Tag: Motley Fool

The Vicinity Centres (ASX: VCX) share price is still 25% lower than its pre-COVID high, as we can see on the chart below. Could the ASX dividend stock be an undervalued investment opportunity?

The real estate investment trust (REIT) owns a portfolio of property centres across Australia, with a stated $23 billion of retail assets under management (AUM) across 59 shopping centres.

Its assets include local shopping centres and DFOs across the country and 50% of Australia’s largest mall, the Chadstone Shopping Centre in Melbourne, Victoria.

There are two key reasons why I like this business.

Solid passive income yield

One vital financial metric for a REIT is the adjusted funds from operations (AFFO), which is essentially the net rental profit.

Vicinity Centres’ distribution payout ratio target range is between 95% and 100% of AFFO, which can create a good distribution yield.

The business expects its AFFO per security to be at the top end of its guidance range between 11.8 cents and 12.2 cents per security. In the FY24 first-half result, it paid a distribution of 5.85 cents.

According to Commsec, the ASX dividend stock is predicted to pay a distribution of 11.7 cents per security in FY24. This translates into a forward distribution yield of around 6%. By FY26, it’s predicted to pay a distribution per security of 12.5 cents, which would be a yield of 6.25%.

The payout could increase in FY25 and FY26 — and growing passive income is one of the main things I look for when choosing ASX dividend shares.

Limited real estate

Australia’s cities continue to grow, and the number of shoppers keeps increasing, but there isn’t any more space in suburban locations for large shopping centres to be built.

Of course, there’s a danger that e-commerce could challenge the relevance of physical retail stores.

In its FY24 half-year update, Vicinity Centres said that its occupancy rate increased to 99.1%, with a leasing spread (rental increase) of 3.3%, so the lease metrics are still attractive.

I think many retailers will still want a physical presence in the future, even if e-commerce plays a bigger role. Shopping centre spaces could be used for purposes beyond retail, such as education, entertainment, and so on. The underlying land also has a lot of value.

Vicinity Centres reported its net tangible assets (NTA) was $2.29 at December 2023, so the Vicinity share price is at a 13% discount to this.

In addition, the ASX dividend stock is spending hundreds of millions of dollars in the next few years to improve and expand some of its existing assets, which will lead to a boost in rental profits once those projects are finished.

Foolish takeaway

If the rental income can keep growing, then I think Vicinity Centres could be a compelling pick for the long-term with the ASX dividend stock’s irreplaceable shopping centres, including the excellent Chadstone Shopping Centre asset.

The post 1 ASX dividend stock down 25% to buy right now appeared first on The Motley Fool Australia.

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More reading

• Here’s how the ASX 200 market sectors stacked up last week
• 13 ASX 200 shares at 52-week highs

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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Westpac Banking Corp (ASX: WBC) shares have been on form so far in 2024.

Since the start of the year, the banking giant’s shares have rallied 15% and now trade at $26.39.

This means that a $20,000 investment on the final trading day of 2023 would now be worth approximately $23,000 today.

The good news for shareholders is that one leading broker believes that the shares of Australia’s oldest bank could still be undervalued.

This could mean that there’s still room for them to climb from where they trade today.

Broker says Westpac shares are undervalued

According to a recent note out of Ord Minnett, its analysts think the market is being too negative on Westpac.

The broker believes that rational competition in home loans and customer deposits is on the way and that Westpac stands to benefit more than most.

In light of this, its analysts feel that investors should be focusing less on the near term and more on the medium when it comes to Westpac and its shares. They explain:

As margins shrink and bad debts creep higher, earnings growth will be challenging for the Australian banks in the short term, but the current share price paints too bleak a picture on the medium-term earnings power of Westpac, in our view. Over the next five years, we assume rational competition returns for pricing loans and customer deposits.

This should be good news for Westpac. The broker explains:

As the second-largest lender and deposit holder, Westpac should be a willing participant as it stands to benefit materially. Most Australian banks, excluding Commonwealth Bank, face single digit return on equity in FY24, compared with our assumed 9% cost of equity, supporting our view that current loan and deposit price competition is unlikely to persist indefinitely.

As a result, Ord Minnett feels that the bank’s shares are undervalued at current levels. It adds:

Shares in Westpac are undervalued compared with our unchanged $28 fair value estimate.

Double-digits returns to come

With that in mind, based on its current share price of $26.39, Ord Minnett’s valuation represents potential upside of 6.1% before dividends.

As for dividends, the broker is forecasting fully franked dividends of $1.45 per share in FY 2024 and then $1.50 per share in FY 2025. This equates to dividend yields of 5.5% and 5.7%, respectively, for investors over the next couple of years.

In total, this means that the broker sees scope for a total return of approximately 11.6% for investors between now and this time next year.

The post Are Westpac shares undervalued by the market? appeared first on The Motley Fool Australia.

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More reading

• Do Westpac dividends still beat money in a term deposit?
• Here are the top five ASX 200 stocks in Macquarie’s model income portfolio
• After leaping to 52-week highs in March, what’s next for the Westpac share price?
• I’d spend $8k on these ASX 200 shares today to target a $6,102 annual passive income
• Are Westpac shares a buy following the bank’s big tech update?

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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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BHP Group Ltd (ASX: BHP) stock is best known for its iron ore operations.

And for good reason.

For the half year through to 31 December, the S&P/ASX 200 Index (ASX: XJO) mining giant reported producing 129 million tonnes of the industrial metal, selling this for an average realised price of US$103.70 per wet metric tonne.

Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) from BHP’s iron ore division for the six months came in at US$9.7 billion.

But with copper prices surging in 2024, BHP stock’s copper operations have been drawing increasing interest.

For its half-year results (achieved at significantly lower copper prices than today), BHP reported producing 894,000 tonnes of copper and selling it for an average realised price of US$3.66 per pound.

That saw copper deliver underlying EBITDA for the six months of US$3.5 billion.

Copper adding shine to BHP stock outlook

BHP has been upping its copper production, with its Escondida mine in Chile increasing half-year output by 3% to 528,000 tonnes of copper.

And according to Bloomberg Intelligence analyst Grant Sporre, this ramp-up could see BHP stock unseat Chilean state-owned copper mining company Codelco as the world’s number one copper producer.

That forecast is subject to ongoing production ramp-up at Escondida.

Sporre expects the ASX 200 miner will produce 1.44 million tonnes of copper for the year, outpacing his expectations of 1.41 million tonnes of the red metal from Codelco.

And this could come at an opportune time for BHP stockholders, who’ve watched the share price struggle amid a slumping iron ore price this year.

Unlike iron ore, the price of copper has increased more than 10% so far in 2024. It is currently trading for US $9,418 per tonne.

And the red metal could continue to run hot.

Demand for copper on the up

According to Citi analysts, demand is only set to grow, fuelled by copper’s critical role in the global electrification push atop new demand growth from the booming AI industry, which requires support from massive copper-hungry data centres.

Citi’s Global Head of Commodities Max Layton’s base case scenario (courtesy of The Australian) sees the copper price averaging US$10,000 per tonne in the December quarter and rising to US$12,000 per tonne by 2026.

However, he notes there could be a significantly higher increase in cyclical demand than assumed in his base case, which would offer some welcome tailwinds for BHP stock.

“Explosive price upside is possible over the next two-to-three years too, if a strong cyclical recovery occurs at any time,” Layton said.

In this case, the copper price could blow past US$15,000 per tonne or almost 60% above current levels.

The post How BHP stock could unseat the world’s top copper producer appeared first on The Motley Fool Australia.

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More reading

• Why top brokers say Rio Tinto stock is a better buy than BHP
• In this bull market, where are the bargain buys to be found?
• The BHP share price is down 12% in 2024. What’s next for the iron ore price?
• Why I’d confidently buy these 3 ASX blue-chips while others grow fearful
• The pros and cons of buying BHP shares right now

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 Australian Securities Exchange (ASX) is welcoming an AI exchange-traded fund (ETF) today.

Artificial intelligence has captured the hearts and minds of investors with the popularisation of chatbots and AI-generated imagery. The promise of a more productive, creative, and innovative future is taking the world by storm — boosting the fortunes of AI-relevant companies while doing so.

Today’s launch of the Global X Artificial Intelligence ETF (ASX: GXAI) gives Aussies another way to tap into the hot sector. So, let’s take a tour of the latest ETF to hit the ASX while the iron is hot.

What’s inside the ASX AI ETF?

The Artificial Intelligence ETF is the 36th exchange-traded fund in the New York-based provider’s lineup in Australia.

According to its website, this ASX AI ETF aims to invest in companies that “potentially stand to benefit from the further development and utilisation of artificial intelligence technology in their products and services, as well as in companies that provide hardware facilitating the use of AI for the analysis of big data”.

Furthermore, the fund’s goalpost is the Indxx Artificial Intelligence & Big Data Index. The aim is to give investors a return in line with this index. The thematic index that Global X will be tracking has increased 41.9% over the past year.

The all-important question: What will investors buy in a slice of the Global X Artificial Intelligence ETF?

Company	Net Assets (%)
Nvidia Corp (NASDAQ: NVDA)	3.96%
Meta Platforms Inc (NASDAQ: META)	3.62%
Netflix Inc (NASDAQ: NFLX)	3.43%
Amazon.com Inc (NASDAQ: AMZN)	3.20%
Qualcomm Inc (NASDAQ: QCOM)	3.05%
Tencent Holdings Ltd	3.03%
Oracle Corp (NYSE: ORCL)	2.99%
Samsung Electronics Co Ltd	2.96%
IBM Common Stock (NYSE: IBM)	2.93%
Salesforce Inc (NYSE: CRM)	2.93%

AI superstar Nvidia takes pole position in the ETF. The company, which has risen 77% in 2024 alone, is the largest by market capitalisation inside the fund. However, the weighting of positions is not based on market cap.

For instance, social media giant Meta (owner of Facebook and Instagram) has the second largest allocation. Yet, Jeff Bezos’ Amazon is roughly US$600 billion larger than Meta and is fourth on the list.

The ETF is actively managed and incurs a 0.57% management fee for being such. As a comparison, the ASX 300 tracking Vanguard Australian Shares Index ETF (ASX: VAS) charges a 0.07% management fee.

Shares in the ASX AI ETF are trading at $10.07 on the open.

The post What’s under the hood of the new AI ETF on the ASX? appeared first on The Motley Fool Australia.

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More reading

• How I’d invest my first $20k to target $5,000 a year from ASX dividend shares
• Guess which ASX mining stock is rocketing 15% on a new gold discovery
• NAB shares push higher on leadership changes
• Why this is my top Vanguard ETF to buy for the long-term
• How to earn $3,000 in passive income with less than $3,000 in savings

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Mitchell Lawler has positions in Meta Platforms. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Meta Platforms, Netflix, Nvidia, Oracle, Qualcomm, and Salesforce. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended International Business Machines. The Motley Fool Australia has recommended Amazon, Meta Platforms, Netflix, Nvidia, and Salesforce. 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 love the idea of living off passive income from ASX dividend shares.

Some ASX-listed companies aim to pay good dividends to shareholders each year, making them appealing cash flow prospects.

Below are three stocks I’d want in my portfolio if I were starting out with $20,000 and aiming to generate $5000 in annual dividends.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts is a diversified investment house that owns a variety of investments across a number of different industries. These include building products, property, credit, financial services, agriculture, swimming schools, healthcare and so on.

It has paid a dividend every year since listing in 1903. And it has grown its annual ordinary dividend each year since 2000 — the longest streak on the ASX. That’s not guaranteed to continue, but it shows the leadership’s desire to keep paying dividends.

Each year, Soul Patts harvests the investment cash flow its portfolio receives and sends some of the money to shareholders in the form of a larger dividend. With the retained cash flow, the ASX dividend share makes new investments to hopefully drive future dividend growth.

It currently has a grossed-up dividend yield of 3.8%.

GQG Partners Inc (ASX: GQG)

GQG is a fund manager headquartered in the United States. It aims for additional growth by expanding into other countries and using different investment strategies, such as dividend stocks.

The company charges minimal (if any) performance fees on most of its funds. Most of its revenue comes from management fees, so its funds under management (FUM) growth is essential.

In the latest update for March, GQG’s FUM rose from US$137.5 billion to US$143.4 billion, a strong rise in one month that makes it more likely the company’s dividend can grow in the short term.

In the three months to 31 March 2024, the ASX dividend share experienced net inflows of US$4.6 billion, meaning households and institutions gave GQG more money to manage.

If GQG keeps making good net returns within its investment funds and continues seeing net inflows, I think the dividend income will be strong. It targets a dividend payout ratio of 90% of distributable earnings.  

According to Commsec, it could pay a dividend yield of 7.6% in FY24.

Telstra Group Ltd (ASX: TLS)

Telstra is the leading telecommunications business in Australia, with the strongest market position and the largest network coverage.

The ASX dividend share’s huge subscriber base allows it to invest more in infrastructure than its rivals, enabling it to stay ahead of the competition. The more users, the more the infrastructure is being utilised, which can help improve the company’s efficiencies and margins.

Telstra’s lead in 5G could be important if it unlocks high-margin offerings like 5G-powered broadband to compete with the NBN (and take much of the broadband margin). 5G may also lead to new data connections/devices that haven’t been invented yet.

The Telstra board is using the company’s growing profit to pay bigger dividends. In FY24, it’s projected to pay a grossed-up dividend yield of 6.8%, according to Commsec.

Foolish takeaway

If we evenly split $20,000 between those three names, the average grossed-up yield would be just over 6%, creating $1,200 of annual income.

Then, a combination of company-initiated dividend increases, re-investment of dividends into more (ASX dividend) shares, and the introduction of new, saved money into my portfolio could help me grow it to $5,000 over time.  

If the portfolio grew at 10% per annum and kept a 6% dividend yield (and we allocated no new money), it would take 15 years to reach a $83,333 portfolio value and pay $5,000 of dividends per year.

If we added $500 per month to the portfolio, it could take less than seven years to reach $83,333.

The post How I’d invest my first $20k to target $5,000 a year from ASX dividend shares appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX 200 insider has bought $17 million of company shares before the ex-dividend date
• The best ASX buys I’d grab to beat the market without a tonne of risk
• 2 excellent ASX 200 retirement shares to buy now
• Better ASX stock: Woodside vs Telstra
• In this bull market, where are the bargain buys to be found?

Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Telstra Group and Washington H. Soul Pattinson and Company 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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St Barbara Ltd (ASX: SBM) shares are rising strongly again on Wednesday.

In morning trade, the ASX gold mining stock is up 15% to 26.5 cents.

This means that its shares are now up approximately 40% since this time last week.

Why is this ASX mining stock jumping again?

Hot on the heels of a solid production update at the end of last week, St Barbara has given its shareholders another reason to smile today with the release of a promising drilling update.

According to the release, all assay results have now been returned for the resource definition drilling of the Sorowar – Pigiput Trend portion of the 24 hole, 4,700 metre diamond drill program at the Simberi Operations in Papua New Guinea (PNG).

This means that assays results have now been received for all 15 of the resource definition diamond drill holes that will be incorporated in the upcoming mineral resource and ore reserve update in the fourth quarter.

Promisingly, the company highlights that exploration hole SDH542 intersected mineralisation between 80m and 165m similar to that observed in holes SDH525, 533 and 534, that all returned significant intercepts.

The ASX mining stock’s managing director and CEO, Andrew Strelein, also highlights encouraging results from hole SDH531. He said:

Hole SDH531 included 56 metres at 2.9 g/t Au from just 103 metres including 28 metres at 4.7 g/t Au. It is another broad intercept in the new mineralisation zone between Sorowar and Pigiput pits, but outside any current Mineral Resource. Hole SDH533, located in the valley and the southeasternmost of the holes drilled so far, has only recently been accessible for drilling after oxide mining progress in Sorowar pit and included 45 metres at 2.2 g/t Au from surface.

‘Very encouraged’

Strelein also notes that with the gold price at record levels, new areas of the operation are now looking like attractive targets. He said:

This is the first sulphide focused diamond drilling program at Simberi since 2011, apart from an RC drill program conducted at Sorowar only in 2019. We are very encouraged by the results so far. The gold price for Ore Reserve definition back in 2012 was just A$1,250 per ounce and many areas were unable to be drilled at that time because of difficult topography. We are getting positive results by applying more than 10 years of improvement in geological knowledge and targeting insufficiently drilled areas from drill pad locations now available because of more than 10 years of oxide mining.

Overall, recent developments appear to indicate that things are looking up for this ASX mining stock.

The post Guess which ASX mining stock is rocketing 15% on a new gold discovery appeared first on The Motley Fool Australia.

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More reading

• Why is this tiny ASX gold share soaring 10% on Friday?

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

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National Australia Bank Ltd (ASX: NAB) shares are pushing higher on Wednesday.

In morning trade, the banking giant’s shares are up 0.35% to $34.75.

Why are NAB shares rising?

This morning, NAB’s Chief Executive Officer Andrew Irvine announced a number of changes to its executive leadership team.

According to the release, effective Monday 29 April, Rachel Slade will be appointed group executive of business and private banking. Ms Slade is currently group executive personal banking.

On the same day, Ana Marinkovic will be appointed as Slade’s replacement as group executive personal banking. Ms Marinkovic is currently the executive of business direct and small business in the business and private banking team.

Furthermore, effective on 1 July, Cathryn Carver will be appointed group executive of corporate and institutional banking.

Ms Carver will be replacing David Gall, who has decided to leave NAB on 1 October after 16 years with the bank. This includes 10 years as an executive leadership team member. Ms Carver is currently the executive of client coverage in corporate and institutional banking.

‘Delighted’ with appointments

Irvine revealed that he is “delighted” that all the appointments were from within NAB’s senior leadership team. He believes this helps ensure alignment in delivering for the bank’s customers and colleagues. He also highlights that all three executives had a track record of helping customers succeed while getting the basics of banking right.

NAB’s CEO commented:

These appointments demonstrate our ability to identify and develop talent within the business while broadening diversity and experience. Rachel, Ana and Cath, who will lead NAB’s customer-facing businesses in Australia, are great relationship bankers who inspire their teams to deliver results for customers. They understand the importance of using technology and data to make NAB easier and simpler to bank with.

This completes the Executive Leadership Team that will take NAB forward and maintain the momentum we have across the business by executing with discipline and focus. We see plenty of opportunities to build on NAB’s leadership in areas such as business lending, particularly to small and medium businesses, while continuing to deliver better outcomes for customers and colleagues.

Commenting on the exit of David Gall from the key corporate and institutional banking business, Irvine adds:

I would particularly like to thank David Gall for having been a tremendous peer and leader for C&IB while I have been at NAB, and for his previous roles across various functions. David embodies what it means to be a NAB leader and we are grateful for his contribution to the business.

NAB shares are outperforming the market on a 12-month basis and are up 23% since this time last year.

The post NAB shares push higher on leadership changes appeared first on The Motley Fool Australia.

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More reading

• 3 ‘forever’ ASX dividend shares to build your wealth
• Here are the top five ASX 200 stocks in Macquarie’s model income portfolio
• With a 7% dividend yield, are NAB shares a buy?
• 3 top ASX 200 dividend shares to buy now for $2,000 a month in passive income
• NAB boss issues dire prediction for Aussie economy

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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With a wide range of Vanguard exchange-traded funds (ETFs) to choose from, there’s one fund I’m attracted to the most.

It’s good to aim for diversification in our investments because it spreads the risk across more businesses and industries. Owning assets other than ASX shares, such as bonds, can also nicely diversify your portfolio.

However, it is possible to invest in too many different things, leading to what some people call ‘di-worsification’ when too much diversification reduces returns.

And ideally, we’d like to buy a variety of investments that don’t reduce returns.

My top Vanguard ETF pick is the Vanguard MSCI Index International Shares ETF (ASX: VGS), and I’ll explain below how I came to that choice.

Bonds don’t appeal

In my mind, the share market is the leading place to invest for returns. We can find good companies that have proven their ability to develop appealing products and services, re-invest profits over time, and positively compound their results.

Let’s look at the various Vanguard ETFs for ideas.

I like Vanguard Diversified High Growth Index ETF (ASX: VDHG) and its siblings as a ‘one size fits all’ idea, but they all have an allocation to bonds, which may reduce long-term returns. Bonds can’t grow the underlying profit and increase their value in the way that businesses can.

Bonds may reduce short-term volatility – and some people may like that – but I want an ETF comprising 100% shares.

US tech giants are excellent businesses

The ASX share market and the non-US global share market are both solid options. Vanguard Australian Shares Index ETF (ASX: VAS) and Vanguard All-World ex-US Shares Index ETF (ASX: VEU) have their positives.

In trying to narrow the choices down to my favourite Vanguard ETF, I think it’s important to get exposure to many of the world’s strongest businesses in a single investment, such as Microsoft, Apple, Amazon, Nvidia, Berkshire Hathaway and so on.

Neither the VAS ETF nor VEU ETF have exposure to those leading US giants, so I can’t call them my number one.

Geographic diversification can be useful

VGS ETF and the Vanguard US Total Market Shares Index ETF (ASX: VTS) are both excellent ideas, with many high-quality holdings.

Arguably, the VTS ETF has been a better investment up until now, and it comes with a lower management fee than the Vanguard MSCI Index International Shares ETF.

However, if I were to invest in only one Vanguard ETF, I’d prefer to own a fund that can give exposure to great businesses listed worldwide, not just from one country. The United states has been an incredibly strong economic force for decades, though that may not always be the case in the future.

The VGS ETF is invested in many compelling non-US businesses, including Novo Nordisk, ASML, Nestle, LVMH, Accenture, Linde, SAP, and Royal Bank of Canada.

So that’s my ultimate pick of the bunch. But with that, I’ll also add that I like to balance my ETF investing with buying individual ASX shares.

The post Why this is my top Vanguard ETF to buy for the long-term appeared first on The Motley Fool Australia.

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More reading

• 10 ASX ETFs with the lowest management fees and why it matters
• 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?
• 3 reasons the Vanguard US Total Market Shares Index ETF (VTS) is still a top buy

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor 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 ASML, Accenture Plc, Amazon, Apple, Berkshire Hathaway, Linde, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Nestlé and Novo Nordisk and has recommended the following options: long January 2025 $290 calls on Accenture Plc, long January 2026 $395 calls on Microsoft, short January 2025 $310 calls on Accenture Plc, and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended ASML, Amazon, Apple, Berkshire Hathaway, Nvidia, and Vanguard Msci Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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There’s something to be said for earning a fair wage from a fair day’s work, yet there’s nothing quite like sitting back and watching passive income come rolling in.

Of course, just like a fair day’s wages, no one is likely to hand you $3,000 in annual passive income out of the blue.

So, here’s how I’d go about earning that welcome extra cash boost today with limited savings.

The road to passive income with ASX dividend shares

The best income building method I know of is offered by investing in quality ASX dividend shares.

Generally, though not always, these will be S&P/ASX 200 Index (ASX: XJO) stocks.

I prefer to invest in the larger end of the market for passive income, as these companies tend to be less volatile than small-cap ASX shares, and I’m aiming for relatively smooth income returns. There’s also a fair bit more analyst coverage available on blue-chip stocks, making for easier research.

I also recommend preferencing ASX 200 companies that pay fully franked dividends. That should enable investors to hold onto more of their dividend payouts come tax time.

And I prefer stocks with long track records of making reliable dividend payouts. That doesn’t guarantee future payouts, but it helps.

When doing your research, keep in mind that the yields you see quoted are generally trailing yields. Future yields may be higher or lower, depending on a range of company-specific and macroeconomic factors.

Of course, we’re gunning for rising yields here!

$2,950 in savings? No problem!

Now, not many Aussies have enough ready cash to earn $3,000 a year in passive income from ASX stocks overnight.

We have to be realistic in that no company is paying out more than 100% of its profits in dividends.

So, let’s say you have $2,950 to invest in the stock market.

With brokerage fees in mind, you may wish to start with just five ASX dividend stocks. Ideally, these will operate in different sectors and locations to reduce the overall risk to your passive income portfolio.

ASX 200 coal share New Hope Corp Ltd (ASX: NHC), for example, trades on a fully franked trailing yield of 9.8%.

ASX 200  bank stock ANZ Group Holdings Ltd (ASX: ANZ) trades on a partly franked trailing yield of 6.0%.

And ASX 200 iron ore miner Fortescue Ltd (ASX: FMG) trades on a fully franked trailing yield of 8.2%.

You get the idea.

Taking these three ASX 200 dividend stocks as our baseline, if you invested equally across all three, you could earn a yield of 8.0%.

Investing $2,950 today would then offer $224 a year in passive income. Well short of our $3,000 annual goal.

This is where some patience comes into the picture.

Now, with share price gains in mind, I think that by reinvesting those dividends, we can achieve an accumulated annual return of 11%.

With the magic of time and compounding on our side, that will see our $2,950 investment in ASX 200 dividend shares today grow to a whopping $40,845 in 24 years.

At an 8.0% dividend yield, you could then take out a bit more than $3,267 a year in passive income without touching our accumulated capital.

As always, if you’re unsure which ASX shares may be best for you, just reach out for some expert advice.

The post How to earn $3,000 in passive income with less than $3,000 in savings appeared first on The Motley Fool Australia.

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More reading

• ‘Share price looks cheap’: Fortescue & 1 other beaten-up ASX 200 share to buy now
• In this bull market, where are the bargain buys to be found?
• Fortescue shares climb amid Australian first for clean energy
• Want an income boost? Buy ANZ Bank and these ASX dividend stocks
• Own ASX 200 mining shares? Here’s the 5-year forecast for commodity prices

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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Brokers don’t always agree when it comes to ASX 200 stock recommendations.

But one that a couple of leading brokers not only agree about, but also have on their best ideas lists right now is ResMed Inc (ASX: RMD).

It is a developer, manufacturer, and distributor of innovative medical devices and cloud-based software solutions that diagnose, treat, and manage sleep-disordered breathing, COPD, and other key chronic diseases.

Despite a recent rebound, the company’s shares remain down approximately 15% since this time last year. This has been driven by concerns over the emergence of weight loss wonder drugs, which threaten to reduce its addressable market.

However, given the sheer size of its addressable market globally, a number of analysts believe that the ASX 200 stock can still grow at a rapid rate alongside drugs like Ozempic.

Who is bullish on this ASX 200 stock?

Analysts at Bell Potter and Morgans have the company’s shares on their preferred and best ideas lists, respectively.

Bell Potter currently has a buy rating and $34.00 price target on them. This implies potential upside of 19% for investors. It said:

The market for OSA and chronic obstructive pulmonary disease (COPD) remains under penetrated, and we expect industry volume growth to continue in the 6-8% range for the foreseeable future. In this regard, the competitive dynamics are very much in favour of RMD due to the Philips recall and improving semiconductor availability. Looking ahead, ResMed continues to expect device sales to be sequentially higher throughout CY2023. Furthermore, ResMed is well-positioned to build on its dominant share even after Philips returns to the global market, with the launch of its latest continuous positive airway pressure (CPAP) device, the Air Sense 11.

Over at Morgans, its analysts have an add rating and $32.82 price target on the ASX 200 stock. This suggests upside of 15% for investors. They commented:

While weight loss drugs have grabbed headlines and investor attention, we see these products having little impact on the large, underserved sleep disorder breathing market, and do not view them as category killers. Although quarters are likely to remain volatile, nothing changes our view that the company remains well placed and uniquely positioned as it builds a patient-centric, connected-care digital platform that addresses the main pinch points across the healthcare value chain.

Overall, it seems that these brokers agree that investors should be snapping up this high-quality company while its shares are down in the dumps.

The post Why two brokers have named this ASX 200 stock as a best buy appeared first on The Motley Fool Australia.

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More reading

• Bell Potter names more of the best ASX 200 shares to buy
• 5 ASX 200 shares for trying to build wealth after 50
• Got $5,000? 5 ASX shares to buy for lasting wealth
• Why Cettire, Harvey Norman, Orora, and ResMed shares are sinking today
• Here’s why I think the Resmed share price should be 18% higher

Motley Fool contributor James Mickleboro has positions in ResMed. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed. 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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