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There’s no end to the advice offered to investors seeking ASX dividend shares to buy. Additionally, individual investors will likely search for winners in a way that best suits them and their goals.

If you’re looking to build an ASX dividend shares ‘wish list’ but not sure where to start, you’ve come to the right place.

As the saying goes, ‘failing to plan is planning to fail’. That’s why I believe it’s a good idea to jot down a ‘best buys now’ list when building a portfolio of ASX dividend shares.

That way, I can easily identify where my cash will go, what its anticipated growth prospects are, and whether I am diversified to my liking before jumping in with both feet.

Often the best place to begin a ‘best ASX dividend shares to buy now list’ is by finding a few quality shares trading at cheap prices.

How I’d build a ‘best ASX dividend shares to buy now’ list

Identify quality ASX dividend shares

There are plenty of factors that can help determine if an ASX dividend share is ‘high quality’. Personally, I tend to look for shares with strong balance sheets, notable competitive advantages, and consistent dividends.

A company that corners its market with an irreplaceable offering is ideal. Though, a loyal clientele and ability to grow is also a major competitive advantage.

A strong balance sheet can help bolster that growth. It can also help a company navigate tough times.

In the case of ASX dividend shares, a strong balance sheet might also suggest a company is managing its capital well, thereby reducing the risk they’ll reduce or forego dividends when things don’t go to plan.

But investors would be wise to avoid being blinded by a company’s strengths. Nearly every business has a weakness. Identifying them can be helpful when assessing potential risk factors.

There are plenty of other factors worth considering on an individual level. Different investors have different goals, investment timeframes, and risk tolerances.

Thus, individuals might choose to search for dividend-paying growth shares over blue-chip stocks, or vice versa, for instance.  

Seek out cheap stocks

A ‘best ASX dividend shares to buy now’ list should also consider if ‘now’ is the right time to buy into a particular company.

That means, once I’d found a few quality shares that suit my investment style, I would determine if they’re trading for reasonable prices.

There are many measures that can be referred to when considering if an ASX dividend share represents good value. Some examples include dividend yields, price-to-book (P/B) ratios, and price-to-earnings (P/E) ratios.

These are all simple measures that rely on data easily found in a company’s earnings reports. While they’re not perfect – and they certainly can’t predict the future – they can provide a good starting point in accessing value.

Of course, a consistently high dividend yield is the dream. However, it’s worth considering if a company can continually afford to offer such yields, particularly if its operating conditions shift in the future.

Derisk, derisk, derisk

Finally, I would contemplate how diverse my ‘best ASX dividend shares to buy’ list is, and how diverse it needs to be. That means investing in numerous companies across various sectors.

A strategically diverse portfolio provides protection from single-sector or company downturns. It also sees an investor exposed to a greater number of opportunities across the share market.

Though, diversification doesn’t guarantee returns or downside protection.

The post How I’d build a ‘best ASX dividends shares to buy now’ list appeared first on The Motley Fool Australia.

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More reading

• Xero share price could rise almost 80%: Goldman Sachs
• Why has the NAB share price had such a miserable week so far?
• ‘Use the volatility’: QVE reveals 3 ASX shares it just bought
• Lest We Forget
• Analysts say these ASX dividend shares are buys

Motley Fool contributor Brooke Cooper 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 Xero Limited (ASX: XRO) share price had a day to forget on Thursday.

A half-year earnings miss and the surprise exit of its CEO led to the cloud accounting company’s shares falling over 10% to $64.74.

This means the Xero share price is now down almost 56% since the start of the year.

Is the Xero share price weakness a buying opportunity?

According to a note out of Goldman Sachs, its analysts believe that investors should be picking up shares while they’re down.

This morning the broker has reiterated its buy rating with an improved price target of $115.00.

Based on the current Xero share price, this implies potential upside of almost 78% for investors over the next 12 months.

What did the broker say?

While Xero’s earnings fell well short of the broker’s estimates, it was pleased with its top line performance and particularly its average revenue per user (ARPU) metric. It commented:

This momentum is continuing, with exit ARPUs in both ANZ & International well above blended ARPU during the half (despite. c.NZ$10mn of Xerocon revenues). This suggests a strong revenue trajectory into 2H23, aided by further price rises (NA in Nov, Partner in Mar) ongoing transaction growth, partly offset by spot FX.

Goldman also highlights that while some may doubt Xero’s ability to deliver improvements in its subscriber growth in the UK and North America during the second half, it believes it is possible. The broker explained:

Finally, the expected improvement in 2H sub growth in the UK & NA will likely be viewed with some skepticism, but should benefit from improved go-to market and the revised MTD compliance changes in November.

Its analysts also note that Xero’s new CEO, Sukhinder Singh Cassidy, will be based in the United States. They suspect this could be a sign that Xero will be increasing its focus on this massive market.

Ms Singh Cassidy will be US domiciled, suggesting this market could be an increasing focus for XRO (large TAM, but in our view the most competitive for Xero.

All in all, the broker believes Xero is well-placed for long term growth and great value at current levels.

The post Xero share price could rise almost 80%: Goldman Sachs appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Amidst the ongoing tech stock wreck, value shares are everywhere. There’s just one catch…
• Why Block, Lake Resources, Pendal, and Xero shares are dropping today
• Xero share price sinks 7% on half-year earnings miss and CEO exit
• 5 things to watch on the ASX 200 on Thursday

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 Xero. The Motley Fool Australia has positions in and has recommended Xero. 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 National Australia Bank Ltd (ASX: NAB) share price has fallen by around 3.5% this week. That compares to the S&P/ASX 200 Index (ASX: XJO), which has gone up 1%. So, NAB has noticeably underperformed the market.

Share prices move all the time — and there could be an uptick for a number of ASX 200 shares today following a strong night on Wall Street.

But this week there was particularly important news for NAB – the big four bank released its FY22 result for the 12 months to September 2022.

Let’s have a look at some of the highlights.

FY22 result earnings recap

Statutory net profit after tax (NPAT) increased by 8.3% to $6.89 billion and cash earnings increased by 8.3% to $7.1 billion.

With the final dividend of 78 cents per share, this brought the annual dividend per share to $1.51 per share. The full-year dividend was increased by around 19%. At the current NAB share price, the FY22 grossed-up dividend yield is 7%.

However, the net interest margin (NIM) – the amount of money a bank makes on its lending – declined six basis points to 1.65%

Expenses increased by 5.8%, which is a sizeable increase. Excluding the impact of the Citi consumer business, expenses rose by 3.9%, with the biggest elements including higher remuneration and volume-related costs, higher technology and investment costs and increased financial crime and remediation spending, partly offset by productivity benefits.

Interestingly, the ratio of the number of loans that are over 90 days past due and impaired gross assets fell from 0.94% of total loans in FY21 to 0.66% in FY22.

It also said that housing lending competitive pressures are “likely to intensify” and that the NIM impact of RBA cash rate increases on unhedged deposits is expected to peak in the first half of FY23, while the estimated benefit of cash rate increases from October 2022 is “expected to be lower”.

Is the NAB share price an opportunity?

The broker Goldman Sachs is positive on NAB, according to reporting by my colleague James Mickleboro. It has a buy rating on the business, with a price target of $35.41. That implies a possible rise of around 14%.

Goldman Sachs reportedly said:

NAB’s cost management initiatives, which seem further progressed vs. peers, has allowed it to deliver the highest levels of productivity over the last three years, and we think this leaves it well positioned for an environment of elevated inflationary pressure (c. A$400 mn productivity savings expected in FY23).

However, Morgans currently rates it as a hold, with a price target of just $30.63. That suggests the NAB share price could remain flat over the next year. It lowered its expectations for the NIM leverage, though it’s still expected to rise and it’s also expecting higher costs. There could also be problems in the future with possible loan issues.

Citi is neutral on the business, with a price target of $32.75. That could be a possible rise of around 5%. A slowdown in business lending, where NAB is a key player, could also impact NAB’s future growth.

NAB share price snapshot

Despite the recent decline, the NAB share price has still risen by 5% since the beginning of the year.

The post Why has the NAB share price had such a miserable week so far? appeared first on The Motley Fool Australia.

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More reading

• Goldman Sachs tips major upside for the NAB share price
• ASX 200 bank shares: Buy, hold, or fold?
• 5 things to watch on the ASX 200 on Thursday
• Everything you need to know about the NAB dividend
• Why is the NAB share price sinking 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 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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If you keep asking yourself “What’s next?”, you are not the only one.

The world has been a more turbulent place than usual in 2022, and that has translated into plunging valuations on share markets.

Unfortunately, the experts at QV Equities are expecting more of the same.

“We expect markets to remain volatile in the near future,” they said in a memo to clients.

“The gap between inflation and interest rates remains high and we believe investors will remain uncertain until there are clear signs inflation has started to decline markedly.”

The team noted that Labor treasurer Jim Chalmers’ first budget last month was largely uneventful, but ASX stocks rose during October.

“In the broad rally all ex-20 sectors were up, with real estate (+9.8%) and consumer discretionary (+9.3%) performing best as investors hoped that October’s lower-than-expected RBA rate rise would mean property markets and consumer demand would hold up better than expected.”

Be ready to jump on opportunities

So in such a climate, which ASX shares are the QVE team buying at the moment?

“With the full effect of recent interest rate rises yet to be felt by the Australian economy, we remain focused on investing in companies with strong competitive advantage and recurring earnings.”

Having some cash in hand is important, the memo read, to be able to pounce on opportunities of heavily discounted stocks.

The QVE analysts named several examples of when they did this.

“We used the recent volatility to increase our holdings in high-quality companies at attractive prices including Lottery Corporation Ltd (ASX: TLC) and APA Group (ASX: APA).”

The Lottery Corporation share price has risen about 15% since mid-October, and multiple experts have called it out as a quality defensive stock.

“Revenues have shown resilience through periods of softer economic growth,” read a Firetrail memo last month.

“During the GFC, revenues grew 7% in the year to June 2008, and another 8% in the year to June 2009.”

APA Group shares have risen around 6% year to date, during a period when many of its peers are in the red.

The stock was named as one of the 22 high-yield dividend shares on the Wilsons hit list last month.

The QVE team also bought up shares in one company that’s still in the headlines for all the wrong reasons.

“We also took the opportunity to increase our holding in Medibank Private Ltd (ASX: MPL) after its share price fell heavily after a well-publicised cyber-attack on its client database.”

Medibank shares are going at a 25% discount compared to the end of August.

The post ‘Use the volatility’: QVE reveals 3 ASX shares it just bought appeared first on The Motley Fool Australia.

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More reading

• Do Medibank shares now represent a buying opportunity?
• Here are the 3 most traded ASX 200 shares on Wednesday
• Medibank share price lifts despite hackers leaking data
• Here are the top 10 ASX 200 shares today  
• Why A2 Milk, Cettire, Lottery Corp, and Weebit Nano shares are rising

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 no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended APA 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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I knew it. At least I must – or should – have known it.

And yet, the sight shocked me.

Driving through Northern France, a decade ago, and they were just there. Along the roadside.

Red poppies.

We had driven from Calais, on our way to the Western Front battlefields of World War One.

But it was the poppies I saw first.

Of course they were there.

Growing wildly in France, just as they had, a century earlier, while this place was the scene of unimaginable death and destruction.

Things of beauty that came to represent life. And hope.

And it is precisely because they were there, at that place, that they became symbols of Remembrance.

A vivid, natural, reminder of the service and sacrifice of our Diggers and the armed forces of Australia and her allies.

The Flanders Poppy that remains an instant and evocative touchstone.

They grew there, then.

They grow there, still.

Perhaps that, at least in part, is why they are such powerful symbols.

They are also powerfully part of John McCrae’s poem of remembrance, In Flanders Fields:

In Flanders fields the poppies blow
Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.

We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie,
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.

Today, of course, is November 11.

Remembrance Day.

Once called Armistice Day, because it marked the end of World War One, it became a day of remembrance for all those who served, suffered and died, primarily for countries of the British Commonwealth and their allies.

After years of horror, the guns fell silent at 11am on that day.

The war, finally, was over.

And, from what had become a muddy, awful hellscape, poppies started to bloom.

Today, the area that was once the Western Front is again a bucolic, picturesque part of rural France. But the scars remain on the landscape, including old trenches, craters and the remains of simple fortifications.

And, tragically, so many war cemeteries.

I don’t know that I’ve ever been so overcome as I was there. The only thing that comes close is the Bomana War Cemetery in Port Moresby, where the remains of too many Australian soldiers, from another war, just 20 years later, are interred.

Every French town in the area has a war cemetery. Most of them are quite large. A few, overwhelmingly so.

And the poppies flower among and around them, just as they would have when these men arrived to do their duty on the Western Front.

Men – young men – who gave their lives for their countries.

And that is what we commemorate on Remembrance Day.

We remember those who made the supreme sacrifice.

And we remember those who came home, but whose lives were irrevocably changed by the horror of war – the physical and emotional scars that they would, and do, carry for the remainder of their lives.

It is nothing less than our sacred duty.

They went with songs to the battle, they were young,
Straight of limb, true of eyes, steady and aglow,
They were staunch to the end against odds uncounted,
They fell with their faces to the foe.

They shall grow not old, as we that are left grow old:
Age shall not weary them, nor the years condemn
At the going down of the sun and in the morning
We will remember them.

Lest We Forget.

The post Lest We Forget appeared first on The Motley Fool Australia.

More reading

• Analysts say these ASX dividend shares are buys
• 16% dividend yield: Fund names 2 slammed ASX shares to buy for the long run
• Movies and health: Fund loves 2 ASX shares that have gone nowhere till now
• Why these 4 ASX dividend shares stand out from the crowd: fund manager
• 5 things to watch on the ASX 200 on Friday

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If you’re wanting to boost your income with some dividend shares, then you might want to consider the two listed below.

Here’s what you need to know about these dividend shares:

Accent Group Ltd (ASX: AX1)

The first ASX dividend share for income investors to look at is footwear retailer Accent.

It has been tipped as a buy by analysts at Bell Potter. The broker has put a buy rating and $2.00 price target on its shares.

Its analysts note that the “company’s focus on achieving full gross margins was encouraging as the company executes on a disciplined growth strategy to sustain earnings growth.”

Bell Potter is expecting this to lead to fully franked dividends of 9.5 cents per share in FY 2023 and 12.7 cents per share in FY 2024. Based on the current Accent share price of $1.51, this would mean yields of 6.3% and 8.4%, respectively, over the next couple of years.

Suncorp Group Ltd (ASX: SUN)

Another ASX dividend share that has been tipped as a buy is Suncorp.

It is one of Australia’s leading insurance and banking companies and the owner of brands including AAMI, Apia, Bingle, GIO, Shannons, Suncorp, and Vero.

Morgans is positive on Suncorp and currently has an add rating and $13.70 price target on its shares.

It likes the company due to its efficiency program and attractive valuation. The broker notes that it sees “SUN’s current valuation as undemanding, e.g. FY23 PE multiple of 13x and a 6% dividend yield.”

At present, the broker is forecasting fully franked dividends per share of 70.6 cents in FY 2023 and 78.5 cents in FY 2024. Based on the current Suncorp share price of $12.01, this will mean yields of 5.9% and 6.5%, respectively.

The post Analysts say these ASX dividend shares are buys appeared first on The Motley Fool Australia.

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More reading

• Bendigo Bank share price climbs as chair slams ANZ-Suncorp deal as ‘sub-optimal’
• Are storm clouds gathering over ANZ’s Suncorp bid?
• ‘Undemanding’ valuation: Morgans tip 17% upside for the Suncorp share price
• Analysts say these ASX dividend shares with 6%+ yields are buys
• Why I’d grab today’s cheap ASX shares before it’s too late

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 Accent 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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Sure, it’s been a frightening time for investors. But 2022 has also been an opportunity to pick up some absolute bargains as quality ASX shares end up heavily discounted.

With this in mind, it’s prudent to see which stocks have fallen radically in recent weeks but the professionals are still backing for a long-term rise.

This allows a low entry point for maximum long-term returns.

Fortunately, the analysts at QV Equities revealed two such stocks in a recent memo to clients.

Short-term pain, long-term gain

The QVE team admitted its fund fell behind its benchmark slightly in October.

“The main reasons for the lagging performance were some very strong performances by lithium stocks, which the portfolio is not exposed to, as well as strong rises in several consumer discretionary stocks, which we remain cautious on given what looks to be a tough 2023 ahead for the sector.”

The portfolio was also held back by “some disappointing performances” seen in a pair of “key stocks”.

“Ampol Ltd (ASX: ALD) fell 5.3% in October following a mixed quarterly update in which its fuel distribution business recorded an unexpected loss due to one-off factors, while the company’s other divisions performed strongly.”

The Australian Clinical Labs Ltd (ASX: ACL) share price also took a 4.3% hit downwards for the month as COVID-19 testing volume continued to wind down.

“Although the company also reported that its underlying business is still growing strongly.”

Despite these short-term losses, the QVE team is keeping the faith.

“Both Ampol and Australian Clinical Labs remain very well positioned in their industries with strong balance sheets and we retain our positive long-term view of their prospects.”

How ASX stocks Ampol and ACL have been going

During a time when energy and fuel prices have been soaring, it may be surprising that the Ampol share price is actually down 8% year to date. 

It does pay out a juicy 5.8% dividend yield though.

The petroleum provider last month named as one of the 22 ASX shares that Wilsons is targeting for their high-income yield.

October was not the only bad month for Australian Clinical Labs. Its stock price has almost halved since the start of the year.

A life of queuing for hours for a PCR test and scrambling to purchase rare rapid COVID-19 tests now seems like a distant memory, even though that was just 10 months ago.

The devaluation of ACL does mean its dividend yield now stands at a remarkable 15.8%.

The post 16% dividend yield: Fund names 2 slammed ASX shares to buy for the long run appeared first on The Motley Fool Australia.

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More reading

• Why ANZ, Australian Clinical Labs, Core Lithium, and Kogan are sinking today
• Another ASX All Ords share is plunging 12% on cyberattack news
• 22 high-yield ASX dividend shares Wilsons is targeting
• Why Ampol, Cann, Reliance Worldwide, and South32 shares are dropping

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 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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If you want better returns than the market average, then you need to buy ASX shares that others haven’t yet bought.

Fortunately, the team at Celeste Funds Management this week named two stocks it has in its portfolio that are absolute sleeping giants. 

Although they have not impressed with their recent returns, the Celeste analysts explained why they’re bullish about these ASX shares:

The first ASX-listed health insurer

ASX-listed health insurance providers have been in the headlines for all the wrong reasons in recent weeks.

Out of all of them, NIB Holdings Limited (ASX: NHF) was the first to float on the ASX, back in 2007.

While the stock grew exponentially in the first 10 years, the ensuing five have not been flattering. The share price has inched up only 0.15% over the last half-decade.

To rub short-term salt into the long-term wound for shareholders, the NIB share price took a 10.2% hit last month.

Celeste analysts attributed this to the company’s foray into a new business area.

“The company raised $150 million as part of [its] previously flagged expansion into NDIS plan management, with the acquisition of Maple Plan becoming the first of many,” read a Celeste memo to clients.

“Maple Plan is the seventh largest plan manager, with 7,000 participants.”

NIB is aiming to hit a target of 50,000 NDIS participants by 2025, according to the Celeste team, and will possibly achieve this through more takeovers. 

“Additionally, strong student visa and work visa grants for the quarter (up 47% and 31% respectively) bodes well for NIB’s international business, while the cybersecurity breach at competitor Medibank Private Ltd (ASX: MPL) might see NIB show above-system member growth.”

NIB shares are currently paying out a dividend yield of 3.16%.

Don’t call them Event Cinemas

EVT Ltd (ASX: EVT) is the cinema operator formerly known as Event Hospitality & Entertainment Ltd.

The Celeste team was impressed with what it heard at the company’s recent annual general meeting.

“EVT Limited announced at the AGM that 1q22 performance had been strong with group earnings of $70.6 million, exceeding the previous comparable quarter of a loss of $15.5 million and even exceeding $53.3 million earned in 1q19, a pre-COVID comparable.”

The EVT share price has risen only 6% over the past five years.

However, the arrival of the pandemic forced some serious soul-searching with cinemas sitting empty — and burning cash — for months.

“Strong cost control driven by the COVID lockdown has now enabled revenue growth to translate to significant earnings leverage.”

The AGM also revealed that a significant legal headache has now been dealt with. 

“EVT also announced they have settled their dispute with Vue over the failed 2020 takeover of the EVT German cinema assets,” read the Celeste memo.

“Vue, currently in receivership, paid $11.6 million to [expedite] bondholder assumption of ownership.”

The meeting was also when the company commenced its rebranding to EVT to “better reflect the spread of businesses”, as it also operates hotels and resorts.

The post Movies and health: Fund loves 2 ASX shares that have gone nowhere till now appeared first on The Motley Fool Australia.

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More reading

• Is the NIB share price benefitting from Medibank’s woes?
• Here are the top 10 ASX 200 shares today
• Why Chalice Mining, Core Lithium, Corporate Travel Management, and NIB are rising
• These 2 ASX 200 shares are ‘compelling growth opportunities’: fund manager
• Why is the WAM Capital share price having such a lousy start to the week?

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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended NIB Holdings Limited. 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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Ask a Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In part two of this edition, we’re rejoined by Romano Sala Tenna, co-founder of Katana Asset Management.

The Motley Fool: With capital gains under pressure this year, ASX dividend shares are gaining much more investor attention. Do dividends play a role in determining your investment decisions?

Romano Sala Tenna: We’ve got 11 key criteria, which are broken up into other subset criteria. Additionally, there’s up to 154 data points we can look at for a company.

Dividends is one of them; it carries some weight.

Over the last 146 years, the ASX has averaged 10.8% per annum return. That’s made up of roughly 6% to 6.5% capital growth with dividends around 4% to 4.5%. That’s over the ultra-long term.

So, we if can find an ASX stock that has a dividend yield of 10.8% or better, that we believe is sustainable, and may even grow at 5% per annum, then that is definitely worth our attention.

There are a lot of high-yielding dividend stocks at the moment. But I would caution inexperienced investors about taking on some of the yields that we’re seeing currently. Trailing yields count for nothing. That’s the first thing. You need to look at forecast yields.

MF: Are there any ASX dividend shares you currently hold that stand out from the crowd?

RST: Coronado Global Resources Inc (ASX: CRN), which is in our portfolio for yield. They have tier-one assets, long-life mines, a good mix between Australia and the US, and a high-quality product (85% to 90% met coal).

If you look at where Whitehaven Coal Ltd (ASX: WHC) is, for example, and you look at where Coronado is, Whitehaven is producing fewer tonnes and lower grade, and it’s trading at a huge premium to Coronado. So, I think we’ll see some equalisation there at some point.

On 31 October, they announced a 13 US cent special dividend, which is 20 [Aussie] cents, which is over a 10% yield as an interim special, just off the bat.

We think Coronado could pay an average of 35% in dividends over three years. So it pays itself back in three years. But we also think over that time, as the coal price comes off, we could see the capital side of it depreciate by 40% to 50%. So in our base case, we’re going to see between 70% and 100% in dividends over the next three years and maybe a 40% to 50% capital loss. What is the end result of that?

It looks something like 30% to 40% yield, net, over that time frame, so 10% to 15% per annum net. That probably still makes sense.

But it’s not for inexperienced investors. You really do have to be watching a number of drivers. Obviously, watching the met and thermal coal prices closely. And also some more subtle drivers in terms of what we’re seeing in markets that give an indication of where prices are going.

MF: Any other ASX dividend shares you’re bullish on?

RST: South32 Ltd (ASX: S32) is another example. We always say it has tier-one assets in tier-two commodities. But some of those tier-two commodities are coming back into their own in terms of electrification and decarbonisation.

I think they’ve been one of the best companies in terms of capital management. They’ve run the longest continuous buyback in our stable, which we love to see. We don’t like to call it a buyback, we call it a buy-and-back. Management is buying and backing themselves.

Now, some of their commodity prices have come off a bit, and they do run the risk at the moment of some downgrades in the coming months. But I think through the cycle, from these prices, you’re not paying a premium as you are with some of the other resource plays.   The stock price has retraced significantly.

And Woodside Energy Group Ltd (ASX: WDS) is another example. They’re really executing well at the moment.

But people have to understand that there will be a capital loss amongst these ASX dividend shares at some point. They need to take that into the equation when working out what the real net yield will be.

MF: ASX coal shares have been making headlines for their outsized revenues amid record coal prices in 2022. There is a range of forecasts for both metallurgical and thermal coal prices heading into 2023. Do you have an in-house view of where prices are heading?

RST: Yes, the met coal price has been extraordinary. It went down below US$120 per tonne, then it briefly ran up above US$600. Now it’s back at US$320 per tonne on the spot market.

We differentiate the two coals, so met coal and thermal coal.

Met coal, we see it has to have some appreciation and thermal coal some depreciation They have to normalise. In 30 years of following markets, I’ve never seen the met coal price sustainably below the thermal coal price as we’re seeing at the moment.

We’re starting to see that normalise. We’ll see some substitution. At least 10% to 20% of the met coal can be substituted for thermal coal in the markets with the right adjustments and the right time frame.

We’ll see the thermal coal price come back, and we’ll see the met coal price appreciate. In fact, we’re seeing that already.

Secondly, you have to understand we have drawn a line in the sand. Russian gas is not coming back into the European market anytime in the next few years, if at all. The war could literally end tomorrow, but Europe is not going back to Russian energy. That ship has sailed. In the short term, thermal coal is the only way to replace those energy molecules.

I definitely see coal being stronger for longer. Is it US$350 per tonne? Probably not. Is it US$250 or US$200 per tonne for thermal, possibly. But that’s still incredible prices for thermal coal. I think we’ve got some runway on some of the thermal coal plays.

MF: Any particular dividend-paying ASX coal shares that look strong to you?

RST: For example, Yancoal Australia Ltd (ASX: YAL). It’s not without risk. But Yancoal, on our numbers, generated 25% of its market capitalisation in free cash flow last quarter. They’re not doing it just at the moment, but when they turn their attention to capital management,  it could be very substantial..

***

Tune in tomorrow for part three of our interview with Romano Sala Tenna. If you missed part one, click here.

(You can find out more about the Katana Australia Equity Fund here.)

The post Why these 4 ASX dividend shares stand out from the crowd: fund manager appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Amidst the ongoing tech stock wreck, value shares are everywhere. There’s just one catch…
• Don’t panic! Here are 7 reasons we can avoid a recession: AMP
• Why is the Woodside share price being whittled away today?
• Here are the 3 most traded ASX 200 shares on Wednesday

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 Thursday, the S&P/ASX 200 Index (ASX: XJO) was out of form and dropped into the red. The benchmark index fell 0.5% to 6,964 points.

Will the market be able to bounce back from this on Friday and end the week on a high? Here are five things to watch:

ASX 200 expected to jump

The Australian share market looks set to end the week with a very strong gain after US inflation came in softer than expected. According to the latest SPI futures, the ASX 200 is expected to open 141 points or 2% higher this morning. In late trade in the United States, the Dow Jones is up 3.2%, the S&P 500 has risen 4.7%, and the Nasdaq has stormed 6.3% higher.

Oil prices rise

Energy shares Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a decent finish to the week after oil prices pushed higher overnight. According to Bloomberg, the WTI crude oil price is up 1.3% to US$86.96 a barrel and the Brent crude oil price is up 1.6% to US$94.12 a barrel. Oil prices rebounded on the inflation news.

Xero remains a buy

The Xero Limited (ASX: XRO) share price was sold off on Thursday after the company’s half year earnings fell short of expectations and its CEO quit. Goldman Sachs sees this as a buying opportunity and has reiterated its buy rating with an improved $115.00 price target. Goldman was pleased with Xero’s exit ARPU metric.

Gold price jumps

Gold miners including Newcrest Mining Ltd (ASX: NCM) and St Barbara Ltd (ASX: SBM) could have a positive end to the week after the gold price jumped overnight. According to CNBC, the spot gold price is up 2.35% to US$1,754.60 an ounce. Traders were buying gold on the belief that the US Federal Reserve would slow its interest rate hikes following the inflation reading.

Breville named as a buy

The Breville Group Ltd (ASX: BRG) share price could be in the buy zone according to Goldman Sachs. Its analysts have reiterated their buy rating with a $24.70 price target following the appliance maker’s trading update. Goldman said: “We reiterate our Buy rating for BRG as we believe the business remains defensive with >60% of sales exposed to US and APAC regions where demand remains resilient to date.”

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

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More reading

• Here are the top 10 ASX 200 shares today
• Guess which ASX ETF is up 13% so far this week?
• Amidst the ongoing tech stock wreck, value shares are everywhere. There’s just one catch…
• Here are the 3 most traded ASX 200 shares on Thursday
• Don’t panic! Here are 7 reasons we can avoid a recession: AMP

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 Xero. The Motley Fool Australia has positions in and has recommended Xero. 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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