Tag: Motley Fool

The Western Areas Ltd (ASX: WSA) share price won’t be going anywhere on Tuesday.

This morning the nickel producer requested a trading halt so that it could launch an equity raising.

What did Western Areas announce?

Western Areas announced that it is aiming to raise a total of $100 million to complete the Odysseus development, advance organic growth projects at Forrestania and Cosmos, and continue exploration.

According to the release, this equity raising comprises a fully underwritten placement to raise $85 million and a non-underwritten share purchase plan to raise up to $15 million.

Western Areas is raising the funds at a floor price of $2.15 per new share, which represents an 8.1% discount to its last close price of $2.34.

Why is Western Areas raising funds?

Management plans to use the proceeds from the equity raising predominantly to fund the mine development capital expenditure at Odysseus.

Development at the operation is progressing on schedule and the first concentrate production is targeted for mid FY 2023.

Once Odysseus is in steady state production, delivery of 14.6kt of nickel in concentrate per annum is expected from the operation.

In addition, some of the proceeds will be used to help advance Western Areas’ targeted drilling campaign on its portfolio of exploration assets. These include Western Gawler, Metal Hawk, and Forrestania.

Western Areas’ Managing Director, Dan Lougher, commented: “The Placement supports the development of the Odysseus underground mine which is progressing well with excellent advance rates being achieved while also providing funding for Western Areas’ exploration portfolio where we hope to make significant progress in 2021. With greater balance sheet flexibility, the Company will be able to take advantage of opportunities within the portfolio and maximise returns to our shareholders.”

The Western Areas share price is expected to return to trade on Wednesday following the completion of the bookbuild process.

More reading

• These are the 10 most shorted shares on the ASX
• Why the Western Areas (ASX:WSA) share price is crashing 10% lower
• These are the 10 most shorted shares on the ASX
• These are the 10 most shorted shares on the ASX

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia 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.

The post Why the Western Areas (ASX:WSA) share price is in a trading halt appeared first on The Motley Fool Australia.

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The share market has stalled recently, especially for growth shares that led the spectacular bull run after the COVID-19 crash last year. 

The S&P/ASX All Technology Index (INDEXASX: XTX), which includes so many of the growth darlings of 2020, has sunk almost 16% in the past 3 weeks.

But experts warn that in down times like this, it’s critical investors don’t go in their shell.

In fact, a depressed market is the best time to buy stocks — since prices are lower and the upside is greater.

Collins St Value Fund managing director Michael Goldberg posted last month on Livewire that 90% of returns are made in just 5% of trading days.

“Extreme conditions create the most attractive investing opportunities.”

Don’t fall victim to ‘terminal paralysis’

Legendary investor and GMO co-founder Jeremy Grantham once wrote a letter to investors in March 2009 — in the middle of the global financial crisis crash.

He said many investors would liquidate to sit on a pile of cash in such times.

“As this crisis climaxes, formerly reasonable people will start to predict the end of the world, armed with plenty of terrifying and accurate data that will serve to reinforce the wisdom of your caution.” 

But then even as the actual crisis passes, according to Grantham, “terminal paralysis” can grip the market.

“Those who were over-invested will be catatonic and just sit and pray. Those few who look brilliant, oozing cash, will not want to easily give up their brilliance,” he said.

“So almost everyone is watching and waiting with their inertia beginning to set like concrete.”

But it always becomes obvious in retrospect that those with a big pile of cash will miss out on the market recovery.

“There is only one cure for terminal paralysis: you absolutely must have a battle plan for reinvestment and stick to it,” said Grantham.

How to buy shares in a depressed market

The first and last thing every stock expert tells retail investors is that no one can perfectly time the market.

Grantham is no different.

“Remember that you will never catch the low,” he said.

“Since every action must overcome paralysis, what I recommend is a few large steps, not many small ones. A single giant step at the low would be nice, but without holding a signed contract with the devil, several big moves would be safer.”

Forager research analyst Chloe Stokes told The Motley Fool last month that every investor should have a “wishlist” of shares they would buy if their prices came down. 

“It might seem like a waste of time, but you never know when the opportunity could come along to own a high-quality business at a more than reasonable price,” she said.

“I wouldn’t want to miss out on owning some of my favourite businesses if the opportunity presents itself again.”

Grantham said much the same in his 2009 letter.

“A simple, clear battle plan – even if it comes directly from your stomach – will be far better in a meltdown than none at all.”

The S&P ASX All Technology Index rose more than 93% in about 5 months after the COVID-19 crash.

There are plenty of other examples of post-correction rallies.

“In June 1933, long before all the banks had failed or unemployment had peaked, the S&P rallied 105% in 6 months. Similarly, in 1974 it rallied 148% in 5 months in the UK!” said Grantham.

“How would you have felt then with your large and beloved cash reserves?”

He added that the market doesn’t start rallying when it sees light at the end of the tunnel.

“It turns when all looks black, but just a subtle shade less black than the day before.”

More reading

• Why the Western Areas (ASX:WSA) share price is in a trading halt
• 3 mistakes passive income investors can make when investing in dividend stocks
• The ASX share dividend growth record belongs to Soul Patts (ASX:SOL)
• 3 fantastic ASX growth shares to buy in March
• Subreddit ASX Bets is gambling these 4 ASX shares will follow in GameStop’s footsteps

Motley Fool contributor Tony Yoo 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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Buying dividend stocks to make a passive income can be a worthwhile move. It may allow an investor to generate significantly higher returns than those available from other income-producing assets.

However, shares are much riskier than assets such as bonds. There is always scope to lose money on them over any time period. Therefore, by avoiding these three common mistakes, it may be possible to reduce risks, improve returns and enjoy a growing income stream over the long run.

Accessing an affordable passive income

A common mistake made by passive income investors is failing to check the reliability of a company’s dividend. It is all too easy to become focused on yields and how much a dividend could potentially grow by in future. As such, analysing a company’s dividend in terms of its affordability can easily be overlooked – especially during a bull market when many investors are upbeat about the future prospects for the stock market.

Assessing a company’s dividend affordability can be undertaken by comparing its shareholder payouts to cash flow or net profit. This provides guidance on how many times it was able to pay its dividend. A figure of less than one is clearly a red flag, since it means a company’s profits were insufficient to make dividend payouts. However, investors may wish to demand a figure of more than one at the present time due to the uncertain economic outlook.

Building a concentrated portfolio

Obtaining a passive income from shares is a risky pursuit. Any company can experience tough operating conditions at any time. This can compromise its capacity to pay a dividend.

Therefore, it is important to avoid building a concentrated portfolio of stocks. Many investors hold too few companies in their portfolios because they do not wish to dilute their overall yield by purchasing businesses with lower yields. However, this can be a dangerous move, since it means they are reliant on a relatively small number of companies through which to generate an income over the long run.

Forgetting about everything else

It is easy to have tunnel vision when seeking to make a passive income from dividend shares. In other words, investors sometimes forget about everything other than a company’s income prospects. For example, they may fail to check its valuation, the strength of its balance sheet, or a variety of other factors that matter to its future performance.

Of course, dividends are likely to be most important to an income-seeking investor when buying dividend shares. However, it is imperative to check all aspects of a business in order to build an accurate picture of its strengths and weaknesses. Through undertaking this process, it may be possible to obtain a higher income stream that is more resilient in the coming years.

More reading

• Why the Western Areas (ASX:WSA) share price is in a trading halt
• How to reinvest when terrified
• The ASX share dividend growth record belongs to Soul Patts (ASX:SOL)
• 3 fantastic ASX growth shares to buy in March
• Subreddit ASX Bets is gambling these 4 ASX shares will follow in GameStop’s footsteps

Motley Fool contributor Peter Stephens 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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There is one ASX dividend share that can claim to have the longest dividend growth record on the Australian Stock Exchange. It’s called Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), or Soul Patts for short.

What is the record?

Soul Patts has increased its dividend every year since 2000. That means the consecutive growth streak has been going on for 20 years.

The dividend payments have kept increasing through two global share market crashes. There was the GFC over a decade ago, and it also increased its dividend last year despite the impacts of COVID-19.

The ASX dividend share also has another impressive dividend statistic. It has paid a dividend every year since 1903, which is the year that it listed.

What is Soul Patts?

As I just mentioned, Soul Patts was listed in 1903. It was previously two separate pharmacy companies, Pattinson and Co. and Washington H. Soul and Co.

It’s now an investment conglomerate that has assets across a diverse range of industries including resources, building materials, telecommunications, retail, agriculture, property equity, investments and corporate advisory.

The ASX dividend share has been managed by the same family. Soul Patts says that’s the key to its strength. It says:

Its leadership has been grounded in successive family members who value the history of the company, yet are able to adapt to changing times and economic conditions. All have had the ability to spot talented people to fill senior and middle management positions.

In turn, management has always been supported by able, loyal and long-serving staff. More than 40 employees have worked for the company for over 50 years. Five generations of the Pattinson family have served the company, as have three generations of the Dixson, Spence, Rowe and Letters families.

What’s in the portfolio now?

Soul Patts has a broad range of investment holdings. In terms of listed holdings, it has: TPG Telecom Ltd (ASX: TPG), Tuas Limited (ASX: TUA), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Bki Investment Co Ltd (ASX: BKI), Milton Corporation Limited (ASX: MLT), Pengana Capital Group Ltd (ASX: PCG), Pengana International Equities Ltd (ASX: PIA), 360 Capital REIT (ASX: TOT), Australian Pharmaceutical Industries Ltd (ASX: API), Palla Pharma Limited (ASX: PAL) and Apex Healthcare.

The ASX dividend share also has stakes and investments in a number of private businesses including Round Oak Minerals, Pitt Capital Partners, Ironbarn Asset Management, Contact Asset Management, Ampcontrol, Aquatic Achievers, Seven Miles, Verdant Minerals and Dimeo. It’s also invested in luxury retirement living.

One of the most recent investments was a large investment in agriculture, which Soul Patts said were defensive assets benefitting from opening up to foreign trade. Some of the produce that it’s invested in includes citrus, macadamias, avocados, stone fruit and table grapes.

How is the dividend funded?

Soul Patts says that it’s focused on two key things. The first is growth in the capital value of the portfolio (measured by growth in the net asset values). The second is steady and growing dividends, paid from the cash generation of the portfolio.

Its biggest investments are responsible for the biggest proportion of the cashflow. TPG, New Hope and Brickworks are the biggest three sources of cashflow for the ASX dividend share right now.

In FY20, Soul Patts paid out 56.9% of its regular operating cash flows, allowing the retained amount to be invested in more opportunities and this could help grow the dividend further.

More reading

• 2 ASX 200 shares worth buying for income
• 2 top ASX dividend shares to buy
• 3 reasons why Brickworks is a great ASX dividend share
• No ASX dividend share is perfect, but Soul Patts (ASX:SOL) is more perfect than most
• 3 ASX shares that keep growing the dividend every year

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post The ASX share dividend growth record belongs to Soul Patts (ASX:SOL) appeared first on The Motley Fool Australia.

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If you have a penchant for growth shares, then I have good news for you. The Australian share market is home to a good number of companies growing their earnings at a quick rate.

Three ASX growth shares that could be worth a closer look are listed below. Here’s what you need to know about them:

Kogan.com Ltd (ASX: KGN)

Kogan is one of Australia’s leading ecommerce companies. It has been a huge winner from the accelerating shift to online shopping caused by the pandemic. For example, during the first half of FY 2021, Kogan reported a 97.4% increase in gross sales to $638.2 million and a whopping 250.2% lift in adjusted net profit after tax to $36.5 million. This was driven by a large increase in active customers, acquisitions, and strong Exclusive Brands sales. Analysts at Credit Suisse were pleased with its performance. The broker has put an outperform rating and $20.85 price target on its shares.

NextDC Ltd (ASX: NXT)

Another growth share to look at is NextDC. It is Australia’s leading data centre operator, with a total of nine centres located across Australia. It has been benefitting greatly from a different shift – the shift to the cloud. This has led to a significant increase in demand for the company’s highly interconnected platform of premium colocation data centres. So much so, it led to NextDC recently reporting a 29% increase in EBITDA to $65.7 million for the first half. Pleasingly, more of the same is expected in the second half. In response to its results, UBS put a buy rating and $15.40 price target on its shares.

Pushpay Holdings Group Ltd (ASX: PPH)

Pushpay is leading donor management and community engagement platform provider for the faith sector. Like the others, it has been growing at a rapid rate in FY 2021 despite the pandemic. Strong demand in the United States means that Pushpay is expecting to achieve full year operating earnings of US$56 million and US$60 million. This will be up a massive 123% to 139% year on year. And thanks to further operating leverage, its earnings are expected to grow even quicker. Analysts at Goldman Sachs are positive on the company. They have a conviction buy rating and $2.59 price target on its shares.

More reading

• International Women’s Day: Which ASX companies are fighting gender inequality?
• 5 things to watch on the ASX 200 on Monday
• 3 highly rated ASX growth shares to buy now
• Brokers name 3 ASX shares to buy right now
• Why is everyone talking about bond yields?

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and PUSHPAY FPO NZX. The Motley Fool Australia has recommended Kogan.com ltd and PUSHPAY FPO NZX. 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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At the end of January, the GameStop Corp. (NYSE: GME) share price hit an all-time high of US$483. Only 2 months previously, shares in the company were trading at US$14.75. Many attributed the video game retailer’s dramatic rise to subreddit Wall Street Bets.

The Australian equivalent – ASX Bets – has 10 shares it believes will be our next GameStop. Here are 4 of them.

Zip Co Ltd (ASX: Z1P)

The most popular of the recommended shares is Zip. At least one post a day on ASX Bets is devoted to the buy now, pay later (BNPL) provider.

At close of trade Monday, shares in the company were swapping hands at $8.90. That’s down 6.9% on the previous trading day’s close and over 34% for the month. High-risk shares are suffering this year as US bond-yields increase.

If an investor bought shares in the company this time last year, they would be sitting on a hefty 302.7% return.

Lake Resources N.L. (ASX: LKE)

Lake Resources is a lithium exploration business with a number of lithium brine projects being developed or explored across Argentina. 

As previously reported, lithium’s commodity price is skyrocketing. It’s increased 80% over 3 months and currently sits at US$70,500. The price rise is mostly attributed to increasing electric car sales.

Lake Resources closed 7.1% lower on Monday to finish at 32.5 cents per share. Just one week ago shares in the company were swapping hands at 46 cents. Yet, this time last year, the Lake Resources share price was just 3.4 cents, which puts the company’s 12-month return at an astronomical 802.8%.

Race Oncology Ltd (ASX: RAC)

As the name suggests, Race Oncology is in the business of treating cancer. It is developing a cancer-fighting drug it calls Bisantrene. The medical company recently announced Bisantrene is effective in terminating patient-derived ovarian cancer cells.

In the first half of FY21, Race Oncology reported a net loss of $2.1 million – up 37% from the prior corresponding period (pcp).

The Race Oncology share price closed 1.36% higher on Monday to end the day at $3.73. If you bought shares exactly one year ago, you would have a mouth-watering 921.9% return on your investment.

Latin Resources Ltd (ASX: LRS)

Latin Resources is an Australian and South American-based mining and mineral exploration company. Its operations include a gold mine in NSW, a copper project in Peru and lithium opportunities in Argentina as well as Brazil.

While the company is focused on exploring a range of elements, the hype is in its lithium projects. Like with Lake Resources, as the demand for lithium is booming, so too is its price. The main beneficiaries of the frenzy will inevitably be lithium miners.

The Latin Resources share price closed 1.56% higher on Monday at 6.5 cents. In the last 3 months, it has increased by more than 100%. Even more astounding, over the last 52 weeks it has soared by a logic-defying 1,525%.

More reading

• ASX 200 rises, TWE jumps, Zip sinks
• Here’s why the Zip (ASX:Z1P) share price is down 8% today
• Why Audio Pixels, Nick Scali, Smartgroup, & Zip are tumbling lower
• Aristocrat (ASX:ALL) share price surges as it finds a sweet spot
• The Zip (ASX:Z1P) share price is down 34% in less than a month

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. 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 Vocus Group Ltd (ASX: VOC) share price will be one to watch on Tuesday.

This follows the release of an update on its takeover approach by a consortium owned by Macquarie Infrastructure and Real Assets (MIRA) and Aware Super.

What did Vocus announce?

This morning the specialist fibre and network solutions provider announced that it has entered into a Scheme Implementation Deed with the consortium.

According to the release, the agreement will see the consortium acquire 100% of the share capital of Vocus for $5.50 cash per share.

This represents a 10% premium to the latest Vocus share price. It is also a 25.6% premium to Vocus’ closing price of $4.38 per share on 5 February 2021. This was the day before the offer was first made.

Why is Vocus accepting the offer?

Vocus’ Chairman, Bob Mansfield, believes that the offer is in the best interests of shareholders.

He commented: “The Vocus Board is unanimous in our view that this offer is in the best interests of Vocus shareholders. In making this assessment, the Board considered a range of alternatives, including the execution of our existing strategy under which the proceeds of an IPO of Vocus New Zealand would reduce debt and be invested in our core business.”

“Feedback from shareholders in recent weeks on the indicative offer of $5.50 originally received from MIRA has been overwhelmingly positive and there is a broad recognition that this is a very fair value for Vocus shareholders,” he added.

What now?

The Vocus Board has agreed to unanimously recommend that Vocus shareholders vote in favour of the Scheme. This is in the absence of a superior proposal and subject to an Independent Expert concluding that the Scheme is in their best interests.

Subject to these qualifications, each Vocus director has confirmed that they intend to vote any shares that they hold or control in favour of the Scheme.

Shareholders will be given the opportunity to vote on the takeover at a scheme meeting, which is currently expected to be held in June. After which, if shareholders vote in favour of the scheme, its implementation would occur in July.

More reading

• Here’s why the Vocus (ASX:VOC) share price is pushing higher today
• Vocus (ASX:VOC) share price rises after takeover update
• ASX 200 Weekly Wrap: ASX cools on earnings reality check
• These were the best performing ASX 200 shares last week
• Telstra (ASX:TLS) share price rises as brokers pass judgement on its profit result

Motley Fool contributor James Mickleboro 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 Australian share market may have been pushing higher recently, but not all shares have fared so well.

Two ASX shares that have just hit 52-week lows are listed below. Here’s why they are down in the dumps:

Adore Beauty Group Ltd (ASX: ABY) 

The Adore Beauty share price dropped to a 52-week low of $4.59 on Tuesday. This means the online beauty retailer’s shares are now down 32% from their IPO price of $6.75.

Investors have been heading to the exits despite Adore Beauty smashing expectations during the first half of FY 2021. For the six months ended 31 December, the company delivered revenue of $96.2 million and EBITDA of $5.2 million. This was up 85% and 188%, respectively, over the prior corresponding period. It was also ahead of its prospectus guidance for revenue of $89 million and EBITDA of $3.3 million.

The catalyst for the selling has been rising bond yields, which has put significant pressure on growth shares. This is because as the risk-free rate rises, the premium that investors are prepared to pay for shares reduces. Though, one broker that sees this share price weakness as a buying opportunity is UBS. Late last month it upgraded Adore Beauty’s shares to a buy rating with a $6.20 price target.

Nuix Limited (ASX: NXL)

The Nuix share price hit a 52-week low of $4.63 on Monday. This means the leading investigative analytics and intelligence software provider’s shares have now fallen 61% from their 52-week high and are trading below their IPO price of $5.31 per share.

Investors have been selling Nuix shares following the release of its disappointing half year results last month. The company fell short of expectations during the half, despite listing on the market just a few weeks before the end of it on 4 December. And while management has just defended its performance and reaffirmed its guidance for the full year, this hasn’t been enough to stop the Nuix share price from continuing its slide.

Morgan Stanley remains positive on the company and has an overweight rating and $10.75 price target on its shares.

More reading

• One person earned $250,000 on Airtasker last year. Now it’s listing
• Here’s why the Nuix (ASX:NXL) share price is storming 5% higher today
• Nuix (ASX:NXL) share price hits all-time low: Time to buy?
• The Nuix (ASX:NXL) share price has a lot of ground to make up in FY21
• Top brokers name 3 ASX shares to buy next week

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Nuix Pty Ltd. The Motley Fool Australia has recommended Nuix Pty 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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A familiar name on the smartphones of many younger generations will be floating on the ASX next week.

Airtasker Limited (ASX: ART) will start trading on Monday 22 March after an initial public offering of 65 cents per share. That’ll give it a market capitalisation of $255.4 million.

Airtasker allows users to post mainly domestic jobs, with “taskers” replying to complete the chore for a fee. 

Like many modern tech firms, there is a founder story behind the business. 

Co-founder and chief executive Tim Fung declined to speak to The Motley Fool, but he told smh.com.au that in 2011 he had to move house and asked for help from a friend who had a van.

He thought surely he wasn’t the only one in that situation.

“Why do we ask friends and family to do all these kinds of jobs when there’s so many people out there who are looking for work and opportunities?” he asked.

“We thought of the huge opportunities that we could unlock if we could make it really simple to be able to buy local services… About nine months after that, we launched.”

Recent tech IPOs not inspiring confidence

Airtasker’s name value may help it drive up initial demand for its shares.

But it’s been tough times for many of the other tech companies that have floated in the past few months.

The biggest example is Nuix Ltd (ASX: NXL), which listed in early December amid huge hype and some analysts calling it the IPO of the year.

The shares for the data analytics provider hit as high as $11.86 in January. But they tanked after the half-year results at the end of last month. The stock now goes for $4.93, which is 7% lower than the IPO price of $5.31.

Fintech Douugh Ltd (ASX: DOU) boasted the highest 2020 return of any IPO that year, but has since nosedived due to regulatory and performance concerns.

Online retailer MyDeal.com.au Limited (ASX: MYD) floated for $1 in October then immediately thrilled the market, trading for as high as $2.20. As of Monday, it has dipped back below its IPO price, trading at 98 cents.

Value per task increasing

A typical Airtasker scenario is a person who just bought flat-pack furniture wanting to get someone else to assemble it for them.

But the average dollar value per task is increasing. 

It went from $97 in the company’s early days to $159 last financial year. The prospectus forecasts $189 by the end of the current year.

“What we’ve observed from that is that it’s actually the types of work that people are requesting through Airtasker that are increasing in complexity and sophistication.”

So there are now more professional tasks exchanged on the platform, such as legal or accounting work.

The highest earning tasker in 2020 earned about $250,000 through the platform.

Cynics have pointed out the ASX listing may be more of an exit ploy by long-time investors, rather than a genuine capital raise. For example, Seven West Media Ltd (ASX: SWM)’s investment arm is selling off its entire $46 million stake.

Airtasker copped a pro forma net loss after tax of $5.2 million for the 2020 financial year. It estimates losing $6.2 million for the current year.

More reading

• Here’s why the Nuix (ASX:NXL) share price is storming 5% higher today
• Why the Douugh (ASX:DOU) share price is jumping 12% today
• Nuix (ASX:NXL) share price hits all-time low: Time to buy?
• 2 buy-rated small cap ASX shares with strong growth potential
• The Nuix (ASX:NXL) share price has a lot of ground to make up in FY21

Tony Yoo owns shares of Nuix Pty Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Nuix Pty Ltd. The Motley Fool Australia has recommended Nuix Pty 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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Is the Westpac Banking Corp (ASX: WBC) share price a buy for a dividend yield that could be 6.3%, grossed-up, in FY21?

What is the projected 6.3% dividend yield based on?

We’ll get to broker thoughts later, but the headline yield comes from a prediction based on Commsec numbers that Westpac will pay a fully franked dividend of $1.09 per share in FY21. This would be a sizeable increase from the dividend paid in FY20 of just $0.31 per share.

What’s driving the Westpac share price right now?

A month ago the big four ASX bank announced that its FY21 first quarter statutory net profit was $1.7 billion, up from the quarterly average of the second half of FY20 of $550 million.

It also said that FY21 first quarter cash earnings of $1.97 billion was much higher than the FY20 second half quarterly average of $808 million, up 54% excluding notable items.

Westpac said that it was boosted by a $501 million impairment benefit from improved credit quality, the stronger economic outcomes that the bank is seeing and a better economic outlook.

The Westpac share price is up around 10% since the release of this update.

The big bank said that its stressed assets and delinquencies declined. Stressed assets to the bank’s total committed exposure fell 15 basis points, with almost all industry segments improving. Consumer delinquencies of over 90 days were lower over the quarter, which included Australian mortgage delinquencies of over 90 days down 16 basis points to 146 basis points.

It reported a net interest margin (NIM) of 2.06%, up 3 basis points from the second half of FY20. This was up 2 basis points excluding notable items.

The big four ASX bank said that core earnings were up 28%, or up 3% excluding notable items.

In terms of the balance sheet, Westpac said that its common equity tier 1 capital ratio was 11.9% at 31 December 2020, up 74 basis points over the quarter and up 111 basis points year on year. This is above APRA’s ‘unquestionably strong’ benchmark.

At the time of the update, Westpac said that the number of COVID-19 deferrals was continuing to decline. At 31 January 2021, $11 billion Australian mortgages were being deferred, with significant roll-off expected in February and March. The big bank also said that $400 million of small business loans were being deferred at 31 January 2021, which represented less than 1% of the small business portfolio.

Is the Westpac share price a buy?

Broker Morgans has a share price target of $27.50 for Westpac and actually thinks that the big four bank could pay a dividend of $1.32 per share in FY21. That translates to a grossed-up dividend yield of 7.6% at today’s share price. Morgans rates Westpac shares as a buy.

However, not every broker is so bullish about the bank.

Whilst Ord Minnett thinks that Westpac could pay a dividend of $1.20 per share in FY21, it only has a share price target of $24.50 for the big four ASX bank. Ord Minnett thinks that the Westpac share price is a hold.

More reading

• Why the Westpac (ASX:WBC) share price just hit a 52-week high
• ANZ (ASX:ANZ) hits 3 year high. Can we thank dividends?
• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• Beat low interest rates with this outstanding ASX dividend share
• Brokers name 3 ASX shares to buy right now

Motley Fool contributor Tristan Harrison 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.

The post Is the Westpac (ASX:WBC) share price a buy for a 6.3% dividend? appeared first on The Motley Fool Australia.

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