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The ASX gold train has been running full steam ahead for more than a month now.

Investors have been sending ASX gold stocks soaring amid a fast-rising gold price.

It was only back on 3 October that the yellow metal was trading for US$1,823 per ounce.

By 28 February, that same ounce was worth US$2,030.

And over the past five weeks, gold has continued to charge higher, hitting new record highs of more than US$2,355 per ounce earlier today.

As for the performance of the Aussie gold miners?

Since 28 February the S&P/ASX All Ordinaries Gold Index (ASX: XGD) has soared an eye-popping 26%. For some context, that compares to a 3% gain posted by the ASX 200 over this same time.

The Northern Star Resources Ltd (ASX: NST) share price has underperformed the gold index, though it’s still up a very healthy 19% since 28 February.

The Newmont Corp (ASX: NEM) share price, on the other hand, has outperformed, up 33% over this time. Evolution Mining Ltd (ASX: EVN) shares have also outpaced the gold benchmark, gaining 36% since 28 February.

With these fat gains already in the bag, is the ASX gold train ready to run out of puff?

Or can it keep charging ahead?

What now for the speeding ASX gold train?

While the future is inherently uncertain, I believe that the gold price and most ASX gold stocks could still offer some sizeable gains in 2024.

That’s because the demand outlook for gold continues to look very strong.

The yellow metal, which pays no yield itself, tends to perform better in low or falling interest rate environments. While we’re not sure when the US Federal Reserve, the RBA and other central banks will begin cutting rates, some easing certainly looks to be on the cards for 2024.

Gold also has been benefiting from its safe-haven status, both in terms of an uncertain global economic outlook and amid rising geopolitical tensions from the Middle East to Eastern Europe.

The gold price should also find support with both consumer demand (particularly in China) and central bank demand at near-record levels and forecast to remain strong.

So, I think the gold train certainly has some steam left in it.

Investors looking to get exposure to further potential rises in the gold price without buying and storing physical bullion themselves could consider buying an exchange-traded fund (ETF) like Perth Mint Gold (ASX: PMGOLD) or Betashares Gold Bullion ETF (ASX: QAU).

Or, for potentially leveraged returns, investors can consider buying shares in the big ASX gold producers like Newmont, Northern Star and Evolution Mining. These stocks will often rise (or fall) significantly more than any underlying moves in the gold price.

If you’re not sure how or where to invest your hard-earned money, please reach out for some expert advice.

The post Is it too late to get on board the ASX gold train? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• Buying ASX 200 gold stocks? Here’s why the record gold price could keep charging higher
• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today

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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On Wednesday, the S&P/ASX 200 Index (ASX: XJO) was on form again and pushed higher. The benchmark index rose 0.3% to 7,848.5 points.

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

ASX 200 expected to tumble

The Australian share market looks set for a disappointing session on Thursday following a poor night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 64 points or 0.8% lower this morning. In the United States, the Dow Jones was down 1.1%, the S&P 500 fell 0.95%, and the Nasdaq tumbled 0.85%. Hotter than expected US inflation weighed on the market.

Oil prices rebound

ASX 200 energy shares including Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a good session after oil prices rebounded overnight. According to Bloomberg, the WTI crude oil price is up 1.25% to US$86.29 a barrel and the Brent crude oil price is up 1.25% to US$90.53 a barrel. Concerns over rising tensions in the Middle East drove prices higher.

Dividend payday

Today is yet another big day for Aussie investors with a number of ASX 200 shares distributing their latest payouts to their shareholders. Among the companies that are paying dividends today are logistic solutions companies Brambles Ltd (ASX: BXB) and Qube Holdings Ltd (ASX: QUB), insurance giant Suncorp Group Ltd (ASX: SUN), and retail giant Woolworths Group Ltd (ASX: WOW). The latter is paying out a fully franked 47 cents per share dividend.

Gold price falls

It looks set to be a tough session for ASX 200 gold shares including Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) after the gold price slumped overnight. According to CNBC, the spot gold price is down 0.5% to US$2,351.7 an ounce. The precious metal fell from its record high following the release of US inflation data.

Buy Capricorn shares

The Capricorn Metals Ltd (ASX: CMM) share price is good value according to analysts at Bell Potter. This morning, the broker has responded to the gold miner’s latest update by retaining its buy rating and lifting its price target to $6.15. This implies potential upside of 15% from current levels. It commented: “CMM is a sector leading gold producer with a strong balance sheet, clear organic growth options and a management team with an excellent track record of delivery.”

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

• Why I’d drip-feed $500 a month into ASX 200 shares, starting now
• Here are the top 10 ASX 200 shares today
• 4 ASX 200 blue chip shares to buy now
• 3 ASX 200 dividend shares to buy according to brokers
• 5 things to watch on the ASX 200 on Wednesday

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The BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC) has performed strongly, rising by around 30% since the end of October 2023, as we can see in the chart below. So, is the ASX tech exchange-traded fund (ETF) still an investment opportunity after its rally?

Let’s take a look.

The ATEC ETF gives investors exposure to a range of technology-oriented market segments such as IT, consumer electronics, online retail and medical technology.

The portfolio currently has 37 holdings. To give you a flavour of the types of companies in the portfolio, these are the biggest 10 positions by weighting:

• Computershare Ltd (ASX: CPU) – 10.4%
• WiseTech Global Ltd (ASX: WTC) – 10%
• CAR Group Limited (ASX: CAR) – 9.9%
• Xero Ltd (ASX: XRO) – 9.4%
• REA Group Ltd (ASX: REA) – 7.9
• NextDC Ltd (ASX: NXT) – 7.4%
• Seek Ltd (ASX: SEK) – 7.3%
• Altium Ltd (ASX: ALU) – 6.9%
• Pro Medicus Ltd (ASX: PME) – 4.7%
• TechnologyOne Ltd (ASX: TNE) – 4.2%

It’s more expensive now

When a share price has surged so much in a relatively short amount of time, it leads to a higher price/earnings (P/E) ratio, which undoubtedly makes the ATEC ETF more expensive.

Share prices can’t sustainably rise without good justification. Each business has its own earnings profile, but they all face the same higher interest rate environment, which is meant to push down valuations.

It still could be a long time before interest rates start coming down, with inflation remaining stubbornly higher than central bankers would like. The great investor Warren Buffett once described why interest rates are so important for valuations:

The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be.

So every business by its nature… its intrinsic valuation is 100% sensitive to interest rates.

But there’s plenty of growth

Collectively, many of the ATEC ETF’s holdings are delivering good growth.

For example, in its recent FY24 half-year result, WiseTech reported free cash flow growth of 13% and statutory net profit after tax (NPAT) growth of 8%. Meanwhile, CAR Group grew adjusted NPAT by 34% to $163 million. Computershare is benefiting from the sustained high interest rates thanks to the large cash balance of clients it makes interest income on.

Ultimately, businesses can justify a high price if the financial and operational performance keeps going well.

Many of the ASX tech shares in this portfolio are among the best stocks in the country.

The ATEC ETF might fall in value in the shorter term (and it would be a better buy), but because of its underlying quality and continuing performance, I think we could see good performance over three or five years.

The post The pros and cons of buying this ASX tech ETF after its 30% rally appeared first on The Motley Fool Australia.

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More reading

• How much passive income would $10,000 in Wesfarmers shares generate?
• Why I’d drip-feed $500 a month into ASX 200 shares, starting now
• Is it time to put Zip shares back on the table in 2024?
• Buy these ASX ETFs for a big income boost
• Own Pilbara Minerals shares? Here’s your third-quarter update preview

Motley Fool contributor Tristan Harrison has positions in Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, Pro Medicus, REA Group, Technology One, WiseTech Global, and Xero. The Motley Fool Australia has positions in and has recommended WiseTech Global and Xero. The Motley Fool Australia has recommended Car Group, Pro Medicus, REA Group, Seek, and Technology One. 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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Owners of Wesfarmers Ltd (ASX: WES) shares have received a pleasing level of dividend payouts over the years. After all, passive income from an ASX blue-chip share can be precisely the steady income-generating strategy that people are looking for.

Wesfarmers owns a variety of leading Australian retailers, including Bunnings, Kmart, Officeworks and Priceline.

Bunnings and Kmart Group (which includes Target) make enormous profits each year for the ASX retail conglomerate. In the FY24 first-half result, Bunnings made $1.28 billion of earnings before tax (EBT), while Kmart Group earned $601 million in EBT.

Profit is very important because that’s what funds dividend payments. So, how much passive income would $10,000 in Wesfarmers shares generate?

Potential passive income

Wesfarmers has a stated goal of increasing its dividend over time “commensurate with performance in earnings and cash flow“.

The company has highlighted that Bunnings and Kmart can provide customers with what they need during this high cost-of-living environment – good products at good prices.

Its ongoing profit growth could help push the annual dividend payment up slightly higher to $1.95 per share in FY24, according to Commsec. That would be a grossed-up dividend yield of 4.1% in the current financial year.

If an investor had $10,000 in Wesfarmers shares today, the 4.1% grossed-up dividend yield would translate to around $410 in dollar terms, including the franking credits. The upfront cash part of the dividend would be almost $290.

But, the dividend isn’t expected to stay below $2 per share for long.

The estimates on Commsec suggest the payout could rise to $2.13 per share in FY25 and $2.35 per share in FY26.

In FY25, the company’s grossed-up dividend yield could be 4.5%, which would mean $450 of grossed-up income with a $10,000 investment in Wesfarmers shares.

It could then have a grossed-up passive dividend income yield of around 5% in FY26 — that would mean $500 of grossed-up income with a $10,000 investment today.

Will owners of Wesfarmers shares see profit growth?

The retailer has proven its ability to deliver a slight profit rise even when some households are struggling in this economic environment.

Perhaps unsurprisingly, the Commsec forecast suggests EPS could rise to $2.23 in FY24, $2.43 in FY25 and $2.70 in FY26. If it does manage to reach that projected profit for FY26, it would mean the Wesfarmers share price is valued at 25x FY26’s estimated earnings.

The company is investing in areas like healthcare and lithium mining to grow and diversify its earnings, which may help the Wesfarmers share price in future years.

Past performance is not a guarantee of future performance, but Wesfarmers has a long-term track record of paying pleasing passive income and delivering capital growth as it expands its core businesses.

The post How much passive income would $10,000 in Wesfarmers shares generate? appeared first on The Motley Fool Australia.

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More reading

• Why Goldman Sachs rates Wesfarmers shares as a buy
• 5 things to watch on the ASX 200 on Wednesday
• The best ASX buys I’d grab to beat the market without a tonne of risk
• 2 safe ASX dividend shares that have paid income for decades
• Are Wesfarmers shares an ASX bargain buy or overvalued right now?

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 Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. 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 ASX share market has generated returns of 10% per annum over the ultra-long term, which is why S&P/ASX 200 Index (ASX: XJO) shares could be the right place to invest $500 per month steadily.

We can’t become millionaires instantly unless we win the lottery, but the steady investment approach can lead to long-term success in a ‘get rich slowly’ strategy.

I’m going to outline how investing $500 per month could compound into a very pleasing amount over time.

Why ASX 200 shares?

The ASX 200 represents a list of 200 of the biggest businesses on the Australian Securities Exchange by market capitalisation. They are among the most significant in the country — even the world — at what they do.

For example, Commonwealth Bank of Australia (ASX: CBA) is the biggest bank in Australia, BHP Group Ltd (ASX: BHP) is the world’s largest miner, Goodman Group (ASX: GMG) is a global industrial property developer and owner, Telstra Group Ltd (ASX: TLS) is Australia’s biggest telco, and WiseTech Global Ltd (ASX: WTC) is a leading global logistics software provider.  

Thanks to their brand power or scale, the industry leader can often earn the biggest margins and profits. Ongoing re-investment in the business can deliver satisfactory profit growth and capital growth.   

Now, I don’t know what the shareholder returns are going to be for a specific company or the overall ASX 200, but I’m optimistic about the future. ASX 200 shares can continue to grow profit, with Australia’s growing population being a tailwind for earnings.

Invest $500 per month

The minimum investment that a broker normally requires for a trade is $500, so that could be a good starting amount to invest. Or, investors could save more and make a bigger investment – some brokers have a very low cost for a transaction with a value of under $1,000.

Using a compound interest calculator, if we invest $500 per month and that money returns an average of 10% per annum, it will turn into $1 million in just over 30 years.

If that’s not quick enough for you, there are two main ways to bring forward millionaire status. First, we could invest more – investing $1,000 per month would mean hitting $1 million in less than 24 years. That shows that simply investing an extra $500 per month can shave off six years of the timeframe.

We could also aim to invest in the best ASX 200 shares possible, which could increase returns. For example, investing $1,000 per month and having a portfolio return an average of 12% per annum could reach $1 million in less than 22 years.

In my mind, there’s no better time to start investing than now. The earlier we can start the ball rolling, the better.

The post Why I’d drip-feed $500 a month into ASX 200 shares, starting now appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today

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 Goodman Group and WiseTech Global. The Motley Fool Australia has positions in and has recommended Telstra Group and WiseTech Global. The Motley Fool Australia has recommended Goodman 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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Zip Co Ltd (ASX: ZIP) shares are the best-performing companies in the All Ordinaries Index (ASX: XAO) in 2024 so far. Personally, I have never taken much of an interest in buying Zip shares, but the recent run has left me with egg on my face.

In less than four months, the Zip share price has flown from 64 cents to $1.41, a year-to-date increase of 127%. This is an incredible return compared to the benchmark’s paltry 3.1%. Overcoming the odds — namely high interest rates — Zip grew on all key fronts in its half-year results.

So, is it time I ate my words and invested in this enduring buy now, pay later (BNPL) business?

Interest rate relief for Zip shares

There’s no denying that Zip is moving in the right direction.

Operating costs at the Afterpay competitor have been falling for the past two years, losses are narrowing, and revenue is growing. That’s a great position for a company.

For the first time, potentially in its history, real profitability looks possible. At long last, there’s a chance Zip can prove its viability with genuine net profits after tax (NPAT). If it can do that, we can begin looking at it with less speculation and more fundamental analysis.

The optimist in me thinks falling interest rates could be the spark that sets profitability into motion.

Rate cuts before the end of the year are the general consensus among economists. Some are forecasting by August, and others are forecasting for December. Either way, the economic environment could soon be more conducive to BNPL spending.

Additionally, lower rates will help lighten Zip’s $2.5 billion debt burden.

Where’s the value?

Now for the more pessimistic side of my personality.

Regulation proposed by the Australian government could risk BNPL’s edge. The current proposals might mean Zip, Afterpay, and others must conduct credit checks and hold an Australian credit license.

Fortunately for Zip, it already conducts checks and holds a license. Still, I wonder how these companies differ from other credit providers. More importantly, how will they outcompete other options once on a level playing field?

The technology is hardly nascent. Payment giants such as PayPal Holdings Ltd (NASDAQ: PYPL), Apple Inc — heck, even our very own Commonwealth Bank of Australia (ASX: CBA) offers ‘pay later’ options.

My concern is that Zip and others might become just lower-margin lending businesses. In which case, it’s hard for me to see how Zip shares outperform traditional lenders long term.

The post Is it time to put Zip shares back on the table in 2024? appeared first on The Motley Fool Australia.

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More reading

• Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today
• 3 ASX All Ords shares up 50%+ in March
• Why Mesoblast, Patriot Battery Metals, Sigma, and Zip shares are pushing higher
• Up 71% in 3 weeks, have Zip shares topped out?
• Why is the Zip share price the best-performing ASX 300 stock so far this year?

Motley Fool contributor Mitchell Lawler has positions in Commonwealth Bank Of Australia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended PayPal and Zip Co. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: short June 2024 $67.50 calls on PayPal. The Motley Fool Australia has recommended PayPal. 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 Australian share market can be a great place to generate a passive income. However, if you’re not confident about stock picking, it can be intimidating.

But don’t let that stop you from earning income from the share market.

Especially when there are ASX exchange-traded funds (ETFs) available that can make your life easy by giving you access to large groups of dividend-payers with a single click of a button.

Three such ASX ETFs that could be worth considering are listed below. Here’s what you need to know about them:

BetaShares S&P 500 Yield Maximiser (ASX: UMAX)

The first ASX income ETF for investors to look at is the BetaShares S&P 500 Yield Maximiser.

This fund gives investors access to the top 500 companies listed on Wall Street. These are many of the world’s most recognisable brands and the titans of our age.

However, with a clever covered call strategy the actively managed fund has the potential to earn quarterly income that is significantly greater than the dividend yield of the underlying share portfolio.

For example, at the last count, its units were providing income investors with a trailing 4.8% distribution yield. This is much greater than the current average yield (1.35%) of the S&P 500 index.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

Another ASX income ETF that could be used to generate passive income is Vanguard Australian Shares High Yield ETF.

It gives investors access to a group of ASX-listed shares that have higher-than-average forecast dividends based on broker research.

Importantly, it does this with diversity in mind. While you will inevitably be buying a slice of miners and banks such as BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA), you won’t just end up owning these types of companies. The ETF has strict limits on the proportion it will invest in any one industry or company.

At present, the Vanguard Australian Shares High Yield ETF has 72 holdings and trades with a dividend yield of approximately 5.2%.

Vanguard Australian Shares Index ETF (ASX: VAS)

Finally, income investors may also want to check out the very popular Vanguard Australian Shares Index ETF.

It is a low-cost, diversified, index-based exchange-traded fund that aims to track the ASX 300 index.

The ASX 300 index is home to Australia’s leading 300 listed companies. This includes the big players like BHP and CBA but also smaller names such as Dicker Data Ltd (ASX: DDR) and Rural Funds Group (ASX: RFF).

And while not all companies in the fund pay dividends, the ETF still trades with an attractive dividend yield of 3.9% at present.

The post Buy these ASX ETFs for a big income boost appeared first on The Motley Fool Australia.

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More reading

• 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?
• How is the Vanguard Australian Shares ETF (VAS) falling almost 1% today?

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All eyes will be on Pilbara Minerals Ltd (ASX: PLS) shares next week when the lithium miner releases its eagerly anticipated third quarter update.

Ahead of the release on Friday of next week, let’s now take a look at what the market is expecting from the company’s report.

Quarterly update preview

According to a note out of Goldman Sachs, its analysts are expecting Pilbara Minerals to report spodumene production of 173,000 tonnes. This will be down 1.7% quarter on quarter.

It is also a touch short of the consensus estimate of 177,000 tonnes of spodumene for the three months ended 31 March.

Goldman expects Pilbara Minerals to report spodumene sales volumes of 174,000 tonnes for the period, up 6.1% quarter on quarter. Once again, this is slightly lower than the consensus estimate of 180,000 tonnes.

What about lithium prices?

While production and sales volumes are important, the biggest impact on Pilbara Minerals shares from this report is likely to come from the price it commands for its lithium.

Unfortunately, Goldman Sachs believes that the company will report another sharp decline in the average realised spodumene price.

For the three months, it is expecting an average price of US$869 per tonne. This is down 21.9% quarter on quarter and 82% year on year.

As with the other metrics, the broker’s estimate is lower than consensus expectations. The market currently expects an average realised spodumene price of US$891 per tonne for the quarter.

One positive is that Goldman believes Pilbara Minerals will report a small reduction in its cash costs to A$630 per tonne. This is actually lower than the consensus estimate of A$666 per tonne.

Should you buy Pilbara Minerals shares?

As you might have guessed from its bearish view on both lithium prices and the company’s operating performance, Goldman Sachs doesn’t think investors should be buying Pilbara Minerals shares right now.

This week the broker has reiterated its sell rating with a lowly $2.90 price target. This implies potential down of over 25% for investors. It explains:

We are Sell rated on: (1) Valuation: where PLS remains at a premium to peers (1.2x NAV & pricing ~US$1,265/t LT spodumene; peer average ~1.1x & ~US$1,250/t), with near-term FCF continuing to decline on lithium prices and increasing growth spend (c.-10% FCF yield in FY24E, and c.0% in FY25-27E) and a significant premium out to FY30E vs. peers on both EV/EBITDA and EV/Production on broadly normalised production/lithium prices; (2) Doubling production over 5 years with further optionality, though more than priced in, where we continue to see risk that a Beyond P1000 expansion disappoints vs. market expectations on a combination of capex, size, or timing (study expected Jun-24 Q), with a P1400 spend of ~A$0.85bn taking total capex spend over FY24-28E to ~A$3bn, ~A$0.9bn ahead of consensus which already prices further expansion; (3) Funded for further growth opportunities and ongoing capital management, though on more modest cash balance.

The post Own Pilbara Minerals shares? Here’s your third-quarter update preview appeared first on The Motley Fool Australia.

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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 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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The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen 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 Nanosonics. The Motley Fool Australia has positions in and has recommended Nanosonics and Smartgroup. The Motley Fool Australia has recommended Ansell. 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 Bank of Queensland Ltd (ASX: BOQ) share price closed 1.15% lower today at $6.04 amid rumours the ASX bank share may be planning to sell one of its divisions.

But it was not the only bank share to dip on Wednesday. Shares in the Commonwealth Bank of Australia (ASX: CBA) were down almost 1% at the close of trade, while the ANZ Group Holdings Ltd (ASX: ANZ) and National Australia Bank Ltd (ANZ: NAB) share prices also slipped into the red.

The chart below shows that the BOQ share price has dropped by around 30% over the last three years.

Is the way forward for the bank to divest and simplify so that it can focus on its core offering of lending and term deposits? Time will tell.

Potential sale of auxiliary business unit

According to reporting by The Australian, speculation has been mounting that the Bank of Queensland is moving toward the sale of a business it bought from Investec almost 10 years ago. The business came with $2.4 billion in loans and $2.7 billion in deposits.

The acquisition — offering Australian professional finance, asset finance and leasing, and mostly servicing dentists and doctors — reportedly cost $440 million.

The Australian reported that analysts believed regional banks were under pressure to simplify their businesses, noting that Bendigo and Adelaide Bank Ltd (ASX: BEN) recently sold its stake in Homesafe and planned to sell out of Cuscal when it floats.

Upcoming report

BOQ will report its FY24 half-year results and dividend next week (17 April).

As my colleague James Mickleboro reported recently, broker Goldman Sachs expects cash earnings of $154 million from BOQ. That net profit is 6.1% lower than the consensus of analyst expectations of $164 million.

Goldman Sachs also tipped an interim dividend of 16 cents per share. This is 7.5% lower than the market’s expectation (17.3 cents per share) and would represent a 20% decrease year over year.

The broker thinks the net interest margin (NIM) could disappoint, as well as a smaller-than-expected loan book.

Broker UBS is also negative on the ASX bank share. It has a sell rating on the bank, with a price target of $5 – that implies the BOQ share price could fall this year by around 17% from where it is today.

UBS suggested BOQ could generate earnings per share (EPS) of 44 cents, which would imply the current BOQ share price is valued at 14x FY24’s estimated earnings. However, the bank could then achieve EPS growth each year between FY25 and FY28 until it reached an EPS of 66 cents in the 2028 financial year.

Of course, these broker forecasts about profit and share price are educated guesses — BOQ could perform much better or worse than expected.

The post Why are BOQ shares falling on a rumoured sale? appeared first on The Motley Fool Australia.

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• This ASX 200 bank share could drop 20%!
• Should you wait for a dip to buy ASX 200 bank shares?

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 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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