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The S&P/ASX 200 Index (ASX: XJO) is taking a beating today.

After closing higher on Monday, Tuesday, and Wednesday this week, the benchmark index is down 0.57% around Thursday lunchtime.

The ASX 200 is following the lead of United States markets, which all closed sharply lower overnight after the latest US inflation readings through to the end of March.

Here’s what’s happening.

ASX 200 catching US inflationary headwinds

Following on the inflation data released by the US Labor Department, the S&P 500 Index (INDEXSP: .INX) closed down 1.0% while the tech-heavy Nasdaq Composite Index (INDEXNASDAQ: .IXIC) ended the day down 0.8%.

This came after hotter than expected inflation readings pushed back investor expectations of when we can expect an interest rate cut from the US Federal Reserve. Those revised expectations also look to be pressuring the ASX 200 today.

The US core consumer price index, which takes out volatile food and energy prices, was up 0.4% from February. Year-on-year core CPI remained unchanged at 3.8%, against consensus expectations of a pullback.

Headline inflation increased 0.4% in March with inflation now running at 3.5% on an annual basis, up from 3.2% last month.

That’s well above the Federal Reserve’s 2% target. And it could see the official US cash rate stay at the current 5.25% to 5.5% for considerably longer than ASX 200 investors have been hoping.

Former Obama administration economist Jason Furman noted that the core inflation figures in the US are picking up at a historical pace.

According to Furman (quoted by The Australian Financial Review):

Over the last three months core CPI has risen at a 4.6% annual rate. That is faster than any three-month period from August 1991 to 2020. Over the last twelve months core CPI has risen 3.5%. That is faster than any twelve-month period from February 1993 to 2020.

What are the experts saying about rate cuts now?

Commenting on the sticky inflation in the world’s top economy, David Kelly, chief global strategist at JPMorgan Asset Management said (quoted by Bloomberg), “The sound you heard there was the door slamming on a June rate cut. That’s gone,”

As for when ASX 200 investors might expect the Fed to begin easing now, Bloomberg Economics Anna Wong and Stuart Paul said:

The Fed is likely to take a stronger signal that disinflation momentum is slowing from this report. We push back our expectation for a first rate cut to July, from our previous baseline of June.

Closer to home, the economists at National Australia Bank Ltd (ASX: NAB) are also dialling back rate cut forecasts (courtesy of the AFR).

According to NAB:

The market now has between one and two Fed rate cuts priced for year-end, from between two and three. [The inflation data] reduced the implied odds of a June rate cut to less than 20% from around 50% heading into the release.

“The modest overshoot in US March CPI inflation was sufficient to force a fragile market to reprice the first full 25bp rate cut from the Fed back to November from July,” ANZ Group Holdings Ltd (ASX: ANZ) economists added.

Could ASX 200 investors see interest rates actually go higher now?

While most analysts are still confident that the path for interest rates from the Fed, along with other leading central banks like the RBA, is lower, former US Treasury Secretary Lawrence Summers cautioned that a rate hike isn’t off the table.

Saying, “We do not need rate cuts right now,” he forecast the odds of a rate hike from the Fed were in the range of 15% to 25%.

Summers noted (quoted by Bloomberg):

You have to take seriously the possibility that the next rate move will be upwards rather than downwards. On current facts, a rate cut in June it seems to me would be a dangerous and egregious error comparable to the errors the Fed was making in the summer of 2021.

A likely delayed rate cut from the Fed is already sending the ASX 200 sharply lower today.

An unexpected rate increase would be most unwelcome.

The post Why is the ASX 200 tumbling on the latest US inflation print? appeared first on The Motley Fool Australia.

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More reading

• How much do you need to invest in the Vanguard Australian Shares Index ETF (VAS) for $10,000 in annual dividends?
• How does the VanEck Wide Moat ETF return 17% per annum?
• Why is this ASX lithium stock racing 15% higher today?
• Why did this ASX All Ords stock just crash 16%?
• 2 ASX betting shares making big news this week

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

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The Vanguard Australian Shares Index ETF (ASX: VAS) is a popular way to invest passively in ASX shares. But can we consider this exchange-traded fund (ETF) a good option for dividends?

The job of an index fund like VAS is to match the returns of its underlying index. In this case, it’s the S&P/ASX 300 Index (ASX: XKO) – 300 of the biggest businesses on the ASX.

In terms of dividends, the VAS ETF passes on to its unitholders the dividend income (or distributions) it receives from its holdings.

How large is the VAS ETF dividend yield?

The biggest holdings in the Vanguard Australian Shares Index ETF portfolio also have some of the ASX’s biggest dividend yields.

We’re talking about ASX blue-chip shares like Rio Tinto Ltd (ASX: RIO), Fortescue Ltd (ASX: FMG), Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ) and Telstra Group Ltd (ASX: TLS).

This means the VAS ETF as a whole has a generous dividend yield as well.

According to Vanguard, the VAS ETF had a partially franked dividend yield of 3.9% at the end of February 2024. Franking credits are a bonus that adds more to the after-tax returns – they either offset some of the tax owed, or the franking credits can be refundable.

However, everyone’s tax position is different, so I’ll just use the regular dividend yield when calculating.

How much to invest for $10,000 of annual dividends?

We’re talking about a sizeable investment in the ETF to receive $10,000 of annual dividends, as it’s a large amount of cash flow. Based on a 3.9% dividend yield, we’d need to invest around $256,000 in VAS ETF units to receive $10,000 of yearly dividends.

Looking at more realistic numbers, a $25,641 investment would generate $1,000 per year of cash dividends. And if we had $10,000 to invest in Vanguard Australian Shares Index ETF units, this would create $390 of annual cash dividends.

Another option

Focusing on building a portfolio of individual ASX dividend shares might be a more efficient strategy for investors who want a higher yield.

For example, Commsec estimates suggest that in FY24, Telstra could pay a cash dividend yield of 4.7%, diversified property owner Charter Hall Long WALE REIT (ASX: CLW) could pay a distribution yield of 7% and IGA supplier and hardware business Metcash Ltd (ASX: MTS) could pay a cash dividend yield of 5.1%.

There are plenty of other ASX shares with appealing dividend yields to look at as well.

The post How much do you need to invest in the Vanguard Australian Shares Index ETF (VAS) for $10,000 in annual dividends? appeared first on The Motley Fool Australia.

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More reading

• Buy these ASX ETFs for a big income boost
• Why this is my top Vanguard ETF to buy for the long-term
• Forget gold! I’d buy these top ASX shares to beat inflation
• Is the Vanguard Australian Shares Index ETF (VAS) a good long-term investment?
• Is the Vanguard Australian Shares ETF (VAS) just a big ASX bet on banks and miners?

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

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Enjoying a return of around 17% per annum over a number of years is something that most ASX investors aren’t used to. But that’s what investors of the VanEck Morningstar Wide Moat ETF (ASX: MOAT) have been served up for many years.

Conventional wisdom would dictate that one would have to be a pretty savvy stock picker to consistently bang out a 17% per annum return. Anyone who sticks to ASX index funds, like the Vanguard Australian Shares Index ETF (ASX: VAS), certainly wouldn’t be used to getting 17% on their money every year.

And yet this is the norm for MOAT investors.

If you look at the latest figures from VanEck, it’s evident that this is no pipedream. As of 31 March, MOAT units have returned an average of 17.16% per annum over the last five years. That’s inclusive of this exchange-traded fund (ETF)‘s dividend distribution returns.

Those investors have also enjoyed a 15.9% per annum return over the past three years. And a whopping 25.78% over just the past 12 months.

The VanEck Wide Moat ETF hasn’t been on the ASX for an entire decade just yet, with an ASX inception date of June 2015. However, the index that it tracks has returned an average of 17.74% per annum over the ten years to 31 March.

In contrast, the Vanguard Australian Shares ETF has returned an average of 8.2% per annum over the ten years to 31 March.

So how does the VanEck Wide Moat ETF do it? How can it generate such lucrative returns for investors? After all, a 17.12% return over 10 years is enough to turn every $1,000 invested into roughly $5,000 over a ten-year span.

How can the VanEck Wide Moat ETF consistently return 17% per annum to ASX investors?

Well, I think this ETF’s stellar returns can be broken down into two parts for investors to understand.

Firstly, the quality of the underlying shares in this ETF’s portfolio undoubtedly helped it achieve these stunning numbers. The Wide Moat ETF isn’t really an index fund in the traditional sense. It functions more like an actively managed fund.

MOAT’s portfolio is constructed by analysing large companies in the US markets and only selecting those that demonstrate the possession of what’s known as a wide economic moat. This is a concept first coined by legendary investor Warren Buffett. It refers to an inherent competitive advantage that a company can possess. This helps it keep customers in the face of attacks from competitors.

There are many kinds of moats a company can have. But the most common include a strong brand (perhaps Apple or Toyota), offering products or services at the lowest prices (Amazon or Coles Group Ltd (ASX: COL), or possessing an asset that customers find difficult to avoid (maybe one of Transurban Group (ASX: TCL)’s toll roads).

Buffett loves these kinds of companies because they tend to be amongst the highest-returning investments on the market.

These are the only companies that the VanEck Wide Moat ETF houses in its portfolio.

Right now, you’ll find names like Campbell Soup Co, Alphabet, Altria, Pfizer, Nike and Disney in the Wide Moat ETF. Most of those names are famous around the world, and for good reason.

This Buffett-like investing methodology clearly pays off for the Wide Moat ETF and its investors.

Dollars and dollars

The second reason is the current currency environment. Over the past decade, the Australian dollar has weakened considerably against the US dollar. Back in April 2014, one Aussie dollar was buying around 92 US cents. Today, that same dollar will get you just 65 US cents.

This might be bad news for motorists and any other consumers of imported goods or services. But it’s great news for anyone who owns assets that are priced in US dollars. As it happens, MOAT’s entire portfolio is US dollar-denominated.

So it’s a combination of these two factors that seem to have turbo-charged the returns of the VanEck Wide Moat ETF over the past ten years. Let’s see if investors will continue to enjoy a 17% per annum return over the next ten years.

The post How does the VanEck Wide Moat ETF return 17% per annum? appeared first on The Motley Fool Australia.

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More reading

• The best ASX shares to invest $10,000 in right now
• 3 of the best ASX ETFs to buy now
• If you start investing today, when could you retire?
• Why I’d buy VanEck Morningstar Wide Moat ETF (MOAT) for anyone in my family
• 3 excellent ASX ETFs for smart investors in April

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Alphabet, Altria Group, Amazon, Apple, Nike, VanEck Morningstar Wide Moat ETF, Vanguard Australian Shares Index ETF, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Nike, Pfizer, Transurban Group, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2025 $47.50 calls on Nike. The Motley Fool Australia has positions in and has recommended Coles Group. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Nike, VanEck Morningstar Wide Moat ETF, and Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Vulcan Energy Resources Ltd (ASX: VUL) shares are avoiding the market weakness on Thursday.

In morning trade, the ASX lithium stock is up almost 15% to $3.28.

Why is this ASX lithium stock jumping?

Investors have been buying the lithium developer’s shares after it released an update on its Lithium Extraction Optimisation Plant (LEOP) in Landau, Germany.

According to the release, the company has started production of the first Lithium Chloride (LiCl) product at the LEOP.

Management notes that this represents the first lithium chemicals domestically produced from a local source in Europe for the European market.

The good news is that LEOP is showing strong early results with consistently over 90% (up to 95%) lithium extraction efficiency from its Adsorption-type Direct Lithium Extraction (A-DLE) unit. This replicates what the ASX lithium stock saw in its lab and pilot plant operations. Importantly, it is in line with its commercial plant expectations and financing model.

What is the LEOP?

Vulcan has spent 40 million euros on LEOP. It is an optimisation, operational training, and product qualification testing facility. Its aim is to enable operational readiness for when the Phase One commercial facility is completed.

The next step will be its conversion to a battery-grade lithium chemical in Vulcan’s downstream optimisation plant. The LiCl product produced from LEOP will be transported to Höchst Industrial Park Frankfurt, where Vulcan is currently completing its Central LEOP. This facility will convert the LiCl into battery grade Lithium Hydroxide Monohydrate (LHM).

Looking further ahead, once Phase One commercial production commences, Vulcan estimates that its integrated renewable energy and Zero Carbon Lithium business will produce enough lithium for approximately 500,000 electric vehicles.

‘Significant milestone’

The ASX lithium stock’s CEO, Cris Moreno, was very pleased with the news. He commented:

This significant milestone marks a pivotal moment in Vulcan’s journey towards revolutionising domestic lithium raw material supply for Europe’s Battery industry. Vulcan’s LEOP facility is equipped with world-leading technology designed to showcase the efficiency of our A-DLE process and environmental benefits, whilst training our commercial production team in a pre-commercial environment as we build the Phase One commercial plant.

It is encouraging to see LEOP deliver extraction efficiency in line with our expectations. I would like to thank our determined project execution and operations team for getting us to this landmark. We look forward to providing further updates on our Central Lithium Electrolysis Optimisation Plant (CLEOP) as we aim to produce Europe’s first fully integrated lithium battery chemicals from our own domestic resource, and also to providing updates on Phase One of the Zero Carbon Lithium Project, including financing, in the coming months.

The post Why is this ASX lithium stock racing 15% higher today? appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX 300 lithium stock is up 64% in a month

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

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The All Ordinaries Index (ASX: XAO) is down 0.8% in morning trade, and it’s certainly not being helped by this tumbling ASX All Ords stock.

The company in question is ASX healthcare stock Avita Medical Inc (ASX: AVH).

The Avita Medical share price closed yesterday trading for $4.50. In early morning trade on Thursday, shares crashed to $3.77, down a precipitous 16.3%.

Following some potential bargain hunting, shares have since recouped some of those losses.

At the time of writing, shares in the ASX All Ords stock are trading for $4.00 apiece, down 11.1%.

Here’s what’s happening.

ASX All Ords stock tumbles on missed guidance

Avita Medical is a commercial-stage regenerative medicine company focused on devices for wound care management and skin restoration.

And the ASX All Ords stock is under heavy selling pressure today after reaffirming management’s expectations for full-year 2024 revenue to come in at the lower end of Avita’s previously provided guidance of US$78.5 million to US$84.5 million.

The company also announced an update to its expected commercial revenue for the first quarter of 2024.

For the March quarter, Avita Medical said it now expects commercial revenue to be in the range of US$11.0 million to US$11.3 million. That’s significantly lower than the company’s prior revenue guidance of US$14.8 million to US$15.6 million for the three-month period.

Management pointed to a slower-than-expected conversion rate of new accounts for Avita’s expanded label of full-thickness skin defects for the downward revision.

Commenting on the results putting the ASX All Ords stock under the gun today, Avita Medical CEO Jim Corbett said, “In light of the challenges encountered in the first quarter of 2024, we are intensifying our efforts to drive growth.”

Corbett added:

While our account conversion rate impacted our quarterly revenue, we remain optimistic for the full year.

With the recent launch of PermeaDerm in March and the upcoming launch of RECELL GO, along with our deeper understanding of the VAC processes and timelines, we believe that we will meet the lower end of our previously provided annual revenue guidance range of US$78.5 million to US$84.5 million.

Corbett said that Avita remains committed to delivering value and making a positive impact on the lives of its patients.

The company is expected to report its financial results for the first quarter of 2024 after the close of the US financial markets on 13 May, meaning we should have them here at market open on 14 May.

Avita Medical share price snapshot

Despite today’s big fall, shares in the ASX All Ords stock remain up 8% over six months.

The post Why did this ASX All Ords stock just crash 16%? appeared first on The Motley Fool Australia.

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More reading

• 3 struggling ASX shares to buy at a discount

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

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There has been some big news in the Australian betting industry this week involving Bluebet Holdings Ltd (ASX: BBT) and Betmakers Technology Group Ltd (ASX: BET).

This has led to both ASX shares rising strongly this week.

Big news from these betting ASX shares

BlueBet shares rocketed 30% on Wednesday before being slammed into a trading halt.

The company acknowledges that this was likely due to the leaking of its merger plans with rival Betr. In its response to a price query request from the Australian stock exchange, BlueBet said:

Yes. BBT confirms that, at the time of receipt of the price and volume query from ASX, BBT was aware of information concerning it that had not been announced to the market which, if known by some in the market, could explain the recent trading in its securities referred to in the ASX letter. This information related to BBT’s proposed acquisition of NTD Pty Ltd’s (ACN 658 859 262) (betr) wagering business and the associated equity capital raising proposed to be conducted by BBT.

The official details of the merger plans have now been released.

BlueBet has agreed to acquire Betr’s wagering business in an all-scrip deal, which it believes will create a leading Australian online wagering company.

It notes that its larger and more competitive combined business is expected to reach monthly EBITDA profitability in first half of FY 2025 and be EBITDA profitable for the full year.

BlueBet will acquire Betr by way of an asset purchase that will see the issue of approximately 265.4 million fully paid ordinary shares, equating to ~56.9% of its shares on issue.

Though, this is before taking into account the issuance of shares under a $20 million placement that has just been announced. It aims to raise those funds at 21 cents per new share.

The proceeds will be used to fund operational and strategic growth initiatives of the combined business and one-off synergy realisation and transaction costs.

What about Betmakers?

Betmakers is also impacted by this ASX merger news.

According to a separate announcement, in light of its proposed takeover, Betr has agreed to pay outstanding amounts owed to Betmakers.

BetMakers’ CEO, Jake Henson, said:

BetMakers is pleased with the agreed outcome between the parties. We are satisfied with the terms to recover outstanding amounts owed to BetMakers by betr. In addition, we are content with the agreement on the ongoing terms that are a result of betr entering into a new transaction. We wish the betr team all the best in its new venture (should it proceed) and will continue to be supportive wherever we can along that path.

Henson also believes that the agreement leaves the company better placed for the future. He adds:

The executed agreement places BetMakers on a much stronger footing going forward, strengthening our cash position, and relieving the Company of a significant resource commitment, both now and into the future. This provides the ability to further reduce our overall cost base and the opportunity to redeploy key technology and development personnel to expedite the NextGen roll-out for clients globally, which will unlock additional efficiencies, significant savings and an improved product offering for BetMakers’ customers.

The post 2 ASX betting shares making big news this week appeared first on The Motley Fool Australia.

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More reading

• Are Paladin Energy shares really surging 900% today?
• Are Coles or Fortescue shares a better buy for dividend income?
• What’s happening with the NextDC share price following today’s $1.3 billion announcement?
• ASX 200 tech stock slides despite record $21.2 billion results
• Why is the Core Lithium share price jumping 10% today?

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

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Paladin Energy Ltd (ASX: PDN) shares certainly are catching the eye of investors on Thursday.

Depending on where you look, you may see the uranium miner’s shares rising as much as 900%.

But is this really the case? Have its shares almost become a ten-bagger within the first hour of trade this morning?

Unfortunately for shareholders, the short answer is no. But what is actually going on?

What’s going on with Paladin Energy shares?

Earlier this week, Paladin Energy shareholders were invited to vote on a reverse split.

This is what happens when a company reduces the number of shares on issue through the act of consolidation.

It is important to note that this is not the same as a share buyback. No shares are bought back through a reverse split. They are merely consolidated.

So, in the case of a 2-1 reverse split, if you owned 100 shares of a company with a $10 share price, after the split you would own 50 shares with a $20 share price. The value of your investment is unchanged at $1,000.

Paladin Energy’s reverse spilt

On Tuesday, shareholders voted overwhelmingly in favour of a 10-1 reverse spilt. A total of 99.84% votes were cast in favour of the move.

This saw its total number of shares reduce from 2,984,656,146 units to 298,465,615 units this morning.

So, with Paladin Energy shares closing yesterday’s session at $1.52, it meant that they opened today’s session at $15.20.

Why the split?

The uranium miner’s management revealed that the split was undertaken in order to give the company a share price more befitting of its status as an ASX 200 stock. It recently explained to shareholders:

The Consolidation is proposed to reduce Paladin’s shares on issue to a level that better reflects the Company’s position as an ASX 200 company and provides a share price that is more appealing to a wider range of international investors. The Consolidation applies equally to all shareholders and as such the shareholders proportional interest in the Company’s issued capital will remain unchanged (other than minor variations resulting from the rounding of fractional shareholdings).

Prior to today, Paladin Energy shares had absolutely smashed the market with a stunning gain of almost 150% over the last 12 months.

This has been driven by the soaring uranium price which has been caused by optimism over nuclear power adoption and supply shortages of the chemical element.

The post Are Paladin Energy shares really surging 900% today? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Own ASX 200 mining shares? Here’s the 5-year forecast for commodity prices
• This ASX 200 uranium stock has turned $10,000 into $107,857 in just 5 years!
• Here are the top 10 ASX 200 shares today
• Why now is the time to buy to buy this ASX 200 uranium stock

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

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Plenty of ASX blue-chip shares are known for being generous ASX dividend shares.

In this article, we have two income-generating shares that most Australians will be familiar with: supermarket giant Coles Group Ltd (ASX: COL) and iron ore miner Fortescue Ltd (ASX: FMG).

Now, the market is always on the move and we typically don’t know exactly which way share prices will go. But dividends are much more predictable. A company’s payouts are decided by its board and paid for by profits the business has generated.

I’m going to look at a couple of key areas to help me decide which of the two passive income stocks are a better buy for dividends.

Dividend yield

Both Coles and Fortescue have solid dividend yields. A yield is influenced by two things, the dividend payout ratio and the price/earnings (P/E) ratio (which is the earnings multiple valuation).

If a company pays out more of its profit then it will have a higher dividend yield. A lower earnings multiple can push up the dividend yield, while a higher valuation pushes down on the dividend yield.

According to the estimates on Commsec, owning Coles shares could result in a grossed-up dividend yield of 5.8% in FY24, 6.2% in FY25 and 7% in FY26.  

Meanwhile, owning Fortescue shares could mean a yield of 11.2% in FY24, 8.3% in FY25 and 6% in FY26.

In the short-term, Fortescue may offer a bigger dividend yield, but by FY26, Coles could pay a larger dividend yield.  

Sustainability of the payout

This is the most important element to me. I think dividend projections are a sign of what conditions the companies are facing.

According to forecasts, dividend payouts by Coles and Fortescue are tipped to go in opposite directions.

The last few years have been very supportive for Fortescue’s shares and profit because of relatively high iron ore prices. But, the iron ore price has dropped back down to around US$100 per tonne – it was above US$140 per tonne in early 2024 and was above US$200 per tonne in 2021.

New supply, particularly from Africa, may be a significant headwind for the iron ore price in the next few years, depending on how much demand there is from China. Of course, Fortescue may have its own African project by then, plus it’s diversifying its operations by investing in green energy production.

Coles on the other hand is a very resilient business. As a supermarket business, it provides products that we all need, so the demand is very consistent. On top of that, Australia’s population is growing strongly, so the number of potential consumers keeps increasing.

The Coles dividend is much more sustainable, in my opinion. It has grown every financial year since listing on the ASX a few years ago, though past performance is not a guarantee of future performance.

At the current prices, I’d call Coles shares a better buy, particularly as the Fortescue share price is so high despite current weakness in the iron ore price.

The post Are Coles or Fortescue shares a better buy for dividend income? appeared first on The Motley Fool Australia.

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

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The NextDc Ltd (ASX: NXT) share price isn’t doing anything just yet. Though early indications are that shares may open modestly lower.

Shares in the S&P/ASX 200 Index (ASX: XJO) tech stock closed yesterday trading for $16.71. In morning trade on Thursday, shares remain there, after the company requested a trading halt.

That halt is meant to lift following the company’s announcement of a major capital raising. That announcement has since been made. But as of now, we’re still waiting.

Here’s what we know.

NextDC share price one to watch following cap raise

The NextDC share price is in the spotlight after the company announced it is undertaking a $1.321 billion capital raising via a fully underwritten 1 for 6 pro-rata accelerated non-renounceable entitlement share offer.

New shares will be issued for $15.40, some 8% below where the NextDC share price closed.

The ASX 200 tech stock noted that it’s been experiencing record demand for its data centre services. In calendar year 2023, the company’s contracted utilisation increased by 77% to 149.0MW.

Looking at what could impact the NextDC share price ahead, the company expects that a record forward order book of 68.8MW will convert into billings across FY 2025 to FY 2029, which management said will drive future revenue and earnings growth.

With that growth in mind, the ASX 200 tech company intends to deploy the $1.321 billion to accelerate the development and fit out of its digital infrastructure platform in its core Sydney and Melbourne markets.

The company reported that once the capital raising is complete, it will have pro-forma tangible asset backing of approximately $5.1 billion and pro-forma liquidity of around $3.4 billion.

What did management say?

Commenting on the capital raising that could move the NextDC share price today, CEO Craig Scroggie said:

NextDC continues to see significant growth in demand for its data centre services underpinned by powerful structural tailwinds.

Amid this backdrop, we have decided to bring forward the development and fitout of key assets in Sydney and Melbourne to ensure we are able to meet this growth in demand, continue to support our customers, and ensure the company is well positioned to take advantage of the diverse range of opportunities expected to present over the medium term.

NextDC maintains guidance

The NextDC share price could get a boost after the company maintained the FY 2024 guidance it initially offered on 27 February.

That guidance is as follows:

• Total revenue in the range of $400 million to $415 million
• Net revenue in the range of $296 million to $304 million
• Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) in the range of $190 million to $200 million
• Capital expenditure in the range of $850 million to $900 million

The NextDC share price is up 51% over the past 12 months.

The post What’s happening with the NextDC share price following today’s $1.3 billion announcement? appeared first on The Motley Fool Australia.

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

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S&P/ASX 200 Index (ASX: XJO) tech stock Netwealth Group Ltd (ASX: NWL) is sliding today.

Shares in the investment platform provider closed yesterday trading for $20.28. In morning trade on Thursday, shares are swapping hands for $19.68 apiece, down 3.0%.

For some context, the ASX 200 is down 0.8% at this same time.

Here’s what investors are mulling over today.

ASX 200 tech stock falls despite record 12-month fund inflows

The Netwealth share price is in the red following the release of the company’s quarterly update for the three months to 31 March.

Among the highlights, the ASX 200 tech stock reported $84.7 billion of Funds Under Administration (FUA) as at 31 March.

Over the three months, FUA increased by $6.7 billion. That was achieved via net fund inflows of $2.7 billion along with positive market movement of $4.0 billion.

Impressively, management noted that quarterly FUA gross inflows of $5.2 billion were up 40.7% year on year. And FUA net inflows of $2.7 billion were up 62.2%.

Over the 12 months to 31 March FUA were up by 28.5% or $18.8 billion. That comprised FUA net inflows of $10.6 billion and positive market movement of $8.2 billion.

The strong results were driven by a new record 12-month FUA inflow of $21.2 billion.

As for Funds Under Management (FUM), those were up by $1.6 billion for the quarter to $19.7 billion. Netwealth reported FUM net inflows of $600 million for the three months.

Meanwhile, the ASX 200 tech stock’s managed account balance increased by $1.4 billion to $17.0 billion, including net inflows of $600 million, a 62.1% year on year increase.

The number of accounts were up as well, increasing by 11.6% compared to the prior corresponding quarter. The company cited “strong momentum in the March quarter”, adding 5,132 new accounts, 3.7% higher than the December quarter.

The Netwealth share price could be under some selling pressure with the company noting that the structure of its tiered administration fees, fee caps and most ancillaries, when combined with the lower cash percentage, “has resulted in a reduction in average revenue bps in the March quarter”.

Looking ahead

Looking at what could impact the Netwealth share price in the months ahead, the ASX 200 tech stock said:

In addition to strong account growth in the quarter, we expanded and strengthened our new adviser and licensee relationships. Our new business pipeline including conversion rates, is very strong across all segments.

Management forecasts June quarter FUA inflows “to be very strong with several new large transitions commencing, in addition to higher seasonal flows and increased market activity”.

On the AI front, the ASX 200 tech stock noted the rapid changes encompassing the tech world. As such, management said, “Innovations in generative artificial intelligence are being actively explored and implemented to improve efficiency, productivity, client engagement and service.”

The Netwealth share price is up 60% over 12 months.

The post ASX 200 tech stock slides despite record $21.2 billion results appeared first on The Motley Fool Australia.

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

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