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The Insurance Australia Group Ltd (ASX: IAG) interim dividend announced last month was 67% higher than last year, at 10 cents per share.

That’s some very nice turbocharged passive income, right there.

And analysts say it’s only going to get better from here.

IAG dividend trajectory

So, IAG investors will be receiving their 10 cents per share on 27 March.

What’s next?

Well, consensus expectations published on CommSec today are for IAG to pay a total dividend of 25 cents in 2024. That means the final dividend, to be announced in August, should be about 15 cents per share.

Last year, 15 cents was what IAG paid in dividends for the entire year. So, you get the drift. IAG dividends are on the increase.

Based on the IAG share price of $6.23 at the time of writing, a total dividend of 25 cents this year would equate to a dividend yield of 4%.

This is nothing spectacular — 4% is the average dividend yield for S&P/ASX 200 (ASX: XJO) stocks.

But we need to remember that the IAG share price has had a significant run-up of late. Over the past 12 months, it’s up 30%. That sort of price growth is obviously going to lower the yield.

What about future IAG dividends?

The consensus forecast is for IAG to pay a total annual dividend of 30 cents in 2025 and 32 cents in 2026. That means yields of 4.8% and 5.1%.

That’s better!

And don’t forget about the franking on top. In 2023, the annual dividend had 30% franking attached. The recent interim dividend for 2024 had 40% franking attached.

Should you buy?

After 30% share price growth, some investors might like to wait for the next pullback in price.

To give you some guidance, the consensus rating is currently a hold. The rating was downgraded from a moderate buy this week.

Goldman Sachs has a 12-month share price target of $6 on IAG shares. So, the broker reckons IAG shares are already trading above value today.

Over to you.

The post Here’s the IAG dividend forecast through to 2026 appeared first on The Motley Fool Australia.

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More reading

• Passive income watch: The ASX stocks dishing out the biggest dividend boosts this earnings season
• IAG shares go ex-dividend tomorrow: Should you buy now?
• Why Inghams, IAG, Neuren Pharmaceuticals, and Pro Medicus shares are sinking today
• IAG share price sinks 6% despite huge dividend boost and buyback
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Bronwyn Allen 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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It has been another busy week for Australia’s top brokers. This has led to the release of a number of broker notes.

Three broker buy ratings that you might want to know more about are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

DroneShield Ltd (ASX: DRO)

According to a note out of Bell Potter, its analysts have upgraded this counter drone technology company’s shares to a buy rating and 90 cents price target. The broker made the move on valuation grounds after a sharp pullback in recent sessions dragged its shares down to an attractive level. The Droneshield share price is trading at 62 cents on Friday.

Megaport Ltd (ASX: MP1)

A note out of Citi reveals that its analysts have retained their buy rating and $16.80 price target on this network services provider’s shares. As well as being very impressed with its first half performance, the broker believes recently announced actions will be supportive of growth in the Australian market. Particularly given that there are signs of increasing demand for global WAN solutions locally. The Megaport share price is fetching $15.17 this afternoon.

Viva Energy Group Ltd (ASX: VEA)

Analysts at Macquarie have retained their outperform rating on this fuel retailer’s shares with an improved price target of $4.70. The broker has made some site visits recently and came away feeling very positive on its proposed acquisitions. And thanks to higher fuel margin assumptions, the broker has boosted its future earnings estimates and lifted its valuation accordingly. The Viva Energy share price is trading at $3.50 on Friday.

The post Brokers name 3 ASX shares to buy now appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• DroneShield share price down 36% in 6 days. Should you buy the dip?
• Why DroneShield, Magellan, Platinum, and Zip shares are rising today
• Why DroneShield, Healius, Newmont, and Paragon Care shares are pushing higher
• Why this leading broker just upgraded DroneShield shares

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 DroneShield, Macquarie Group, and Megaport. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Megaport. 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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Is Ampol Ltd (ASX: ALD) an S&P/ASX 200 Index (ASX: XJO) stock that should be on more investors’ radars?

Ampol shares have lifted by 16% in the past four months, which is a solid rise. The ASX 200 has risen by 12% over the same time period, so the energy company has outperformed the index by 4%.

Ampol describes itself as Australia’s leading transport energy provider – it used to be known as Caltex Australia. The company supplies Australia’s largest branded petrol and convenience network, as well as refining, importing and marketing fuels and lubricants. It also recently launched its electric vehicle charging solutions.

Ampol operates 16 terminals, six major pipelines, 55 ‘wet’ depots and more than 1,800 branded sites (with 690 company-operated sites).

Expert thoughts on the FY23 result

The broker UBS described Ampol’s 2023 full-year result as “solid”, with a special dividend (of 60 cents per share) slightly ahead of what the market was expecting.

After returning $1.3 billion to shareholders at a dividend payout ratio (including special dividends) of 89% of RCOP net profit after tax (NPAT) in FY22 and FY23, UBS thinks investors will be focused on the sustainability of the capital return. The company’s guidance for FY24 and FY25 capital expenditure is approximately 30% higher than what the market (consensus) was expecting.

UBS believes Ampol’s balance sheet has the capacity to absorb higher costs, with debt levels remaining below its target range, despite the increase in capital expenditure.

The broker has forecast “fairly resilient” group earnings before interest and tax (EBIT) for the ASX 200 stock despite higher capital expenditure at the refinery, as well as investments in lower-returning assets like electric vehicle charging. However, this may challenge the sustainability of the capital return over the next few years.

Even though there has been cost-of-living pressures and falling tobacco sales, Ampol’s convenience retail division has “held up” thanks to a shift of sales to higher-margin products. It’s forecasting flat convenience EBIT between 2023 to 2027 as fuel margins normalise.

Is the Ampol share price a buy?

UBS reduced its earnings per share (EPS) forecast for 2024 by 8% and increased its 2025 EPS forecast by 11%, having brought forward the Lytton turnaround.

UBS has a neutral rating on Ampol shares, with a price target of $34.40, suggesting the Ampol share price could fall by around 10% over the next year.

The ASX 200 stock is valued at under 14x FY24’s estimated earnings, according to UBS’ numbers.

The post Is this surging ASX 200 stock an under-the-radar buy? appeared first on The Motley Fool Australia.

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More reading

• ASX 200 soars to another new all-time high on Friday!
• 13 ASX 200 shares with ex-dividend dates next week
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Thursday

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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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to close the week at a record high. At the time of writing, the benchmark index is up 0.8% to 7,827.3 points.

Four ASX shares that are rising more than most today are listed below. Here’s why they are climbing:

Judo Capital Holdings Ltd (ASX: JDO)

The Judo Capital share price is up 4% to $1.34. This may have been driven by a broker note out of Goldman Sachs yesterday. It put a buy rating and $1.66 price target on the bank stock. Goldman said: “We think the market’s skepticism around the at-scale NIM focuses on the lending spread assumption of mid-4%, given the 1H24 spread was <4%.”

Paladin Energy Ltd (ASX: PDN)

The Paladin Energy share price is up 5% to $1.26. This is despite there being no news out of the uranium miner today. However, it is worth noting that most ASX uranium shares are racing higher today. Investors may believe recent weakness in the industry has created a buying opportunity.

Virgin Money UK (ASX: VUK)

The Virgin Money share price is up 33% to $4.08. Investors have been buying the UK-based bank’s shares after it received a takeover offer. Nationwide Building Society has tabled an offer of 220 British pence per share. This equates to $4.26 per share based on current exchange rates and values the bank at approximately $5.7 billion.

WA1 Resources Ltd (ASX: WA1)

The WA1 Resources share price is up 2% to $13.20. This morning, analysts at Bell Potter initiated coverage on the niobium explorer’s shares with a speculative buy rating and $17.65 price target. The broker believes the company’s “Luni [deposit] has the potential to be a globally significant Tier-1 asset characterised by its high-grade and scale.”

The post Why Judo, Paladin Energy, Virgin Money, and WA1 shares are racing higher appeared first on The Motley Fool Australia.

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More reading

• Virgin Money share price pops 34% on takeover bid
• Bell Potter just slapped a buy rating on this ASX mining stock
• Forget CBA and buy this ASX bank stock for big returns
• What Dutton’s nuclear push could mean for ASX uranium shares
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Judo Capital. 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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Block Inc (ASX: SQ2) shares are marching higher again today.

Shares in the global S&P/ASX 200 Index (ASX: XJO) buy now, pay later (BNPL) stock – which acquired Afterpay in January 2022 – closed yesterday trading for $115.78. During the Friday lunch hour, shares are swapping hands for $116.89 apiece, up 1.0%.

That sees Block shares up a whopping 92.5% since the closing bell sounded on 31 October!

For some context, the ASX 200 (breaking into new all-time highs today) is up 15.4% over this same period.

Here’s what’s been piquing ASX 200 investor interest.

What’s boosting Block shares?

The ASX 200 BNPL stock is getting some tailwinds today as investors are increasingly optimistic about the outlook for interest rate cuts, both in Australia and in the United States.

The case for a rate cut from the RBA was bolstered earlier this week when the ABS released some very lacklustre growth figures for the Aussie economy.

And in the US, Fed chair Jerome Powell said that while the world’s top central bank was still “waiting to become more confident that inflation is moving sustainably at 2%… we’re not far from it”.

Block shares, like other BNPL stocks, have proven to be particularly sensitive to higher interest rates. Powell’s dovish words helped Block’s US listed stock close up 2.2% on the New York Stock Exchange (NYSE) overnight.

The big rally for Block really kicked off in early November. That’s when the company boosted its guidance and announced cost cutting measures, including staff reductions.

And the rally picked up pace again on 23 February, when the BNPL company reported its fourth quarter results.

Highlights included a 24% year on year increase in net revenue to US$5.77 billion. And gross quarterly profit of US$2.03 billion was up 22% from Q4 2022.

The fast-rising Bitcoin (CRYPTO: BTC) price also bolstered the bottom line. Block’s Bitcoin gross profit increased 90% year on year to $66 million.

That could be helping Block shares with their ongoing gains this week.

According to data from CoinMarketCap, Bitcoin reached an all-time high on Wednesday of US$69,170.63. It’s still hovering near that record, with the world’s top crypto currently valued at U$67,173.56.

Have you been following along?

Every month the Motley Fool’s analysts scour the boards for top stock picks.

And Block made that list last month.

Motley Fool analyst Tony Yoo tipped Block shares to outperform back on 10 February. At the time the stock was valued at $105.19, 11.1% below current levels.

“The financial services company is on the way up after cleaning up its act in recent months,” Yoo said.

He added:

Management has cut costs, reduced staff share issuances, and generally placed a greater emphasis on cash flow. The revival in the Bitcoin price has helped too, with co-founder Jack Dorsey a firm believer in cryptocurrencies.

The post Up 93% since October, why are Block shares marching ahead again on Friday? appeared first on The Motley Fool Australia.

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More reading

• 6 ASX shares to buy and hold until the next leap year
• Here are the top 10 ASX 200 shares today
• Why these 4 ASX 200 shares grabbed the Motley Fool’s headlines this week
• Here are the top 10 ASX 200 shares today
• Why are ASX tech shares booming on Friday?

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Block. The Motley Fool Australia has positions in and has recommended Bitcoin and Block. 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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Income investors looking for high yields have to navigate a difficult tightrope – determining whether high-yielding dividend stocks are safe ASX shares.

The market is, at the end of the day, a mechanism that investors use to price risk against reward. A company trading with a relatively high dividend yield is often doing so because investors are pricing in a risk that the yield isn’t sustainable going forward.

Many novice dividend investors get caught out thinking that if they buy a dividend stock with a 9% dividend yield, they are buying a safe ASX share and are set to receive that yield year in and year out going forward. Imagine their dismay when the company announces in its next earnings that its dividends are getting cut or even suspended.

Remember, there’s no such thing as a truly safe ASX share or a guaranteed dividend.

So today, let’s talk about three ASX shares that are currently offering dividend yields of more than 5% today. We’ll discuss whether these are safe ASX shares to buy for income investors, or yield traps that might lose you money going forward.

Are these 3 ASX dividend shares safe, or are they traps?

Woodside Energy Group Ltd (ASX: WDS)

At current pricing, ASX 200 energy stock Woodside is trading on a trailing dividend yield of 7.19%. That dividend yield comes fully franked too. So this is a potentially big chunk of change we’re talking about here.

So can investors buy Woodside shares today and expect a 7% cash return on their investment every year? Probably not. Like miners and commodity shares, the profitability of any energy stock is almost entirely dependent on the price of crude oil (and gas if applicable).

If oil prices begin climbing over the coming weeks and months, Woodside might indeed match its previous payouts and remain a 7%-yielder. But if oil prices fall, investors can expect Woodside’s dividends to fall just as quickly.

Indeed, the company’s recently announced final dividend of 60 US cents per share represents a 58% reduction on last year’s equivalent payout. If the interim dividend is cut by a similar amount later this year, Woodside won’t be trading on a 7% yield for too long. Unless its share price drops, of course.

I’m not saying that investors won’t enjoy meaningful dividend income from Woodside shares going forward. I just think that you can’t buy this company’s shares today with the expectation of a 7.19% yield every year.

ANZ Group Holdings Ltd (ASX: ANZ)

Next up is ASX 200 bank ANZ. Income investors have long loved ASX bank shares. And for good reason. Today, ANZ shares are displaying a trailing dividend yield of 5.92%. That comes with full franking credits to boot.

It wasn’t that long ago that ANZ shares’ dividend yield was above 6%, but a rising share price has remedied that at present.

So is ANZ a safe ASX share for income investors?

Well, this is also a tricky question to answer. The dividends from ASX banks tend to be a little cyclical too. Not as much as energy shares, mind you. But bank profits tend to rise and fall in line with what’s happening in the broader economy.

Saying that, I think investors can buy ANZ shares today with a reasonable expectation of at least a 5.92% dividend yield going forward. The bank is well capitalised, with a relatively low (for a bank anyway) dividend payout ratio.

I also take note of what ASX broker Ord Minnet has projected when it comes to ANZ. As my Fool colleague covered this week, the broker has predicted modest dividend rises from ANZ shares over the next two financial years. If accurate, that bodes very well for income investors indeed.

WAM Capital Ltd (ASX: WAM)

Finally, let’s talk about listed investment company (LIC) WAM Capital. WAM Capital is a favourite of many income investors due to its history of providing large and fully franked dividends to investors. At current pricing, WAM Capital shares are trading on a monstrous trailing dividend yield of 9.42% (fully franked).

However, this is the company that I hold the most scepticism on this list about being a safe ASX share for income investors.

For one, WAM Captial hasn’t raised its dividend in six years. It has paid an annual 15.5 cents per share every year since 2018. Further, its most recent update tells us that the company has only 13 cents per share in its dividend profit reserve. And that’s before the next payout (worth 7.75 cents per share) is due to be rolled out next month.

That doesn’t look safe to me.

In addition, the WAM Capital share price has lost around 27% of its value over the past five years. All up, this is the exact opposite of what I would call a safe ASX share for income investors (or any investor).

The post 3 ASX dividend shares with yields above 5% (but are they safe?) appeared first on The Motley Fool Australia.

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More reading

• 2 of the best ASX dividend stocks to buy in March
• Why Camplify, Platinum, Rio Tinto, and Woodside shares are dropping today
• Why are the big 4 ASX 200 bank shares leaping to new 52-week highs today
• What is dragging the Woodside share price lower today?
• Buy these ASX dividend stocks with yields of 5% to 7.5%

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 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 S&P/ASX 200 Index (ASX: XJO) is scaling new heights on Friday. In afternoon trade, the benchmark index is up 0.9% to a record high of 7,835 points.

Four ASX shares that are missing out on the good times today are listed below. Here’s why they are falling:

Cettire Ltd (ASX: CTT)

The Cettire share price is down 3% to $3.89. This ecommerce company’s shares have come under pressure this week amid heavy insider selling and a scathing media report. While the company refuted some of the latter’s claims, the negative shopping experiences reported by some users may concern investors.

GQG Partners Inc (ASX: GQG)

The GQG share price is down 1.5% to $2.20. This follows news that Pacific Current Group Ltd (ASX: PAC) has offloaded its stake in the company. PAC has sold almost 120 million shares at a 3.6% discount of $2.16 per share. This equates to a total consideration of $257.3 million.

Mesoblast Ltd (ASX: MSB)

The Mesoblast share price is down 5% to 32.2 cents. This is despite there being no news out of the biotechnology company today. However, with its shares rising strongly in recent weeks, it’s possible that some investors are taking profit today. Mesoblast shares remain up over 17% since this time last month despite today’s weakness.

Nine Entertainment Co Holdings Ltd (ASX: NEC)

The Nine Entertainment share price is down almost 2% to $1.63. This has been driven by the media company’s shares going ex-dividend this morning for its latest dividend. Last month, Nine Entertainment released its half-year results and declared a fully franked interim dividend of 4 cents per share. This will now be paid to eligible shareholders next month on 18 April.

The post Why Cettire, GQG, Mesoblast, and Nine Entertainment shares are falling today appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Up 7%: This All Ords stock reported some big ASX news today
• Cash kings: 2 top ASX dividend shares that pay quarterly
• Cettire shares recover after morning meltdown: What’s happening?
• Why Accent, Cettire, Dicker Data, and Iress shares are dropping today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Cettire and Nine Entertainment. 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 is pushing higher again on Friday, but the same cannot be said for Lake Resources N.L. (ASX: LKE) shares.

The lithium developer’s shares are out of action today after the company requested a trading halt before the market open.

Why are Lake Resources shares in a trading halt?

The trading halt is quite simply because Lake Resources needs money.

During the last quarter, Lake Resources recorded an operating cash outflow of $18 million. This left it with a cash and cash equivalents balance of $31.3 million at the end of December.

And while the company has announced cost cutting measures recently, clearly it is running out of money fast and needs a top up.

So, with its shares up over 40% since early February, management appears to believe that now is the time to rattle the tin.

The company’s trading halt request states the following:

[T]he Company provides the following information: 1. the trading halt is requested pending the release of an announcement by a Company (sic) regarding a potential capital raising (Announcement); 2. the Company requests that the trading halt remain in place until the earlier of the commencement of normal trading on 12 March 2024 or upon the release of the Announcement.

What remains unclear is how much the company is seeking to raise and if its trading halt request has a typo or whether there’s a third-party involved.

One thing that we do know is that Lake Resources will need a huge cash injection if it is ever going to get its Kachi operation off the ground.

In December, it revealed that its estimated initial capex for phase one was US$1.38 billion. And as we have covered here previously, it comes with highly questionable economics.

So, it certainly would take a brave investor to tip money into the company at this point.

Lake Resources shares are down 82% over the last 12 months.

The post Why are Lake Resources shares in a trading halt? appeared first on The Motley Fool Australia.

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More reading

• Why Cettire, Fletcher Building, Lake Resources, and Nick Scali shares are falling today
• Down 80% in a year why are Lake Resources shares tumbling again today?
• Down 7%: What’s gone so wrong for Lake Resources shares today?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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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A tiny ASX mining share is soaring on Friday after announcing a joint venture (JV) agreement with S&P/ASX 200 Index (ASX: XJO) mining giant Fortescue Metals Group Ltd (ASX: FMG).

The junior ASX miner closed yesterday trading for 4.5 cents. In early morning trade shares were swapping hands for 8.0 cents apiece, up 77.8%. After some likely profit taking, shares are trading for 6.9 cents at time of writing, up 53.3%.

Any guesses?

If you said Magmatic Resources Ltd (ASX: MAG), go to the head of the virtual class.

Here’s what’s happening.

Magmatic Resources share price leaps on Fortescue deal

The Magmatic Resources share price is rocketing after the ASX mining share reported it had executed a Farm-in and JV agreement with Fortescue subsidiary FMG Resources Pty Ltd.

The agreement will see Fortescue join Magmatic in exploring the Myall copper-gold project, located in New South Wales. The Myall Project consists of a contiguous 244 square kilometre tenement covering the northern extension of the Junee-Narromine Volcanic Belt.

Fortescue will spend up to $14 million under the agreement to earn up to 75% joint venture interest in the project.

Magmatic Resources will be the operator of the project during the initial Farm-in period of up to four years.

Fortescue will subscribe for 75,946,151 shares in Magmatic Resources. That will see Fortescue holding a 19.9% stake in the junior ASX mining share. Fortescue will pay 4.884 cents per share, which will raise just over $3.7 million for Magmatic Resources.

Magmatic Resources said it will deploy the funds to advance its two other projects in parallel with Myall.

Commenting on the agreement with Fortescue sending the ASX mining share rocketing today, Magmatic Resources executive chairman David Richardson said:

Myall has many of the signatures of a Tier 1 copper-gold deposit and Magmatic has recognised the need to partner with a major to further advance the project following the maiden Resource.

Fortescue’s cornerstone investment in MAG will allow the Company to simultaneously advance our other two projects at Wellington North and Parkes which are strategically located near Alkane Resources Boda-Kaiser deposits and Tomingley Gold Operations respectively.

How has the ASX mining share been tracking?

With today’s intraday gains factored in, the Magmatic Resources share price is down 20% over the past 12 months.

The ASX mining share has soared 130% since the recent 26 February lows.

The post Guess which ASX mining share is rocketing 78% on a JV agreement with Fortescue appeared first on The Motley Fool Australia.

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• Here’s the Fortescue dividend forecast through to 2026
• Investing in an ASX share portfolio for lifelong passive income!
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• Passive income watch: The ASX stocks dishing out the biggest dividend boosts this earnings season
• A 22% yield on Fortescue shares? Here’s how these passive income investors achieved it!

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

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The Virgin Money UK (ASX: VUK) share price is taking off on Friday.

In morning trade, the UK-based banking stock is up 34% to $4.12.

Why is the Virgin Money share price rocketing?

Investors have been scrambling to buy the bank’s shares today after it received a takeover offer.

According to the release, the company has reached a preliminary agreement with Nationwide Building Society on a potential cash takeover.

Nationwide has tabled an offer of 220 British pence per share. This equates to A$4.26 per share based on current exchange rates and values the bank at approximately $5.7 billion.

The offer comprises a 218 British pence per share cash consideration and a 2 British pence per share dividend. The latter would be paid shortly before the completion of the potential takeover.

Eligible shareholders will also continue to receive the upcoming dividend of 2 British pence per share, which is scheduled to be paid on 20 March.

Takeover rationale

The boards of Virgin Money and Nationwide believe that the deal would combine two complementary businesses.

They highlight that it would create a combined group with total assets of approximately GBP366.3 billion pounds and total lending and advances of approximately GBP283.5 billion. This would make it the second largest provider of mortgages and savings in the UK.

The Virgin Money UK board revealed that it carefully evaluated the offer with its financial advisers and concluded that it would be willing to recommend it if a firm offer is made on the same financial terms.

Virgin Money UK’s chair, David Bennett, commented:

The Board of Virgin Money is pleased that Nationwide recognises the considerable strengths and opportunities that exist across our business, with the potential acquisition delivering attractive value for our shareholders. We are confident that a combination would support an exciting new chapter for Virgin Money to benefit from Nationwide’s scale and ambition.

This sentiment was echoed by the bank’s CEO, David Duffy. He said:

This potential transaction with Nationwide represents an exciting opportunity to build on the significant progress we have made in becoming the only new Tier 1 bank in recent history. The combined scale and strength would expand our customer offering and complete our journey in the banking sector as a national competitor.

However, the bank has warned that there’s no certainty that any firm offer will be made.

The post Virgin Money share price pops 34% on takeover bid appeared first on The Motley Fool Australia.

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More reading

• 7 ASX 200 shares with ex-dividend dates next week

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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