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If you’re on the lookout for an income boost, then it could pay to look closely at the ASX shares listed below.

Analysts are feeling very positive about these income options and recently put buy ratings on their shares.

Here’s what sort of yields you can expect from them in the near term:

Deterra Royalties Ltd (ASX: DRR)

The team at Morgan Stanley thinks that Deterra Royalties could be an ASX income share to buy.

Deterra Royalties is focused on the management and growth of a portfolio of royalty assets across a range of commodities. Its cornerstone asset is Mining Area C iron ore mine, which is operated by BHP Group Ltd (ASX: BHP) in the Pilbara region of Western Australia.

Morgan Stanley believes its portfolio leaves the company well-placed to pay some big dividends to shareholders in the near term.

The broker is forecasting fully franked dividends per share of 37 cents in FY 2024 and 34 cents in FY 2025. Based on the current Deterra Royalties share price of $4.88, this will mean dividend yields of 7.6% and 7%, respectively.

Morgan Stanley has an overweight rating and $5.65 price target on its shares.

HomeCo Daily Needs REIT (ASX: HDN)

Another ASX income share that has been given the thumbs up by analysts is HomeCo Daily Needs.

It is an Australian real estate investment trust with a mandate to invest in convenience-based assets across the target sub-sectors of neighbourhood retail, large format retail, and health and services.

HomeCo Daily Needs REIT aims to provide shareholders with consistent and growing distributions.

The team at Morgans believes the company will deliver on this goal. This is thanks partly to “accelerating click & collect trends” and its development pipeline.

Its analysts are expecting dividends per share of 8 cents in FY 2024 and then 9 cents in FY 2025. Based on the current HomeCo Daily Needs share price of $1.27, this will mean yields of 6.3% and 7.3%, respectively.

Morgans has an add rating and $1.37 price target on the company’s shares.

The post Analysts name 2 ASX income shares to buy with 6%+ dividend yields appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why bond yields are bruising ASX property shares on Monday
• Here are the top 10 ASX 200 shares today
• Forget term deposits and buy these ASX dividend stocks
• 3 ASX dividend shares to buy for a passive income boost

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 recommended HomeCo Daily Needs REIT. 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 Challenger Ltd (ASX: CGF) share price is almost exactly where it was a decade ago. But, it has suffered a lot of volatility during that time. I think it now has a better outlook than I thought.

Challenger is an investment management outfit focused on providing customers with “financial security for a better retirement.” It is the largest provider of annuities in Australia.

There are three key reasons why I think Challenger shares could do well as an investment.

Higher interest rates

For me, this is the key difference compared to a few years ago.

There is generally a relationship between central bank interest rates and the return that Challenger offers on some of its key annuities. It’s understandable why some people wouldn’t want to sign up to a long-term/lifetime annuity if the rate is low.

With the Reserve Bank of Australia (RBA) cash rate now a lot higher than it has been for a long time, Challenger is seeing good demand for its lifetime annuity. In the FY24 first-half result, lifetime annuity sales increased 190% to $1.1 billion.   

The Challenger Life business saw earnings before interest and tax (EBIT) increase 15% to $302 million, and the pre-tax return on equity (ROE) increased 330 basis points to 18.1%.

I think we’ve entered a new period in which interest rates will remain much higher than they were in the 2010s.

The HY24 result saw normalised net profit before tax (NPBT) grow by 16% to $290 million, while group assets under management (AUM) increased by 18% to $117 billion. Normalised net profit after tax (NPAT) rose 20% to $201 million.

The company expects normalised NPBT to be in the top half of the $555 million to $605 million guidance range.

According to the estimate on Commsec, the Challenger share price is valued at 12x FY24’s estimated earnings, which seems like a good valuation consideration profit is expected to grow, and it’s exposed to useful tailwinds.

Retirement tailwinds

There are a number of significant trends in the retirement sector.

Challenger referred to Deloitte research that shows Australian superannuation assets are expected to increase from $3.5 trillion today to at least $9 trillion in the next 20 years. There are mandatory (and increasing) contributions, while earnings and contributions are helping the compounding.

The company said that 2.5 million Australians were moving to the retirement phase over the next 10 years, suggesting that the ageing population was a useful tailwind.

Around two thirds of Australian retirees are reportedly concerned with a rising cost of living, and Challenger can help address that worry.

Challenger has a market share of around 88% of annuities in Australia, and that market has grown at a compound annual growth rate (CAGR) of 6% over the past three years.

Plus, the Australian government is progressing a range of reforms to enhance the retirement phase.

Dividend

Challenger has gotten back to growing its dividend for shareholders, which is useful for long-term investors.

According to the estimates on Commsec, the company is projected to pay an annual dividend per share of 25.1 cents in FY24, which would be a grossed-up dividend yield of 5.4%. In FY26, it could pay a grossed-up dividend yield of 6.2% in FY26, according to the projection.

If it can couple a rising dividend with a growing Challenger share price, then it may perform well for shareholders. Having said that, past experience says it won’t be a smooth ride.

The post Why I’m changing my mind about Challenger shares appeared first on The Motley Fool Australia.

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More reading

• Own Challenger shares? There’s cash coming your way today
• If I buy $8,000 of Challenger shares, how much passive income will I receive in 2024?
• Are Challenger shares becoming a top ASX dividend pick?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Challenger. 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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With interest rates increasing materially over the last 12-18 months as central banks fight inflation, term deposits have returned to the spotlight.

But have they been a good place to invest your money?

Let’s take a look and see what $5,000 invested in a term deposit a year ago is worth now in comparison to an investment in ASX 200 shares.

Term deposits

For investors with a low risk tolerance, term deposits can be a great option.

That’s because they offer investors a certain outcome for their money, which is not something that you can say about ASX 200 shares.

One year ago, Commonwealth Bank of Australia (ASX: CBA) was offering income investors a 3.85% interest rate on a 12-month term deposit. This means that if you had invested $5,000, you would have grown your money to $5,192.50 today.

However, it is important to note that the most recent Australian quarterly inflation reading revealed that the consumer price index rose 4.1% on a 12-month basis from December 2022 to December 2023.

And while inflation has been easing further since then and a decline is expected to be reported for the current quarter, it seems quite apparent that most of the gains from the term deposit will be wiped out by inflation.

So, although this is certainly a better outcome than doing nothing, it isn’t the most optimal use of your funds.

ASX 200 shares

It turns out that investing in ASX 200 shares a year ago would have been a very good move.

During this time, the ASX 200 index has risen by a very attractive 10.6%.

If you had been able to match the market return with a balanced portfolio or exchange traded fund (ETF), this would have turned a $5,000 investment into $5,530.

But that’s not all. The local share market is a big payer of dividends, which means that you would have also received a couple of pay checks during the year.

And it turns out that those pay checks would have generated more income than you received from term deposits. The ASX 200 index has a trailing dividend yield of approximately 4.15%, which would have generated a further return of $207.50.

Overall, this would mean your $5,000 investment is worth a total of $5,737.50 today if you reinvested your dividends.

The post ASX 200 shares vs term deposits: What $5,000 invested a year ago is worth now appeared first on The Motley Fool Australia.

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More reading

• I wouldn’t touch CBA shares with a 10-foot bargepole!
• 2 top ASX 200 shares to buy now for $1,000 a month in passive income
• If I’d put $5,000 in CBA shares at the start of 2024, here’s what I’d have now
• Why are ASX investors so obsessed with dividends?
• What’s going so wrong for ASX 200 shares on Friday?

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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Pilbara Minerals Ltd (ASX: PLS) shares have been a sensational investment for anyone who loaded up in 2020 or earlier.

The ASX-listed lithium producer has delivered a pleasant 348% return in the three years since, riding the monstrous boom in demand for the electrifying battery material. However, some enthusiasm around the company has been curbed on account of the sinking price for lithium.

In a mere 12 months, the price of lithium carbonate plummeted roughly 60%. Defying the descent of lithium prices, Pilbara Minerals’ shares have only dropped 28% from their all-time highs.

The Aussie lithium leader goes for $3.90 per share, but I have a different price in mind before I’d go pulling the trigger on this ASX stock.

Underwhelming outlook for lithium

There’s no getting around the fact that numerous analysts are now forecasting little to no growth in the near term for lithium prices. Elevated interest rates and a generally high cost of living are tempering electric vehicle sales — a primary driver of lithium demand.

Experts at Bank of America and Goldman Sachs are less optimistic about a significant price recovery. The headwind for Bank of America senior commodity strategist Michael Widmer is surplus production. Widmer notes that production remains elevated across operators, suggesting an ongoing supply glut.

Meanwhile, the team at Goldman has pulled together their estimates for the coming several years. As discussed by my colleague, the broker sees slight improvements in prices — across lithium carbonate, hydroxide, and spodumene — at best.

As such, I’d calculate my base case for buying Pilbara Minerals shares on the assumption that lithium prices stagnate around current levels.

When I’d buy Pilbara Minerals shares

I like to take a conservative approach when valuing a company to bake in a margin of safety. So I’ll assume no production growth in the short term. Additionally, the price of lithium is approximately 30% lower than levels witnessed during Pilbara’s first half in FY24.

Therefore:

FY2024 full-year revenue estimate = 613,000 tonnes x (US$1,645/tonne x 0.7)

FY2024 full-year revenue estimate = A$1,080 million

Much of the reduction in revenue will flow through to the bottom line due to fixed costs. Because of this, I’d estimate the Pilbara Minerals’ earnings before interest, taxes, depreciation, and amortisation (EBITDA) could be around $350 million.

Take out depreciation and taxes, and I believe FY24 full-year net profit after tax (NPAT) could be in the vicinity of $180 million.

If I apply an 18 times price-to-earnings (P/E) ratio, the estimated market capitalisation of Pilbara Minerals would come to $3.24 billion. Today, the company is valued at $11.71 billion.

Based on these assumptions, I’d be looking to buy Pilbara Minerals shares for around $1.10.

A bullish view

However, there’s every chance analysts are being too pessimistic about the future of lithium. What about a more bullish take on how the future could pan out?

What if interest rates were to fall later this year? Demand for EVs may quickly return, outpacing available lithium supply, pushing prices higher. Perhaps a 50% jump in the price of lithium isn’t outside the realm of possibilities.

In addition, the company is working on increasing its production by 70%. If I were to assume that production rose 20% in the near term, what would estimates look like?

Suddenly A$1.4 billion in NPAT seems feasible again. Throw an 18 earnings multiple on it, and Pilbara Minerals shares could be worth 115% more than they are today.

For now, I’ll be erring on the side of caution, waiting for a more attractive price.

The post The price I would pay for Pilbara Minerals shares during this lithium slump appeared first on The Motley Fool Australia.

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More reading

• These are the 10 most shorted ASX shares
• Why are ASX lithium shares being annihilated on Friday?
• Why Pilbara Minerals, Syrah Resources, Tabcorp, and Westpac shares are sinking today
• Are short sellers of Pilbara Minerals stock about to get stung?
• Here are the top 10 ASX 200 shares today

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Mitchell Lawler 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 Bank of America and Goldman Sachs 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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On Wednesday, the S&P/ASX 200 Index (ASX: XJO) was out of form and edged into the red. The benchmark index fell 0.1% to 7,695.8 points.

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

ASX 200 expected to jump

The Australian share market looks set for a very positive session on Thursday following a great night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 53 points or 0.7% higher this morning. In late trade on Wall Street, the Dow Jones is up 0.9%, the S&P 500 has risen 0.75%, and the Nasdaq is 1.1% higher. This follows news that the US Federal Reserve is still planning three rate cuts this year.

Oil prices tumble

ASX 200 energy shares Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a tough session after oil prices pulled back overnight. According to Bloomberg, the WTI crude oil price is down 2% to US$81.84 a barrel and the Brent crude oil price is down 1.5% to US$86.03 a barrel. Demand concerns weighed on oil prices.

Brickworks results

Brickworks Limited (ASX: BKW) shares will be on watch on Thursday when the building products company releases its half-year results. The market is expecting Brickworks to report a significant drop in earnings for the half. Nevertheless, another increase to its interim dividend is still expected to keep its long run alive.

Gold price jumps

ASX 200 gold shares Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) could have a good session after the gold price jumped overnight. According to CNBC, the spot gold price is up 1.45% to US$2,191 an ounce. Traders were scrambling to buy gold after the US Federal Reserve reiterated its expectation for three rate cuts this year.

New Hope rated as a sell

The New Hope Corporation Ltd (ASX: NHC) share price is overvalued according to analysts at Goldman Sachs. This morning, the broker has reiterated its sell rating on the coal miner’s shares with an improved price target of $3.70. Goldman commented: “The stock is trading at ~1.3x NAV (A$3.58/sh) and discounting a long-run thermal coal price of ~US$95/t (real) vs. our US$83/t estimate (based on our view of long run global marginal costs).”

The post 5 things to watch on the ASX 200 on Thursday appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Up 6% in a week, why is the Woodside share price running hot?
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today
• ASX 200 lifts as RBA keeps interest rates steady

Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Brickworks. 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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I recently decided to sell half of my Temple & Webster Group Ltd (ASX: TPW) stock, yet I’m still optimistic about its outlook and growth potential.

This e-commerce ASX share has delivered big gains for shareholders – it’s up more than 700% in the past five years and it has climbed roughly 300% in the past year.

Why I sold Temple & Webster shares

I was fortunate enough to invest at the end of October 2023. Since then the Temple & Webster share price soared more than 130% – I wasn’t expecting to make that much that quickly.

In my opinion, no business is a buy at any price.

Temple & Webster is doing a lot of good things to grow its underlying value, but the size of the gain made me want to take some profit off the table.

I decided to sell half, rather than all my holding, because I still want exposure to the company. By selling half, I’d have recovered (more than) my initial investment and what’s left is pure profit.

What I still like about the ASX share

The business is growing revenue at an impressive rate, which is one of the driving factors of the rising Temple & Webster stock price, and what attracted me to the business.

Revenue rose by 23% to $254 million in the first half of FY24, and it had increased by 35% year over year in the period between 1 January 2024 to 11 February 2024.

The company is demonstrating good profit margin potential. Its HY24 earnings before interest, tax, depreciation and amortisation (EBITDA) margin was 2.9%, at the top end of its full-year guidance of between 1% to 3%.

It aims to grow its revenue significantly in the next three to five years. I expect it can grow even more by 2030 (and beyond). The expansion into the home improvement and trade and commercial categories can help with its revenue potential.

Having an online model means it doesn’t need a store network like its competitors, reducing costs and increasing margins. Many products are shipped directly by suppliers, so it doesn’t need to hold much inventory.

If the business can keep capturing market share, then the ongoing adoption of online shopping is a powerful tailwind.

The company is expecting profit margins to grow as it scales, with particular scaling benefits relating to its fixed costs.

While I have sold half of my Temple & Webster stock, I’m hoping to buy plenty more in the future. In the meantime, I’m planning to put my sale proceeds to work in different ASX shares.

The post Why I just sold half my Temple & Webster stock even though I still love it! appeared first on The Motley Fool Australia.

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More reading

• If you’d put $30,000 in this ASX retail stock 11 months ago, you’d have $116,000 now
• A once-in-a-decade chance to get rich from ASX 200 shares?

Motley Fool contributor Tristan Harrison has positions in Temple & Webster Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Temple & Webster Group. The Motley Fool Australia has recommended Temple & Webster 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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Earlier this week I suggested to you three ASX shares that you could invest $500 into right now with a long-term horizon.

I did that to dispel the misconception that many Australians have that only wealthy people get to make money from stocks.

There are no more brokers chain-smoking in front of the telephone, nor traders yelling at each other on the floor of the stock exchange. 

Investing in shares has become “democratised” with low fees and almost no barriers to entry.

In that spirit, here are two more top Australian shares to grab now for $500 each, to put away in the bottom drawer:

Resources exposure with a technology bent

RPMGlobal Holdings Ltd (ASX: RUL) is a technology and tech services provider for clients in the mining industry.

I like this stock because it provides exposure to the resources sector without the vomit-inducing volatility that can come with directly owning shares for mines.

Even though the share price has already rocketed more than 66% in the past 12 months, the analysts at Elvest certainly think the outlook is still bright.

“RPMGlobal indicated that demand for its software was increasing across multiple geographies, which, alongside flattening research and development spend, should drive strong earnings growth in coming periods.”

As well as Elvest, the small cap is a strong buy for the teams at Veritas Securities and Moelis Australia.

I think that there is an excellent chance that, in a few years’ time, the RPM share price will be much higher than where it is now.

Top Australian shares for online shopping and AI

It’s not controversial these days to say that e-commerce and artificial intelligence are boom areas set for years of growth to come.

Industrial real estate manager Goodman Group (ASX: GMG) has been, and could continue to be, a major beneficiary from those themes.

The business develops and leases out massive warehouse facilities, which fancy e-commerce clients like Amazon.com Inc (NASDAQ: AMZN) call “fulfilment centres”.

In addition, Goodman has recently identified real estate suitable to host data centres as a huge money spinner, with cloud computing and AI taking off at the moment.

Considering these tailwinds, I am confident that in 2029 the Goodman share price will be well above where it is trading now.

The post Got $500? 2 top Australian shares to buy and hold appeared first on The Motley Fool Australia.

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More reading

• Why Arafura Rare Earths, Core Lithium, Goodman, and Superloop shares are falling today
• Why bond yields are bruising ASX property shares on Monday
• Top brokers name 3 ASX shares to buy next week
• $20,000 invested in these ASX 200 shares 10 years ago is worth how much?
• 2 powerful blue chip ASX 200 shares to buy for your portfolio

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 Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Goodman Group, and RPMGlobal. The Motley Fool Australia has recommended Amazon, Goodman Group, and RPMGlobal. 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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AI shares have boomed in the last 12 months as investors have identified which businesses are going to benefit from selling the new technology to the world. There are a few ASX-listed exchange-traded funds (ETFs) that can give us exposure to that world.

An ETF gives us exposure to a whole range of businesses in just one investment, which is handy considering we can’t say for certain which AI-related business will be the big winner of the future, though NVIDIA Corp (NASDAQ: NVDA) is certainly doing its best to claim the AI title.

Having said that, let’s look at three ASX ETFs that could be good candidates to own if AI exposure is the goal of an investor.

Global X Fang+ ETF (ASX: FANG)

This ETF aims to just invest in the largest businesses in the US. They are involved in a number of investment themes including technological advancements, changing demographics and consumer preferences.

The big technology businesses are among the most influential globally in the AI space. The FANG ETF gives good exposure – around 10% of the portfolio – to names like Nvidia, Microsoft, Tesla and Alphabet. It only owns 10 names though, which isn’t a lot of diversification.

It has an annual management fee of just 0.35%, which is cheaper than other ASX ETFs that give sizeable exposure to large tech names. For example, the Betashares Nasdaq 100 ETF (ASX: NDQ) has an annual management fee of 0.48%.

BetaShares Global Robotics and Artificial Intelligence ETF (ASX: RBTZ)

The idea of this fund is that it invests in global companies involved in areas like industrial robotics and automation, non-industrial robots, artificial intelligence and unmanned vehicles and drones.

It is currently invested in 42 names, so there’s more diversification with this option than the FANG ETF.

The RBTZ ETF has an annual management fee of 0.57%, which isn’t bad.

There are four industries within the portfolio with a weighting of at least 10%, including industrial machinery and supplies (24.3%), semiconductors (21.3%), healthcare equipment (12%) and electronic equipment and instruments (11.2%).

In terms of the biggest individual positions, there are five names with a weighting of more than 7.5%: Nvidia (8.9%), Abb (8%), Intuitive Surgical (7.9%), Keyence (7.9%) and SMC (7.7%).

Global X Robo Global Robotics & Automation ETF (ASX: ROBO)

This is another fund involved in robotics, automation and so on.

Global X explains that the average cost of an industrial robot declined from US$46,000 in 2010 to just US$27,000 in 2017. It’s forecast to fall below US$11,000 by 2025 as technology improves and scales. The fund provider suggests robotics and automation have “wide-reaching applications, extending far beyond industrial activity.”

The ROBO ETF comes with an annual management cost of 0.69%, so it’s the most expensive of the three ASX ETFs in this article.

The ROBO ETF currently has 77 holdings in the portfolio, with the biggest position accounting for less than 2% of the portfolio and most of the weightings being between 1% and 2%.

At the time of writing, the biggest three positions are Kardex, Intuitive Surgical and Autostore.

The post 3 ASX ETFs to buy for exposure to the booming international AI sector appeared first on The Motley Fool Australia.

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More reading

• Can you buy Nvidia shares on the ASX?
• Are these record-breaking ASX ETFs now too expensive to buy?
• The pros and cons of buying the Global X Fang+ ETF (FANG) right now
• How to invest in the magnificent seven stocks on the ASX

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, BetaShares Nasdaq 100 ETF, Intuitive Surgical, Microsoft, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Alphabet and Nvidia. 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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Many people would argue that there is no such thing as intrinsic value for a company or an ASX stock.

The idea is that shares are worth whatever investors are willing to pay for them. Full stop.

Take Commonwealth Bank of Australia (ASX: CBA), for example.

The stock has doubled since COVID-19 and has rocketed 21% since late October.

Even after all that the stock pays out a respectable 3.9% dividend yield, which is fully franked no less.

The “no intrinsic value” camp would say that if the bank’s business outlook is fine, then it’s still not too late to buy now.

I would argue otherwise.

Expensive compared to peers

Even though CBA does have the largest revenue and customer base, you wouldn’t get many arguments from any expert that the major four banks are very similar.

And the price-to-earnings (P/E) ratio would suggest Commonwealth has the highest valuation out of them all plus Macquarie Group Ltd (ASX: MQG).

Bank	PE ratio
Commonwealth Bank	20.4
Macquarie Group	18
National Australia Bank Ltd (ASX: NAB)	14.8
Westpac Banking Corp (ASX: WBC)	13.6
ANZ Group Holdings Ltd (ASX: ANZ)	12.7

The local banking sector is as static as it gets. 

There isn’t a massive group of Australians who are not in the banking system, so growing the industry as a whole is nigh on impossible.

Ever since the government decided that it would not allow further rationalisation of the industry further than four big banks, the market share of each has not changed a great deal.

So if the valuation is already higher than the others, I am reluctant to buy CBA shares right now.

That’s not to say I wouldn’t buy it in the future, but I would need a significant discount to current levels.

Professional investors unanimously agree with this assessment. According to broking platform CMC Invest, none of the 17 analysts who study Commonwealth Bank rate the stock as a buy at the moment.

The post I wouldn’t touch CBA shares with a 10-foot bargepole! appeared first on The Motley Fool Australia.

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More reading

• 2 top ASX 200 shares to buy now for $1,000 a month in passive income
• If I’d put $5,000 in CBA shares at the start of 2024, here’s what I’d have now
• Why are ASX investors so obsessed with dividends?
• What’s going so wrong for ASX 200 shares on Friday?
• If you’d put $1m into shares vs property at the start of COVID, how much would you have now?

Motley Fool contributor Tony Yoo has positions in Macquarie Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie 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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Investing in ASX shares for dividends is one of the best ways, in my view at least, of starting a stream of passive income.

The dividends and franking credits that ASX dividend shares payout can provide a stable, inflation-resistant and future-proof second income for any Australian.

But investing in ASX dividend shares is of course not without risk. This includes dividend investing. Many would-be dividend investors have bought what looks like high-yield shares, only to get burned when those shares end up being dividend traps that cut their shareholder payouts down the road.

So how would one invest $20,000 into ASX dividend shares in order to secure $1,400 per year in reliable dividend income?

No ASX shares can be thought of as truly safe, for income investors or otherwise. Saying that, I think using these five income payers gives any investor a good shot at a reliable stream of passive income for the foreseeable future.

5 ASX dividend shares I would buy for $1,400 in annual passive income

I would start with Coles Group Ltd (ASX: COL). Coles is a supermarket operator we would all be fairly familiar with. Since listing on the ASX in 2018, Coles has built up a strong dividend track record, increasing its annual payout most years since then. That includes over the pandemic. As well as the high inflation years of 2022 and 2023.

Today, Coles shares offer a trailing dividend yield of 4%, which comes fully franked too.

Next up, there’s Transurban Group (ASX: TCL). If you live in one of Australia’s major cities, in particular Sydney, you would be intimately familiar with the toll roads that Transurban operates. This company has been remarkably successful in negotiating inflation-proof quarterly toll rises for most of its roads.

This gives the dividend income Transurban forks out notable resilience and stability. Right now, Transurban shares are trading on a dividend yield of 4.78%.

BHP Group Ltd (ASX: BHP) is our next divided stock worth discussing. BHP is one of the largest miners in the world and has extensive operations in iron ore, copper and other industrial commodities. As a mining company, BHP has a far more volatile track record when it comes to paying dividends.

However, they are usually substantial, regardless of the pricing cycle the company happens to be in. Today, BHP is sitting on a trailing (and fully franked) dividend yield of 5.97%.

A bank and a telco for passive income

It would be hard to build a robust ASX dividend portfolio without at least one ASX bank share. So ANZ Group Holdings Ltd (ASX: ANZ) makes the cut too. Like its ASX banking stablemates, ANZ has been forking out generous and fully franked dividends for decades. 2023 was a bumper year for this bank, with ANZ forking out the highest annual dividend since 2015 at $1.75 per share.

Despite a recent share price surge, ANZ is still trading on a dividend yield of 6.10%.

Finally, I would include ASX telco Telstra Group Ltd (ASX: TLS). Like the banks, Telstra is another famous passive income payer. Investors have been treated to a rising dividend from this company for the past two years after a long period of income stagnation. Telstra offers similar traits to that of Coles or Transurban in my view.

Its business is extraordinarily resilient to economic maladies and should enable Telstra investors to feel relatively comfortable in receiving regular dividend income going forward. Right now, Telstra shares are offering up a dividend yield of 4.51%. That’s replete with full franking credits.

What’s next?

The more mathematically minded readers might notice that these five shares aren’t enough to bank $1,400 in annual dividend income from a $20,000 investment. Let’s assume an investor puts $4,000 into each of these five shares. At their stated dividend yields, this would only get us approximately $995.60 in annual dividend income today. Obviously well off our target of $1,400.

Well, I think that’s unfortunately unavoidable from a $20,000 investment. In order to get an immediate $1,000 in dividend income from a $20,000 investment, we would need to invest in a basket of ASX shares that are all currently yielding above 7%.

Most shares currently trading on yields of this magnitude arguably don’t qualify as reliable income payers. At least for our purposes. However, I do believe that if an investor holds these five shares for a number of years, the dividend income will eventually grow to $1,400 per annum and beyond.

The post How I’d invest $20k to target $1,400 a year from ASX dividend shares appeared first on The Motley Fool Australia.

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More reading

• Are these ASX dividend stocks quality buys this week?
• Why are ASX 200 mining shares smashing the benchmark on Wednesday?
• Why these excellent ASX dividend shares have been named as buys
• Down 5% in 2 years, does the Transurban share price reflect the 2024-26 dividend forecast?
• How are these ASX investors earning an almost 7% dividend yield on their Telstra shares?

Motley Fool contributor Sebastian Bowen has positions in Telstra Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group. The Motley Fool Australia has positions in and has recommended Coles Group and Telstra 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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