Tag: Motley Fool

The Vulcan Energy Resources Ltd (ASX: VUL) share price is pushing higher again on Wednesday.

In morning trade the clean-lithium company’s shares were up as much as 6.5% to $9.00.

At the time of writing, the Vulcan share price has eased back a touch but is still up 2.5% to $8.66.

Why is the Vulcan share price pushing higher?

Investors have been buying Vulcan shares today after it announced a bolt-on acquisition.

According to the release, the company has signed a binding agreement to acquire 100% of geothermal subsurface consultancy company GeoThermal Engineering.

The release explains that GeoThermal Engineering has a highly credentialed, world-leading scientific team with over a century of combined expertise in sub-surface development of geothermal projects. This includes from exploration to production drilling.

Management explained that the acquisition is part of its plans to accelerate its Zero Carbon Lithium project in Germany.

This project will use the company’s Zero Carbon Lithium process to produce both renewable geothermal energy, and lithium hydroxide, from Europe’s largest lithium resource.

What will it cost?

The acquisition will cost Vulcan a single euro. The company notes that the sole shareholder of GeoThermal Engineering is Dr. Horst Kreuter, who is the Executive Director of Vulcan.

Geothermal Engineering owes a debt of approximately 140,000 euros to Dr Kreuter plus a nominal amount of interest. It also has further debt of 135,000 euros owed to external parties.

Completion of the acquisition is subject to the completion of due diligence to Vulcan’s sole discretion and satisfaction.

Vulcan’s Managing Director, Dr. Francis Wedin, commented: “By acquiring GeoT, we are welcoming decades of experience of German deep geothermal sub-surface project development into the Vulcan team.”

“GeoT has exceptional expertise in the geology and geochemistry of the Upper Rhine Valley geothermal brine. Our motivations are fully aligned: to decarbonise heat and power in Europe with geothermal development in the Upper Rhine Valley, and in doing so to co-produce Zero Carbon Lithium for the European electric vehicle market. We expect our larger, bolstered development team to accelerate the development of our globally unique project,” he concluded.

Following today’s gain, the Vulcan share price is now up 212% since the start of 2021.

More reading

• ASX 200 falls 0.9%, Nick Scali reports, Vulcan jumps
• Why Alliance Aviation, REA Group, SEEK, & Vulcan shares are charging higher
• Here’s why the Vulcan Energy (ASX:VUL) share price is storming 14% higher
• Why the Vulcan Energy (ASX:VUL) share price is in a trading halt
• Why the Vulcan Energy (ASX:VUL) share price stormed 186% higher in January

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 Vulcan (ASX:VUL) share price is storming higher today appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3jAwMGl

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

To put it plainly, the coronavirus pandemic boosted most of Amazon‘s (NASDAQ: AMZN) operations. Social distancing orders placed added value on the services it provided and to the company’s credit it capitalized on the situation quite effectively.

The pandemic will not be permanent, and life will at some point slowly return to a more normal reality. Where will Amazon’s business be when this happens? Here we will explore Amazon’s prospects one year from today.

Thriving financially

Amazon fully took advantage of the environment we found ourselves in last year — and it shows in the company’s financial success. In its most recent quarter (ended Dec. 31, 2020) the company eclipsed $100 billion in sales for the first time, with revenue coming in at $125.6 billion — up 44% year over year on a truly massive base.

Its trailing-12-month operating cash flow soared 72% year over year to $66.1 billion with free cash flow over the same period rising 20.1% despite heavy investments in logistics and a historic hiring spree.

The outperformance does make some sense considering the year our world has just endured. Government mandates forced many brick-and-mortar retail rivals to temporarily close or restrict capacity, which boosted Amazon’s gigantic e-commerce presence by limiting consumer selection.

Furthermore, the pandemic accelerated society’s digital transformation. Considering this, one could have expected its Amazon Web Services (AWS) segment to enjoy strong demand just like its commerce business did. After all, Microsoft‘s Azure — its closest competitor — realized a slight ramping in growth quarter over quarter during the same period. It posted 48% growth for Azure versus the prior-year’s period.

However, AWS did not realize a demand boost. Its year-over-year growth of 29% was the same as the previous quarter despite favorable macro tailwinds; this potentially points to the segment continuing to mature and reach its potential. With AWS boasting far better profit margins than its e-commerce business, this is concerning and there is little guarantee it will be able to turn around.

The ebbing of COVID-19

While we don’t know exactly when the pandemic will finally come to end, help is certainly arriving. Over the last several weeks, millions of Americans have received their COVID-19 vaccines, and cases continue to precipitously drop in correlation with this trend. To help supply chains even more, Johnson & Johnson just submitted an Emergency Use Authorization application for its COVID-19 inoculation.

What would this all mean for Amazon?

The return of brick-and-mortar competition should allow stores to more effectively compete with Amazon. This is not to say Amazon’s growth will halt here — far from it. The company has been delivering expansion and shareholder returns for decades and that will not likely change as e-commerce as a whole continues to quickly grow. Still, it does likely mean growth will revert to pre-pandemic levels.

From an AWS perspective, fading social distancing orders could theoretically lead to the return of in-person meeting and collaboration which could be a small headwind there. With AWS’ growth already slowing during the heat of the pandemic, a return to normalcy would be great for the world as a whole but perhaps not as great for Amazon. The company’s somewhat lofty price to earnings (P/E) ratio of 80.2 makes slowing growth in its two primary areas of business troubling.

Proceed with caution 

For years (decades really) Amazon has reliably delivered for investors. While its 2020 was undeniably admirable, a return to normalcy would remove some of the need for Amazon’s products. Investors certainly will not be burned by owning this iconic behemoth, but I do think there are better places to invest your funds.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Amazon unveils its largest-ever renewable energy project
• Amazon’s CEO quits. Time to sell?
• Amazon introduces new electric delivery trucks in Los Angeles
• 4 most trusted ASX companies (and the 4 least trusted)
• GameStop (NYSE:GME) appoints 3 new Vice Presidents from Amazon and Chewy

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Where will Amazon (NASDAQ:AMZN) be in a year? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

from The Motley Fool Australia https://ift.tt/3qaX5FC

Brambles Limited (ASX: BXB) shares are edging higher this morning following the company’s latest ASX announcement. At the time of writing, the Brambles share price has climbed 0.75% higher to $10.76.

Why is the Brambles share price climbing today?

The Brambles share price is on the move in early trade after the company announced a merger of its Kegstar business with MicroStar. Kegstar is Brambles’ keg rental business while MicroStar is a leading United States beer keg solutions provider.

Brambles’ business is a participant in the global beer keg rental sector operating across Australia, New Zealand, the United Kingdom, Ireland, the Netherlands and the US. MicroStar will look to capitalise on synergies in the similar ‘pay per fill’ business models used by both companies.

Brambles will hold an approximate 15% stake in the merged entity with the remaining 85% retained by MicroStar’s existing shareholders. These include Freeman Spogli, a growth-focused private equity firm based out of Los Angeles, USA.

MicroStar is set to purchase Kegstar at an enterprise value of US$52.2 million and issue shares in MicroStar to Brambles. The proposed merger remains subject to foreign investment approval in Australia and New Zealand with expectations this will be finalised by June 2021.

The coronavirus pandemic “significantly impacted” the Kegstar business as reported by Brambles last year. The group’s FY2020 results noted a “slow recovery” in the Kegstar business due to widespread lockdowns and operational inefficiencies.

Whilst the Brambles share price is edging higher in early trade following the news, shares in the logistics group remain down around 16% over the last 12 months while the S&P/ASX 200 Index (ASX: XJO) is down 2.7% over the same period. 

Foolish takeaway

The Brambles share price is climbing higher this morning following the company’s merger announcement. The merger of the Kegstar and MicroStar businesses will create an even larger global keg rental operation.

Brambles will retain a 15% stake in the combined entity’s operations and recognise that as an investment on its books.

More reading

• Why the Crown (ASX:CWN) share price is tumbling lower today
• Why the Mineral Resource (ASX:MIN) share price will be in focus today
• Here’s why the PointsBet (ASX:PBH) share price is surging 6% higher
• Why the Insurance Australia Group (ASX:IAG) share price is charging higher
• Praemium (ASX:PPS) share price on watch after “transformational” period

Motley Fool contributor Ken Hall 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 Brambles (ASX:BXB) share price is climbing today appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3tKTSPp

The Crown Resorts Ltd (ASX: CWN) share price has returned from its trading halt this morning and is tumbling lower.

At one stage, the casino and resorts operator’s shares dropped as much as 9% to $9.25.

The Crown share price has since recovered the majority of these declines and is currently down 3% to $9.82.

Why is the Crown share price under pressure?

Investors have been selling Crown shares following the release of the Commissioner’s report of the inquiry into the suitability of Crown Resorts holding the licence for Sydney’s Barangaroo casino.  

According to the release, Commissioner Patricia Bergin does not believe Crown is suitable to operate its new Sydney casino. Nor does the Commissioner feel Crown Resorts is suitable to be a close associate of the licensee.

Commissioner Bergin explained: “Any applicant for a casino licence with the attributes of Crown’s stark realities of facilitating money laundering, exposing staff to the risk of detention in a foreign jurisdiction and pursuing commercial relationships with individuals with connections to Triads and organised crime groups would not be confident of a positive outcome.”

“It is obvious that such attributes would render an applicant quite unsuitable to hold a casino licence in New South Wales. 23 These facts and the stark realities expressed so baldly may also suggest that it is obvious that the Licensee is not suitable to continue to give effect to the Barangaroo Licence and that Crown is not suitable to be a close associate of the Licensee,” she added.

However, the Commissioner has hopes that Crown could transform itself. This could be saving the Crown share price from a steeper drop today.

She commented: “If Crown is to survive this turmoil and convert itself into a company that can be regarded as a suitable person and achieve the same for the Licensee, there is little doubt that it could achieve a fresh start and emerge a very much stronger and better organisation.”

Directors resign

Two directors that came under fire during the inquiry were Guy Jalland and Michael Johnston.

The commissioner suggested that “if Mr Jalland and/or Mr Johnston remain as directors it will be necessary to have some additional protections from them because of their failures.”

That won’t be necessary, with both directors handing in their resignations today.

What’s next?

The final decision now lies with the Independent Liquor and Gaming Authority (ILGA). Though, it is widely accepted that the Authority will follow the recommendations of the Commissioner’s report.

In the meantime, the company advised that it is currently considering the Inquiry Report.

Crown also advised that will work with the New South Wales ILGA “in relation to the findings and recommendations of the Inquiry Report as contemplated by the regulatory agreements between Crown, ILGA and the State of New South Wales.”

More reading

• ASX 200 drops 0.9%, Crown not suitable for Sydney casino, Macquarie rises
• Crown (ASX:CWN) shares on watch after being found unsuitable to operate Sydney casino
• ASX 200 rises, Worley dumped, Mesoblast rises
• Why the Crown (ASX:CWN) share price could be hit harder than others today
• 5 things to watch on the ASX 200 next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Crown Resorts Limited. 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 Crown (ASX:CWN) share price is tumbling lower today appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/36Y9GEK

The Mineral Resources Limited (ASX: MIN) share price is lifting this morning. This comes after the company announced its half-year results for the 2021 financial year.

In early trading today, the Mineral Resources share price is up almost 2% at $37.67.

How did Mineral Resources perform?

Mineral Resources delivered an exceptional six months of trading despite disruptive first-half trading conditions.

For the period ending 31 December, the company reported total revenue of $1,530.5 million. This reflected an increase of 55% on the previous $986.7 million attained in first-half of FY20.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) soared to $763 million, a jump of 131% on the previous corresponding period (pcp).

Both metrics were driven by mining services growth from the Yilgarn Hub and increased iron ore exports to existing customers. Record iron ore sales stood at 7.9 million tonnes at the Yilgarn Hub. The rise of the iron ore spot price also contributed to the result, moving 33% higher to US$126 per dry tonne.

The strong iron ore result partially offset the reduced revenues received from its lithium counterpart mines. This was due to its lithium operations receiving a lower price for spodumene concentrate. The average realised price of the battery-making ingredient came to $459 per dry tonne, a reduction of $230 per dry tonne – 50% on the same time last year.

Mineral Resources’ net profit after tax (NPAT) surged to $430 million, up 233% over the same time last year.

Operating cash flow improved to $516 million when excluding the tax paid from the sale of its 60% interest in Wodgina Lithium Plant. This reflected a $303 million increase over the pcp.

Diluted earnings per share (EPS) fell to 275.27 cents against the same time last year, which saw EPS at 470.06 cents.

Mineral Resources declared a cash balance of $1.1 billion on hand, down $193 million. However, undrawn debt facilities of $364 million give the company room to support its future business development activities.

The board declared a fully franked interim dividend of 100 cents to be paid to eligible shareholders on 9 March 2021. This is a 335% jump compared to the previous interim dividend (23 cents paid to shareholders).

Words from the managing director

Mineral Resources managing director Chris Ellison welcomed the results, saying:

Despite the backdrop of COVID-19, Mineral Resources has delivered outstanding operational and financial performance in the December half, demonstrating the strength of our business and the ability to maximise returns when commodities like iron ore are doing well. It also vindicates our decision to invest heavily across our iron ore business during the past few years.

Likewise, Mt Marion has outperformed during this period to deliver record production volumes at lower costs, a remarkable achievement for a spodumene operation in what has been a challenging market. Pleasingly, we are seeing some positive signs in the lithium market and Mineral Resources is well positioned to benefit from this commodity’s upturn as the world renews its focus on green energy and demands greater volumes of high-quality spodumene concentrate.

About the Mineral Resources share price

Over the past 12 months, the Mineral Resources share price has gained almost 120% for patient investors. Its shares hit a low of $6.94 in March, before zooming to reach an all-time high of $41.19 last month.

Based on the current share price, Mineral Resources commands a market capitalisation of close to $7 billion.

More reading

• Leading brokers name 3 ASX shares to sell today

Motley Fool contributor Aaron Teboneras 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 Mineral Resource (ASX:MIN) share price will be in focus today appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3rECb24

The PointsBet Holdings Ltd (ASX: PBH) share price is surging higher on Wednesday morning.

At the time of writing, the sports betting company’s shares are up 6% to $16.84.

Why is the PointsBet share price surging higher?

Investors have been buying PointsBet shares following the announcement of another major agreement.

According to the release, PointsBet has signed a multi-year strategic partnership with the National Hockey League (NHL). This partnership sees the NHL name PointsBet as an “Official Sports Betting Partner.”

The agreement between the two companies spans across both the United States and Australia. As part of the partnership, PointsBet receives rights to use NHL marks and logos, as well as a variety of NHL sponsorship and promotional opportunities for its brand across various linear, digital, and social media assets.

Management notes that it also provides PointsBet with the ability to integrate content into live NHL game broadcasts across NHL media partners. This includes NBC Sports, NBC Sports Regional Networks, Altitude TV, and other potential future linear alignments.

In fact, PointsBet, NBC Sports, and the NHL have already begun installing these integrations for the 2020-21 NHL season. This includes the incorporation of PointsBet odds, data, and insights to complement the pregame, in-game, and postgame broadcasts.

NHL’s Chief Business Officer and Senior Executive Vice President, Keith Wachtel, spoke very positively about the agreement.

He said: “As the sports betting landscape evolves at a rapid pace, we continue to develop unique, strategic alliances within the sports gaming industry. Our partnership with PointsBet brings to life our collaboration with our valued media partners and we look forward to enhancing our fan engagement opportunities in concert with both PointsBet and NBC. We are proud to welcome PointsBet to the NHL family.”

As part of the partnership, the company has agreed to issue the NHL 43,106 PointsBet shares. This represents ~A$687,000 based on its last close price.

These shares will be in a holding lock, released in equal proportions after 12, 24, and 36 months respectively.

“Thrilled”

PointsBet’s US CEO, Johnny Aitken, commented: “PointsBet is thrilled to become an official sports betting partner of the National Hockey League. The NHL’s on-ice product provides fans with captivating, nonstop action – it is a privilege to join forces with the NHL and its forward-thinking team, complementing that action with PointsBet’s sports betting product.”

“We are excited to further elevate fan engagement via offering the most markets in the world for each NHL game, including our exclusive PointsBetting product, and enhance TV and digital integrations with mutual partners like NBC Sports,” he concluded.

Following today’s gain, the PointsBet share price is now up 42% year to date.

More reading

• Why the PointsBet (ASX:PBH) share price is jumping higher
• ASX 200 rises 0.4%
• Why the PointsBet (ASX:PBH) share price jumped to a record high today
• Why these ASX shares just stormed to 52-week highs or better
• Why Megaport, Netwealth, PointsBet, & Zip shares are racing higher

The post Here’s why the PointsBet (ASX:PBH) share price is surging 6% higher appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2Z3Jns4

The Insurance Australia Group Ltd (ASX: IAG) share price has been a positive performer on Wednesday.

At the time of writing, the insurance giant’s shares are up 3.5% to $5.23.

How did Insurance Australia perform in the first half?

For the six months ended 31 December, the company reported a 3.8% increase in gross written premiums (GWP) to $6,188 million.

And thanks to lower levels of claims, Insurance Australia Group delivered a sizeable 33.1% increase in insurance profit to $667 million. Management estimates that it experienced a ~$100 million benefit from lower motor claim frequency, largely from lockdowns in Victoria.

The company’s cash earnings also grew strongly. The company reported a 21.6% increase in cash earnings over the prior corresponding period to $462 million.

However, on a statutory basis, the company recorded a loss after tax of $460 million. This was due largely to an adverse ruling in respect to business interruption claims, which led to Insurance Australia making a $1.15 billion pre-tax charge.

In light of this, the company’s board cut its interim dividend by 30% to a fully franked 7 cents per share.

How does this compare to expectations?

The market was expecting the company to report a sizeable loss because of the pre-announced business interruption claims provision, so that was largely already factored into the Insurance Australia share price.

However, one positive surprise was the company’s dividend. Morgans and Goldman Sachs, for example, were not expecting the company to declare an interim dividend.

Outlook

Looking ahead, the company has set itself a target of expanding both its cash return on equity (ROE) and reported margin over the coming years. It is targeting a cash ROE of 12% to 13% and a reported margin of 15% to 17%.

This compares to FY 2020’s cash ROE of 11.5% and reported margin of 15.1%. It hopes this will allow it to pay sustainable dividends to shareholders.

Its margin target is ahead of Goldman Sachs’ forecast of 14.6% in FY 2023. This could be another reason why the Insurance Australia share price is outperforming today.

Management commentary

Insurance Australia’s Managing Director and Chief Executive Officer, Nick Hawkins, was pleased with the half.

He commented: “We have seen a strong underlying performance across our businesses over the last six months and we will build on this performance as we sharpen our focus to deliver a stronger, more resilient IAG.”

The Chief Executive also spoke about the elephant in the room – the $1.15 billion pre-tax charge for business interruption claims.

He said: “Our business interruption policies were never intended to cover pandemics. However, following the Supreme Court of NSW Court of Appeal decision on the COVID-19 business interruption test case, we conducted a detailed review to determine our potential exposure, and took action to strengthen our balance sheet.”

Looking ahead, Mr Hawkins appears positive on the future.

He explained: “Over the past few months, we have put in place measures which I believe will further strengthen the business. We’ve restructured the business, splitting our Australia Division into Direct Insurance Australia and Intermediated Insurance Australia to better align our brands to our customers and to bring a stronger focus to our commercial and personal intermediated businesses.”

“We are acting decisively to address the issues facing our business. We are working with the broader insurance industry to get clarity on how our business interruption policies should be interpreted in the context of COVID-19, and we continue to make progress on our customer remediation program.”

“And today we have outlined our strategy which will allow us to deliver IAG’s full potential over the next three to five years. At IAG we have a great history, strong foundations and a clear purpose. I’m excited about IAG’s future and our opportunity to make the world a safer place for more than 30 million Australians and New Zealanders,” he concluded.

More reading

• These ASX shares are falling after being hit by broker downgrades today
• Why the QBE (ASX:QBE) share price is in focus today

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 Insurance Australia Group (ASX:IAG) share price is charging higher appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/36Y9Trb

The Praemium Ltd (ASX: PPS) share price is on watch after what a “transformational” half year for the Aussie company.

Why is the Praemium share price on watch?

Shares in the Aussie portfolio management platform are worth watching as the company released its half-year report for the period ended 31 December 2020 (1H 2021).

Praemium reported record funds under administration (FUA) up 69% from 31 December 2020 (1H 2020) to $34.3 billion. Platform FUA surged 99% to $20.3 billion in another record for the company.

The Praemium share price is on watch as the records continued to tumble. Australian platform FUA jumped 132% to a record $16.4 billion while International platform FUA was up 24% to a record $3.9 billion.

FUA aside, Praemium also recorded net platform inflows of $1.85 billion, up 77% from the prior corresponding period (pcp). The Praemium share price is certainly one to watch after strong increases across various earnings metrics.

On the income side, Praemium’s revenue jumped 20% from the prior corresponding period (pcp) to $31.7 million for the half. That saw underlying earnings before interest, tax, depreciation & amortisation (EBITDA) increase by 5% from 1H 2020 to $7.3 million.

Net profit after tax jumped 113% to $3.0 million compared to 1H 2020 with a 98% increase in earnings per share. It was also the fourteenth consecutive half of profit increase for the Aussie company.

CEO Michael Ohanessian described the first half result as “truly transformational”. “The addition of Powerwrap positions Praemium positions Praemium as a major player in the fast-changing Australia wealth management landscape”, he added.

The Praemium share price has surged 71.4% higher in the last 12 months thanks to strong inflows across the platform. The company has a market capitalisation of $421.2 million after closing at a 52-week high on Tuesday.

Foolish takeaway

The Praemium share price is on watch in early trade after reporting a bumper half-year result. Strong earnings and FUA numbers across the business have given Praemium solid momentum heading into the second half of the year.

More reading

• Why the Praemium (ASX:PPS) share price has rocketed 11% today
• Why Oil Search, Praemium, Premier Investments, & Universal Store are storming higher

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Praemium Limited. The Motley Fool Australia has recommended Praemium Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Praemium (ASX:PPS) share price on watch after “transformational” period appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2MTLNah

Dividend shares do not only offer the chance to make a generous passive income right now. They also have the potential to deliver impressive total returns over the long run as a result of a lack of other income opportunities available to investors.

This could increase their popularity, and mean that they outperform the wider stock market in the coming years. They could even ultimately provide an annual income of $40,000 from a modest monthly investment that grows at a relatively fast pace in the coming years.

Passive income opportunities among dividend shares

Clearly, an investor who has a $1 million portfolio today could generate a passive income of $40,000 from buying a selection of dividend shares. However, those same stocks could be used to gradually build a portfolio of a similar size from regular investment over the long run.

Dividend shares could become increasingly popular in the coming years because of a lack of opportunities available elsewhere. Low interest rates mean that cash and bonds have very disappointing return prospects that may even lag inflation. Meanwhile, low yields in the property sector due to high house prices may push an increasing number of income investors towards dividend stocks.

Building a retirement nest egg

The impact of higher demand for dividend shares may be rising stock prices that outperform the stock market. Even if they match the performance of equity markets, which have risen by around 8% per year on a total return basis in the past, a modest monthly investment could produce a $1 million portfolio that provides a $40,000 annual passive income.

For example, investing $750 per month over a 30-year time period would lead to a portfolio being valued at over $1.1 million. From this, a 4% dividend return would provide an annual income in excess of $40,000.

Managing a portfolio of dividend shares

Of course, simply buying the highest-yielding dividend stocks may not necessarily lead to the largest portfolio or passive income in the long run. They could have high yields for a variety of reasons, including weak financial prospects that have caused investor sentiment to decline.

As such, it is logical to buy dividend shares that can afford their payouts, and can grow them in the coming years. They may prove to be the most appealing income shares to a wide range of investors. The result could be rising stock prices that catalyse an investor’s retirement portfolio.

Furthermore, diversifying among dividend shares could be a logical move. It will reduce company-specific risk, which is the threat from a small number of companies underperforming and their impact on a wider portfolio. Diversification also allows an investor to capitalise on multiple growth opportunities. This may increase their potential rewards and lead to a larger portfolio, and passive income, in the long run.

More reading

• EML Payments (ASX:EML) share price still 27% below pre-COVID high
• Commonwealth Bank (ASX:CBA) share price in focus after $3.9 billion half year cash profit
• Why the AGL Energy (ASX:AGL) share price continues to sink lower
• 2 ETFs to buy for strong diversification
• 2 highly rated ASX dividend shares with big yields

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.

The post How I’d obtain a passive income of $40,000 per year from buying dividend shares appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2NbzxSm

It has been a disappointing 12 months for shareholders of ASX payments solutions provider EML Payments Ltd (ASX: EML). Despite the EML share price climbing almost 250% off its March 2020 52-week low of $1.20 to $4.17 as at the time of writing, it is still well short of its pre-coronavirus record high of $5.70 recorded last February.

So what’s going on?

What does EML do?

Broadly speaking, EML offers three key payments services to its clients: general-purpose reloadable cards, branded gift cards, and virtual account numbers.

General-purpose reloadable cards are the sorts of cards used by online bookmakers like Ladbrokes or Sportsbet to distribute winnings to their clients. The cards allow their customers to make instant withdrawals or push back amounts to their gaming accounts. However, these types of cards can also be used for various other purposes by corporate and small business clients, such as for employee commission payments and incentives and rewards programs.

The company’s second payment solution is branded gift cards. EML is currently the largest provider of shopping mall gift cards in the world. Its branded gift cards category delivers tailored solutions to business clients and provides a suite of reports to help these clients track the effectiveness of their customer rewards programs.  

EML’s third payment solution is virtual account numbers. These offer a more secure way of facilitating payments between businesses and their suppliers. The payment is made using a unique, single-use card number that can be faster and more efficient than traditional payments methods. This also means clients do not have to regularly communicate their real account numbers, making the entire payments process more secure.

Why is the EML share price still lagging?

The EML share price was hit especially hard by COVID-19. Retail store closures, rising unemployment rates, declining business activity, and even the suspension of many international sporting leagues all hurt EML’s underlying payments business.

A strong performance over the first 8 months of FY20 helped the company deliver an annual revenue uplift of 25% to $121.6 million and a 10% increase in earnings before interest, tax, depreciation and amortisation expenses (EBITDA) to $29.7 million. But, despite this resilient result, these growth rates lagged well behind FY19, when revenue jumped 37% year on year and EBITDA surged 40%.

The company will be hoping that successful vaccine rollouts in many jurisdictions will soon spark a brick-and-mortar retail recovery. And one positive development out of the COVID-19 environment the company will be focussed on is the cultural shift away from cash and towards card as the preferred payment method for many consumers.

More recent news out of the company

All eyes will be on the EML share price when the company releases its first-half FY21 results to the market next week. And there may be some reasons for investors to be cautiously optimistic.

In a first-quarter trading update released to the market back in October, EML stated that it was seeing significant recoveries in gift cards and general-purpose reloadable cards, while virtual account number volumes had rebounded to pre-COVID levels. Total revenue for the quarter was $40.6 million, an increase of 75% over FY20 first-quarter revenue, and EBITDA was a record $10 million, up 215%.

These results appear encouraging, particularly during a quarter that has historically been the company’s weakest. Investors will be hoping for evidence of more green shoots next week and that this translates to a higher EML share price.

More reading

• ASX 200 rises 1%, Zip soars, REA reports
• 2 small cap ASX shares that are growing quickly
• 2 compelling ASX payment shares to buy
• 3 compelling ASX growth shares to buy

Rhys Brock owns shares of EML Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments. The Motley Fool Australia has recommended EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post EML Payments (ASX:EML) share price still 27% below pre-COVID high appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3aRdeK0