main takeover option is an offer of $3.45 cash per Bingo share, reduced by any special dividend paid.

The ASX 200 share’s board intends to pay a fully franked special dividend of $0.117 per share which will unlock franking credits of up to $0.05 per Bingo share.

Bingo’s independent board committee and other Bingo recommending directors unanimously recommend the takeover.

The deal represents a 33% premium to the Bingo one-month volume weighted average price up to and including 18 January 2021. The acquisition earnings before interest, tax, depreciation and amortisation (EBITDA) multiple for the 12 months to December 2020 is 19.5 times.

Frank Kwok, head of MIRA Asia-Pacific said:

We believe the proposal we have developed in collaboration with Bingo will deliver real value for Bingo’s shareholders. The proposal recognises Bingo’s achievements and position in the marketplace, with a strong asset base and highly capable management team.

With MIRA’s significant experience investing in and operating recycling and waste management businesses around the world, we look forward to bringing our expertise to support the team in delivering Bingo’s next phase of growth.

Bingo shareholders will be given the opportunity to vote on the scheme at the scheme meeting which is expected to be held in July 2021. The takeover would be implemented shortly after that.  

More reading

• Up 12% in April – what’s driving the Rio Tinto (ASX:RIO) share price?
• Why has the Zip (ASX:Z1P) share price plunged 6% today?
• Province Resources and Zip were among the most traded ASX shares last week
• 2 high-quality ASX 200 shares to buy today
• Is the BHP Group (ASX:BHP) share price worth a buy today?

Tristan Harrison owns shares of Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Rio Tinto Limited (ASX: RIO) share price has had a great month on the ASX.

At the time of writing, the mining giant’s share price has risen by 12% since the end of March. Rio Tinto shares are currently swapping hands for $123.64 apiece.

For context, the S&P/ASX 200 Index (ASX: XJO) has risen by 3.6% over the same timeframe, while the All Ordinaries Index (ASX: XAO) is up 3.8%.

Let’s take a deep dive into what’s been driving the Rio Tinto share price over the last month.

What has Rio Tinto been up to in April?

The rallying of both the Aussie dollar and iron ore prices has helped boost the Rio Tinto share price over the last month.

The Australian dollar is currently worth 78 US cents. It’s risen by 2.3% over the course of April. As nearly all commodities are valued in US dollars, the company’s profit margin increases with the strength of the Aussie dollar.

This month also saw iron ore prices hit a record Australian dollar high. As the ABC reported on 20 April, the spot price for high quality iron ore in China was approximately $233 per tonne.

Rio Tinto released its quarterly results on 20 April. While the company’s results were positive, they didn’t blow investors out of the water. That day, its share price ending the session trading 0.5% lower than the previous day. 

However, the Rio Tinto share price was boosted by its whopping 3.9% final dividend, which the company paid to shareholders on 5 April. ASX investors with Rio Tinto shares in their portfolio would have received $5.17 per share.

In news from Rio Tinto not released to the ASX, the company achieved battery grade lithium at its Californian plant this month. To produce the lithium, the company is using waste piles at the Boron mine site, which have accumulated by more than 90 years of mining at the site.

Rio Tinto share price snapshot

April’s gains have come at a great time for the Rio Tinto share price. It hit its lowest closing price of 2021 in late March.

Currently, it’s up 7.1% year to date. It’s also up 44% over the last 12 months. Right now, it’s only 5% lower than its all-time highest closing price, which it hit in February this year.

The company has a market capitalisation of around $45 billion, with approximately 1.6 billion shares outstanding.

More reading

• What’s behind the rising BHP (ASX:BHP) share price today?
• Meet the real ASX winners from record high Chinese steel prices
• High iron ore prices are boosting the Fortescue (ASX:FMG) share price again
• 5 things to watch on the ASX 200 on Friday
• Super profits tax risk rising for ASX miners as commodity prices chase record highs

Motley Fool contributor Brooke Cooper 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 Tinybeans Group Ltd (ASX: TNY) share price was on the move today following a new product update.

At the open, shares in the baby-parent-centric social media platform jumped 5.1%. Although, the move lost momentum throughout the day. The Tinybeans share price settled the day with a 0.3% gain to $1.47 per share.

Fur babies welcome

Previously, Tinybeans has been focused on providing a private social network for parents to share their baby’s moments with loved ones. However, today marks the entrance of ‘Pets’, which will be a complementary addition.

The company has built a business model around a “freemium” offering. That means free users of the platform receive advertisements tailored to the infant/child’s age. With such targeted placements, advertisers pay Tinybeans for the viewership.

In the announcement, the company noted an overwhelming demand from both Tinybeans’ families and brand partners. The demand lifted by a surge in pet adoptions, with 11 million United States households adopting since the pandemic.

Tinybeans expects the new product to result in deeper engagement from existing families — as well as new ‘pet-only’ families.

Following a successful beta test earlier in the year, the company expects to launch the new pet features in early May.

More revenue jolts Tinybeans share price

The initial jump in Tinybeans’ share price this morning was likely in relation to the additional revenue from the new product.

According to the release, Tinybeans has secured a new US$500,000 agreement over an initial 6-month period. The deal is with Hill’s Pet Nutrition Inc, which is a subsidiary of Colgate-Palmolive.

Revenue from Hill’s sponsorship is expected to be recognised mostly during Q4 FY21 to Q1 FY22.

Adding to the news, CEO Eddie Geller commented:

We’re excited to broaden our platform to include the pets of our existing families and to welcome new pet-only families. This new feature not only services our existing users with a richer experience that caters to their entire family, but also broadens the user acquisition funnel to millions of pet parents who treat their pets like children.

The company’s market capitalisation is now $67.7 million after today’s move in the Tinybeans share price

More reading

• Nickel Mines (ASX:NIC) share price plunges 12% on quarterly report
• What’s going on with the Wesfarmers (ASX:WES) share price today?
• BetaShares launches new ASX banking ETF
• iSelect (ASX:ISU) share price edges higher on special dividend
• Why has the Zip (ASX:Z1P) share price plunged 6% today?

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 Tinybeans Group Ltd. The Motley Fool Australia has recommended Tinybeans Group Ltd. 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 Nickel Mines Ltd (ASX: NIC) share price was burrowing deep underground today. By the market’s close, shares in the nickel producer were trading at $1.13 – down 12.06%. By comparison, the S&P/ASX 200 Index (ASX: XJO) ended the day 0.17% lower.

Today’s steep price movement came after the company released its activities report for the third quarter (Q3) of FY21.

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

Nickel Mines share price sinks

In a statement to the ASX, Nickel Mines reported disappointing results for the last quarter, with massive declines across the board.

Nickel sales fell 10.0% from the prior corresponding period (pcp) to 10,257 tonnes. Production of the 28^th element at the company’s Ranger Nickel Rotary Kiln Electric Furnace (RKEF) fell 12.7% to 10,067 tonnes.

Sales from RKEF were down 13.0% on the pcp to US$138.2 million and earnings before interest, taxes, depreciation, and amortisation (EBITDA) from the site were a staggering 29.2% lower at US$50.7 million. Underlying free cash flow from operations was 30.5% down on the previous quarter to US$50 million.

As well, production costs increased by double-digit figures. Nickel from the company’s 80%-owned Hengjaya mine cost 14.6% more than in the pcp at US$8,725 per tonne. From its 80%-owned Ranger site, Nickel Mines’ nickel production costs were 16.1% higher at US$8,641 per tonne. The company said 5,065 tonnes of the metal was produced from the Hengjaya mine and 5,003 tonnes from the Ranger mine.

In further news dampening the Nickel Mines share price, the company advised cash, receivables, and inventory on hand at the end of the quarter was down 46.4% to US$277.4 million.

Nickel Mines attributed the large burn rate to a US$180 million payment for a 50% stake in the Angel Nickel RKEF, a US$45 million debt repayment and a US$38.8 million dividend payment. This distribution is equivalent to US1.53 cents per share given 2.52 billion shares outstanding. The debt repayment means the Ranger debt facility is fully paid.

According to the company, lower production in Q3 can be attributed to record production and sales in the previous quarter, as well as the Lunar New Year in February. The increased production costs were blamed on the increasing price of nickel on the commodities market, as well as higher coal prices.

Nickel commodity price

According to the website Trading Economics, the price of nickel fell from its 6-year high of US$19,600 per tonne in February to its current US$16,350 per tonne due to concerns of oversupply. Demand, however, is forecast to increase as electric vehicle sales increase. Nickel is necessary for the production of the batteries used in electric cars.

Nickel Mines share price snapshot

Over the past 12 months, the Nickel Mines share price has increased by around 135%. Before today’s double-digit drop, the company’s value was 17.4% greater compared to the beginning of 2021. Now, Nickel Mines shares are trading just 2.26% higher year to date.

Given today’s market price, Nickel Mines has a market capitalisation of around $2.9 billion.

More reading

• Why a2 Milk, Atlas Arteria, Audio Pixels, & Nickel Mines shares are sinking
• ASX 200 drops, Santos entices CEO, Centuria acquires again

Motley Fool contributor Marc Sidarous 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 Wesfarmers Ltd (ASX: WES) share price is falling at the final hurdle this month, dropping for the second day in a row.

At the time of writing, the Wesfarmers share price is $54.60, down 1.41% today.

It also fell yesterday, though far less dramatically, ending the day 0.81% lower than the previous session’s close.

With no news out of the company, many investors are wondering whether there’s a reason for the Wesfarmers share price tumbling.

Let’s take a look at what Wesfarmers has been up to lately.

A brief refresher on Wesfarmers

Wesfarmers began its life in 1914 as a Western Australian farmers’ cooperative. It has since grown to include many brands that nearly all Australians would recognise.

These include Bunnings, Kmart, Target, Catch.com.au, Officeworks, Kleenheat, and Flybuys.

What’s Wesfarmers been up to this month?

The Wesfarmers share price started the month off strong. Between 31 March and 19 April, it closed every day trading higher than the last.

It climbed from $52.67 to $55.83 and, after a brief correction, it reached $56.14.

Interestingly, such a dramatic climb occurred without the company publishing a word of price sensitive news to the ASX this month. Although, it did quietly release its plans for the future of Kmart. 

Outside of the ASX there has been news that Bunnings Warehouse may repurpose onsite carparks to be used as mass vaccination hubs.

We’ve also heard news from Target this month. It announced when it will be closing between 10 and 25 of its large stores and 50 of its smaller Target Country stores. Nearly 12 months ago we reported on the fate of many of Wesfarmers’ Target stores, but only now do we know the exact details.  

Further, while some top brokers still think Wesfarmers shares are a good deal, some investors may be bearish of its 33.44 price-to-earnings (P/E) ratio.

Wesfarmers share price snapshot

While we have no concrete answers as to why we’re seeing the Wesfarmers share price fall, the drop it’s experienced over the last 2 days has still left it in the green this month.

It’s also currently up 5.9% year to date, and up by 45% over the last 12 months.

Wesfarmers has a market capitalisation of around $62.7 billion, with approximately 1.1 billion shares outstanding.

More reading

• Top brokers name 3 ASX dividend shares to buy today
• 2 strong ASX 200 shares offering good income
• 2 high quality ASX shares for your retirement portfolio
• Wesfarmers’ (ASX:WES) Bunnings open to hosting COVID vaccine hubs
• What’s happening with the Wesfarmers (ASX:WES) share price today?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It was only back in February that we last looked at exchange-traded fund (ETF) provider BetaShares newest addition to the ASX. That was the BetaShares Cloud Computing ETF (ASX: CLDD), which launched in late February.

But today, we have news that BetaShares, evidently not one to rest on its laurels, is back at it. Today marks the first day of trading for the new BetaShares Australian Major Bank Hybrids Index ETF (ASX: BHYB). This new fund began trading this morning after opening at $10.02 per unit. At the time of writing, it hasn’t changed much, still priced at $10.02.

So if you’re a little confused over this ETF’s name, I wouldn’t blame you. Lots of jargon there. So the first thing to note is that this ETF doesn’t actually hold bank shares, like the Vaneck Vectors Australian Banks ETF (ASX: MVB) does. Or technically any ASX shares, for that matter. No, this new ETF will only hold what’s called ‘hybrid securities’ issued by ASX banks.

A hybrids ETF?

A hybrid is a type of security that combines elements of both a share and a bond (hence the name). The instrument is a bond (or a loan) but can be converted into equity (shares). As such, hybrids can offer interest income to investors, as well as possible dividend income and franking credits. All of the ASX banks routinely issue hybrid securities as part of their regular business. These hybrids trade on markets just like ASX shares do. And that is what this BetaShares ETF will invest in. Specifically those from Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking GrpLtd (ASX: ANZ).

So BetaShares tells us the following additional information on hybrids:

The fund provider also states that the running annual yield of the index that this new ETF will track was 3.5% as of 31 March. That compares to the average of 4.1% per annum (5.8% grossed-up with franking credits) that the index returned annually between February 2012 and March 2021.

This new BetaShares Australian Major Bank Hybrids Index ETF will pay income distributions monthly. It also charges a management fee of 0.35% per annum.

More reading

• What’s going on with the Wesfarmers (ASX:WES) share price today?
• iSelect (ASX:ISU) share price edges higher on special dividend
• Why has the Zip (ASX:Z1P) share price plunged 6% today?
• 2 top ASX dividend shares to buy
• Brokers name 3 ASX shares to buy now

Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. 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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