Tag: The Motley Fool Australia

There are few things better than making an investment in an ASX 200 share that delivers strong returns and an attractive dividend yield.

Well, the good news is that Goldman Sachs thinks it has found one that does exactly that. In addition, it boasts a market leadership position and defensive earnings.

Which ASX 200 share offers all this?

The ASX 200 share in question is Dan Murphy’s and BWS owner Endeavour Group Ltd (ASX: EDV).

According to the note, Goldman was pleased with the company’s quarterly sales update, noting that it revealed a second consecutive quarter of market share gains in the alcohol retail market. It said:

EDV reported in-line 3Q24 results of A$2.9B sales +2.2% YoY, where the key highlight was Retail reversion back to market share gain vs COL for second consecutive quarter and Hotel gaming revenues turning back into slight positive, implying margin support for 2H.

In light of the latter, the broker reiterates its view that the market is undervaluing its Hotels business. It adds:

Bottom line, we continue to believe that EDV’s Hotel’s business is under-valued with current market cap implying 4.0x FY25 EV/EBIT. As company continues to focus on driving higher ROIC from a range of options illustrated at the Hotels Strategy Day, we expect the stock to re-rate.

Big returns ahead

The note reveals that Goldman Sachs has reaffirmed its buy rating on the ASX 200 share with an improved price target of $6.30. Based on the current Endeavour share price of $5.24, this implies potential upside of 20% for investors over the next 12 months.

But wait, there’s more! As I mentioned at the top, Goldman is tipping this ASX 200 share to provide investors with an attractive dividend yield.

The note shows that the broker is forecasting fully franked dividend yields of 4.1% in FY 2024, 4.2% in FY 2025, and then 4.6% in FY 2026. This boosts the total potential 12-month return beyond 24%.

Commenting on why it thinks Endeavour would be a top pick right now, the broker concludes:

Our Buy thesis on the stock is based on the following key drivers: 1) Market share gain (already 40% market share) in defensive alcohol retail from consumer data and loyalty advantages; 2) Organic reopening beneficiary with its hotels/pubs business back to pre-COVID sales/property. We believe EDV is trading at a relatively attractive valuation, with potential downside from EGM tax changes already fully priced in. We are Buy rated on EDV.

The post Goldman says this ASX 200 share can rise 20% and offer a juicy dividend yield appeared first on The Motley Fool Australia.

More reading

• Why Goldman Sachs says these ASX 200 dividend stocks are buys in May
• Analysts say these 4 ASX dividend stocks are buys this month
• Why Ampol, Endeavour, Northern Star, and Santos shares are falling today
• Woolworths shares outperform on $468m Endeavour selldown and capital return
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has positions in Endeavour Group. 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 positions in and has recommended Coles Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Medibank Private Ltd (ASX: MPL) share price has dropped around 10% in the last couple of months, as we can see on the chart below. In this article, I’m going to look at whether the ASX healthcare share is a buy or if it’s one to avoid after announcing a business update.

Medibank is the largest private health insurer in Australia, with its Medibank and ahm brands.

Let’s first consider why some investors may be negative on the company.

Why be negative on Medibank shares?

Writing on The Bull, Dylan Evans from Catapult Wealth said:

Group revenue from external customers of $4.024 billion in the first half of fiscal year 2024 was up 3.3 per cent on the prior corresponding period. Group operating profit of $319.4 million was up 4.2 per cent. Across the industry, our concern is rising premiums may price existing customers out of private health insurance and deter others from joining funds.

However, there are some reasons to be positive about the business.

Positive update from the ASX healthcare share

At the Macquarie Australia Conference, Medibank shared some interesting insights.

Firstly, it did note that the average health insurance premium increase from 1 April 2024 will be 3.31% but that “remains below inflation and wage growth in Australia.” That suggests revenue growth for the business over the next 12 months.

APRA statistics released in late February showed “continued industry resilience” with an increase of approximately 277,000 Australians having resident private health insurance hospital cover in the 12 months to 31 December 2023. This included an increase of around 96,000 people under the age of 30, which is “critical to the long-term sustainability of Australia’s health system, reflecting the benefit of recent reform and the growing importance of health among consumers.”

Resident industry policyholder growth was 2.06% over the 12 months to 31 December 2023 compared to 1.9% growth for the 12 months to 30 September 2023, which it called resilient in the face of ongoing costs of living pressures.

However, Medibank did note that the industry continues to be competitive, which is expected to persist in the fourth quarter, which is “historically a strong quarter for growth”.

The ASX healthcare share then said:

Despite this competition, Medibank remains disciplined in its approach by targeting profitable growth in priority segments, including corporate, families and new to industry customers, where we are seeing continued positive momentum. Based on our performance in the March 2024 quarter, we remain on track in our aim to deliver our resident policyholder growth outlook of 1.2% – 1.5% for FY24.

For me, that’s a key part of the equation – policyholder growth. If Medibank’s policy numbers are growing, then it can benefit from increased scale and hopefully deliver a bigger profit and dividend.

Another element of short-term profitability is claims (costs). The company said the risk equalisation outcome in the three months to March 2024 continued to reflect the “benefit of favourable age claiming patterns for Medibank”. Claims growth per policy unit for FY24 among resident policyholders is expected to be at the lower end of its guidance range of between 2.2% and 2.4% for FY24.

Trends impacting claims in the first half of FY24 have “continued into the second half, including particular softness in non-surgical and extras claims, and this is anticipated to result in claims continuing to be below” expectations in the second half of FY24.

Foolish takeaway

The Medibank share price looks relatively attractive to me – revenue is rising, claims are subdued and the company continues to pay a good dividend. The Commsec estimate puts the FY25 grossed-up dividend yield at 6.8%.

The post Down 10% since mid-March, are Medibank shares a buy or a sell? appeared first on The Motley Fool Australia.

More reading

• 3 ASX stocks to benefit from Australia’s ageing population
• If I were a retiree, I’d buy these ASX shares this week

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.

ANZ Group Holdings Ltd (ASX: ANZ) shares are falling on Tuesday.

In early trade, the banking giant’s shares were down almost 3% to $27.99.

They have since recovered but remain down 0.5% at the time of writing.

Why are ANZ shares falling?

Investors have been hitting the sell button today after the bank released its first half results for FY 2024.

In case you missed it, the bank reported a cash profit of $3,552 million for the six months ended 31 March. This represents a 1% decline compared to the second half of FY 2023.

Although ANZ’s shares are falling today, this result was actually slightly ahead of the consensus estimate of $3,531 million.

However, with the bank’s share price rallying this month in response to the release of solid results from other banks, it’s possible that the market had already priced in an earnings beat (and some more).

Not even a larger than expected interim dividend (85 cents per share partially franked) and a $2 billion on-market share buyback has been enough to keep its shares afloat.

Broker reaction

Analysts at Goldman Sachs have had a quick look at the result and appeared to be pleased. While the bank’s profits fell short of their expectations, they note that it was above the consensus estimate. It commented:

ANZ reported 1H24 cash earnings (company basis) from continued operations were slightly down -7% on pcp to A$3,552 mn, and was -3.5% below GSe and +1% higher than Visible Alpha Consensus Estimates (VAe). The miss to GSe was driven largely by higher expenses, partially offset by a lower BDD charge.

One disappointment that could be weighing on ANZ shares is the bank’s net interest margin, which fell short of expectations. However, Goldman believes it is a one-off. It said:

ANZ’s 1H24 group reported NIM was down -9 bp hoh to 1.56% (vs.GSe/VAe of 1.61%/1.62%). However, the miss was predominantly due to the impact of Markets activities, with the NIM ex-Markets activities down -2 bp hoh to 1.63%. The -7 bp drag from Markets activities was split -5 bp from mix (growth in Markets AIEA) and -2 bp from rate (funding costs recognised in NII with associated revenue in OOI).

Furthermore, Goldman highlights that margin weakness in the retail business appears to have stabilised. Though, other sides of the business are still showing a spot of weakness. It adds:

ANZ provided an analysis of quarterly NIM trends which suggests ANZ’s Australia Retail NIMs have stabilised while Australia Commercial, Institutional and NZ Divisions continue to deteriorate.

Finally, the broker was pleased with the bank’s larger than expected capital returns. It said:

The proposed interim DPS of A83¢ was ahead of GSe/VAe (A81¢), and will be franked at 65%, representing a payout ratio of 70% (GSe 66%). ANZ also announced a A$2 bn on-market buyback (GSe A$1.5 bn in total). ANZ’s pro-forma CET1 ratio also adjusting for the completion of the buyback would be 11.85%. ANZ’s NSFR rose to 118%, from 116% in 2H23, and its LCR was 134% up from 132% in 2H23.

Goldman currently has a buy rating and $27.69 price target on ANZ’s shares. Though, that could change once it has updated its financial model to reflect this result.

The post ANZ shares tumble despite $3.5b half-year profit appeared first on The Motley Fool Australia.

More reading

• ANZ share price on watch amid first-half earnings beat and $2b buyback
• 5 things to watch on the ASX 200 on Tuesday
• Brokers say these ASX dividend stocks are buys
• Own ANZ shares? Here’s your first-half results preview
• Here’s how I’d aim for a tonne of passive income from $20,000 in an ASX share portfolio

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

A couple of ASX 200 stocks are moving in very different directions on Tuesday morning after updating their respective earnings guidance for FY 2024.

Let’s now take a look at which stock has upgraded its guidance for the full year and which one has disappointingly downgraded its expectations.

AGL Energy Limited (ASX: AGL)

The AGL Energy share price is rising on Tuesday after the energy company released an update on its guidance for FY 2024.

At the time of writing, its shares are currently up almost 7% to $9.95.

According to the release, the company now expects its underlying EBITDA to be between $2,120 million and $2,200 million in FY 2024. This compares to its previous guidance of $2,025 million and $2,175 million.

This represents a sizeable 56% to 61.5% increase on FY 2023’s underlying EBITDA of $1,361 million.

Also getting an upgrade was the ASX 200 stock’s underlying net profit after tax. This is now expected to be between $760 million and $810 million, compared to its previous guidance of $680 million and $780 million.

In FY 2023, AGL reported underlying net profit after tax of $281 million. This new guidance represents an increase of 170% to 188% year on year.

Management explained that business has been booming during the second half. It said:

The update to guidance reflects the continued strong operational and financial performance of the business since the half year results, due to improved plant availability, flexibility and generation, higher consumer demand over the summer period in New South Wales and Queensland, and continued strong Customer Markets performance.

Sims Ltd (ASX: SGM)

The Sims share price is sinking today after the ASX 200 scrap metal stock downgraded its earnings guidance for FY 2024.

Its shares are currently down a sizeable 9.5% to $10.71.

Management advised that second-half underlying EBIT will be marginally lower than the first half. This compares to its previous guidance for underlying EBIT “to improve in H2 FY24 compared to HY1 FY24.”

Commenting on the guidance downgrade, Sim’s CEO and managing director, Stephen Mikkelsen, said:

Ongoing market challenges have continued across the industry. SA Recycling and ANZ Metal have faced increased challenges compared to the first half. Pleasingly, despite North America Metal facing similar market challenges, we anticipate an improved second-half performance as early positive outcomes of the targeted strategies for margin improvement are emerging. We remain confident in the medium to long-term fundamentals, driven by global decarbonisation efforts.

The post One ASX 200 stock that just upgraded earnings guidance (and one that downgraded) appeared first on The Motley Fool Australia.

More reading

• Down 24% since July, are AGL shares a cheap buy?
• Here’s how I’d aim for a tonne of passive income from $20,000 in an ASX share portfolio
• 2 unexpected ASX 200 stocks to buy now for the AI revolution
• Here’s how the ASX 200 market sectors stacked up last week
• 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 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.

The National Australia Bank Ltd (ASX: NAB) share price is falling on Tuesday.

In early trade, the banking giant’s shares are down almost 2.5% to $33.88.

This is despite the ASX 200 index pushing 0.5% higher this morning.

Why is the NAB share price tumbling?

The weakness in the bank’s share price today could actually be classed as good news for its shareholders.

That’s because the NAB share price is falling today in response to trading ex-dividend for the bank’s upcoming interim dividend payment. This means pay day is approaching for eligible shareholders!

Going ex-dividend

When a company’s shares go ex-dividend, it means the rights to a pending dividend payment are now settled. As a result, anyone buying its shares from this point will not be entitled to receive this payout when it is made.

Instead, the rights to the dividend remain with the seller, even if they no longer own those shares when the payment date arrives.

Given that a dividend forms part of a company’s valuation, its share price will tend to drop in line with the value of the payout on the ex-dividend date. After all, new buyers of its shares don’t want to pay for something they won’t receive.

In the case of NAB, last week it released its half-year results and declared its latest dividend. NAB reported a 0.9% decline in net operating income to $10,138 million and a 12.8% decline in cash earnings to $3,548 million. The latter was largely in line with the consensus estimate of $3,553 million.

This earnings decline couldn’t stop the NAB board from increasing its interim dividend by 1.2% to a fully franked 84 cents per share. It is this dividend that NAB’s shares are going ex-dividend for this morning.

Eligible shareholders can now look forward to being paid this dividend in just under two months on 3 July.

What’s next for the NAB dividend?

A recent note out of Goldman Sachs reveals that its analysts expect another 85 cents per share fully franked final dividend in November. This will bring its total dividends for FY 2024 to $1.68 per share.

After which, the broker expects the NAB board to keep its dividend on hold at this level for the foreseeable future.

It is forecasting fully franked $1.68 per share dividends each year until at least FY 2028. Based on the current NAB share price of $33.88, this will mean dividend yields of 5% per annum over the period.

The post Why is the NAB share price sinking today? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• What you need to do to secure the next NAB dividend
• Forget NAB and buy these ASX dividend shares
• Here’s the NAB dividend forecast through to 2028
• Are NAB shares a buy following the bank’s results?

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

In the bustling world of retail, not all that glitters is gold. The Reject Shop Ltd (ASX: TRS), an established discount retailer, has seen its share price touch 52-week lows recently. A combination of sector-wide and company-specific challenges has driven the stock price down. Investors must now decide if these issues are merely bumps in the road or indicative of fundamental flaws.

The Reject Shop’s plunge

The Reject Shop, known for its budget-friendly offerings, has seen its stock price fall to $4.13, down from $5.80 late last year. The fall can be attributed to several factors. Firstly, there have been significant changes in the company’s leadership, including the resignation of the General Counsel and Company Secretary, and other shifts within the board. Such leadership transitions can often lead to uncertainty among investors​.

Despite improvements in earnings per share (EPS) in FY23 compared to the previous year, consensus EPS estimates were adjusted downwards in October 2023, dampening investor sentiment​.Â

Comparing ASX retail share rivals

Another contributing factor has been the general challenges faced by the retail sector in Australia. Shifts in consumer behaviour and competitive pressures have impacted the entire industry. According to the Australian Bureau of Statistics, household spending on discretionary items decreased by 0.1% in the year to March, with rising interest rates forcing households to cut back.Â

Other ASX-listed retail stocks have also felt the pinch. Take, for example, Adairs Ltd (ASX: ADH), which has seen its share price fall more than 5% over the past year. Adairs reported a decrease in earnings before interest, tax, depreciation and amortisation (EBITDA) of 14.6% in 1H24. The Reject Shop saw a 16% decrease.Â

Retail is also grappling with broader economic factors such as fluctuating consumer confidence and the undeniable impact of e-commerce. For traditional stores like The Reject Shop and Adairs, adapting to this new digital reality is crucial for survival. Sector-wide, there is a strong push towards adopting digital innovations to enhance efficiency and customer engagement.

Is recovery on the horizon for this ASX retail share?

Retailers are expected to continue facing economic pressures such as inflation and high interest rates. This will squeeze profit margins and challenge operational costs. Nonetheless, consumer habits are shifting towards more value-driven purchases due to high living costs. This trend favours discount retailers who can offer compelling price points.

Foolish takeaway

The Reject Shop’s recent stock price woes are emblematic of the broader pressures facing the retail sector. The question for investors is not just whether The Reject Shop can adjust to these challenges, but whether it can leverage them as opportunities.

With consumers increasingly price-conscious, discount retailers like The Reject Shop could be well-positioned to capture market share. To do so, they will need to adapt and innovate effectively.

The post Is this crushed ASX retail share a buy? appeared first on The Motley Fool Australia.

More reading

• 4 ASX All Ords shares with ex-dividend dates this week

Motley Fool contributor Katherine O’Brien 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 Adairs. The Motley Fool Australia has positions in and has recommended Adairs. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If you are on the lookout for some exchange-traded funds (ETFs) to bolster your portfolio, then it could be worth getting acquainted with the three that are listed below.

They have all been tipped as top ideas by analysts at Betashares this year. Let’s dig a little deeper into them and see what they could offer investors.

BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC)

If you are wanting some exposure to the local technology sector, then it could be worth considering the BetaShares S&P/ASX Australian Technology ETF. It offers easy access to the leading tech players on the Australian share market.

This ETF was recently highlighted as one to look at by the team at Betashares. The fund manager commented:

With the nascent adoption of AI, cloud computing, big data, automation, and the internet of things, there’s a good chance that the next decade’s major winners will come from the tech sector. Despite Australia’s sharemarket skewing heavily towards financials and resources, investors can gain direct exposure to Aussie tech stocks via ATEC.

Betashares Global Cash Flow Kings ETF (ASX: CFLO)

Another ASX ETF that is highly rated by the fund manager is the Betashares Global Cash Flow Kings ETF.

Betashares recently named it as one to consider when interest rates start to fall. It said:

For those looking for international exposure, Betashares Global Cash Flow Kings ETF focuses on global companies with strong free cash flow. The fund can serve as a core exposure to global equities or alongside existing low-cost passive global ETFs to enhance a portfolio’s emphasis on cash-generating companies.

Betashares Energy Transition Metals ETF (ASX: XMET)

Finally, if you are looking for exposure to the decarbonisation megatrend, then the Betashares Energy Transition Metals ETF could be for you.

It provides investors with easy exposure to global producers of copper, lithium, nickel, cobalt, graphite, manganese, silver, and rare earth elements.

Betashares named it on its list of 12 ASX ETFs ideas for 2024. It appears to believe the companies included in the fund are well-positioned to benefit from increasing demand for these metals. It commented:

The Earth is blessed with all the minerals we need to power the transition to CO2-free energy. However, defining, extracting, and processing all those deposits is going to require significant new investment. […] Both electric cars and clean energy use notably more metals than their conventional counterparts, and many of these minerals have highly concentrated and insecure supply chains.

The post 3 top ASX ETF ideas for investors in May appeared first on The Motley Fool Australia.

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• The pros and cons of buying this ASX tech ETF after its 30% rally

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.

The Qantas Airways Limited (ASX: QAN) share price has seen its fair share of pain over the past year. It’s still down more than 10% since July 2023, as we can see on the chart below, despite a rally over the past two months.

Qantas has faced a number of negatives in the last few years, including the pandemic.

The ACCC launched a Federal Court against Qantas in August 2023, alleging that between 21 May 2021 and 7 July 2022, Qantas advertised tickets for more than 8,000 cancelled flights. It was also alleged that, for more than 10,000 flights scheduled to depart in May to July 2022, Qantas did not promptly notify existing ticketholders that their flights had been cancelled.

But the airline and ACCC announced yesterday, as reported by my colleague Bernd Struben, that Qantas had agreed to $20 million payments to customers and that Qantas would pay a $100 million penalty.

Investors may now be able to judge the Qantas share price on its merits. One investor is very bullish on the airline.

L1’s bullish view on the Qantas share price

The fund manager said Qantas remains “very well placed” over the next few years because it has “Australia’s best loyalty business which is expected to double earnings over the next five to seven years”. Qantas also has a range of new, more fuel-efficient aircraft, and ‘project sunrise’, which can enable direct flights from Melbourne and Sydney to London and New York.

It was noted by L1 that Qantas shares rallied in April after outlining plans to improve the loyalty offer to enable easier access for frequent flyer members to use their points. The revision to the loyalty offer had a “smaller impact on earnings than market expectations and the company clearly articulated the strong medium-term benefits of investing in the program.”

L1 also noted the airline has “sufficient balance sheet capacity” to continue its share buyback and recommence fully franked dividends next year.

Another positive for Qantas is that the new CEO, Vanessa Hudson, is “rapidly and methodically addressing customer ‘pain points’, which should improve sentiment from both customers and potential investors.”

L1 said the Qantas share price is trading at just 6x FY25’s estimated earnings, despite a “dominant industry position, exposure to the structural tailwinds of Asian inbound tourism to Australia and a high growth, capital-light loyalty division, which remains incredibly underappreciated by the market.”

Qantas share price snapshot

Since the start of 2024, the Qantas share price has risen by 10%.

The post 4 reasons this fund manager thinks Qantas shares are a cheap buy appeared first on The Motley Fool Australia.

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• 10 top ASX shares to buy in May
• Why 29Metals, Base Resources, Qantas, and South32 shares are storming higher

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.

Westpac Banking Corp (ASX: WBC) shares were on form on Monday.

The banking giant’s shares rose over 2.5% to $27.12.

Investors were buying the company’s shares in response to its half-year results.

In case you missed it, Westpac’s net profit before one-offs came in at $3,506 million. This represents an 8% decline on the prior corresponding period and a 1% fall on the second half of FY 2023.

However, this was ahead of expectations. As was its interim dividend of 75 cents per share and surprise 15 cents per share special dividend, and its $1 billion on-market share buyback.

This gain leaves Westpac’s shares trading within touching distance of their 52-week high of $27.70.

But can they go higher from here? Let’s take a look at what one leading broker is saying after updating its financial model.

Can Westpac shares keep rising?

According to a note out of Goldman Sachs, its analysts believe that Australia’s oldest bank’s shares are fully valued at current levels.

The broker has responded to the result by retaining its neutral rating with an improved price target of $24.10.

Based on its current share price, this implies potential downside of 11% for investors over the next 12 months. Though, with Goldman estimating a 6.1% dividend yield this year, the overall potential loss on investment is reduced to 5%.

While Goldman sees a number of positives, it also sees risks on the horizon. So, with Westpac’s shares trading at a reasonably large premium to historical multiples, it doesn’t believe the risk/reward is sufficient right now to have a more positive recommendation. The broker explains:

We believe that low industry-wide RWA growth and WBC’s strong capital position, which even on a pro-forma basis is >12%, well above its 11.0-11.5% target ratio, underpins a sustainable payout ratio at the top of its 65-75% target range.

However, against this, WBC’s technology simplification plan comes with a significant degree of execution risk, given historically banks’ large-scale transformation programs have struggled to stay on budget, and we are currently operating in a stickier-than-expected inflationary environment. Therefore, trading on a 12-mo forward PER of 14.5x (14.0x ex-dividend adjusted, which is one standard deviation above its 15-year historic average of 12.7x), we stay Neutral.

Nevertheless, shareholders aren’t likely to be too disheartened. After all, the Westpac share price is up almost 25% over the last 12 months. And that doesn’t include the fully franked dividends the bank has paid to shareholders over the period.

The post What are brokers saying about Westpac shares following the bank’s results? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Everything you need to know about the supersized Westpac dividend
• Westpac shares charge higher on half-year earnings beat and buyback
• Westpac share price on watch amid results, special dividend and $1b buyback
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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.

Any ASX investment – whether that be an ASX share or an ASX real estate investment trust (REIT) – that seemingly offers a dividend yield of 7.89% is going to attract at least some attention.

After all, that kind of yield is rather unusual on the ASX, at least outside those shares that have a high chance of turning out to be a yield trap.

Yet that’s exactly what investors eyeing off the Charter Hall Long WALE REIT (ASX: CLW) will notice today.

The Charter Hall Long WALE REIT is a real estate investment trust that holds a portfolio of property assets that all share relatively long weighted average lease expires (WALEs). These include offices, shopping centres, industrial warehouses and hotels.

Long WALE REIT units finished trading on Monday flat at $3.42. At this pricing, this ASX REIT is trading on a trailing dividend distribution yield of 7.75%.

To be fair, this yield comes without the franking credits that most income investors enjoy alongside their regular dividend income from ASX shares. But this is the case for almost all ASX REITs, so we can’t hold that against Charter Hall.

This high dividend yield is no illusion. It stems from the Long WALE REIT’s last four quarterly dividend distributions. Those consisted of three payments worth 6.5 cents per share (the latest of which is due on 15 May later this month), as well as the 7 cents per share distribution from last August.

But, as most dividend investors would know, a trailing dividend yield doesn’t guarantee that new investors can expect to receive that same yield going forward.

Even so, one ASX expert is calling the Charter Hall Long WALE REIT a buy anyway.

ASX expert names Long WALE REIT as a buy today

As reported by The Bull, Dylan Evans, of Catapult Wealth, has recently named the Charter Hall Long WALE REIT as one of his buy recommendations. Evans cited the Long WALE REIT’s low exposure to office properties, as well as the REIT’s 99% occupancy rate, as being central to his bullish outlook. Here’s what he said in full:

CLW is a diversified real estate investment trust. A key attraction is a quality property portfolio with an occupancy rate of 99 per cent. An average lease expiry of 10.8 years provides long term income security. Office exposure is only 18 per cent in an environment of more people working from home.

CLW has struggled in the past two years in response to rising bond yields. But the stock is appealing at these levels. The dividend yield was recently above 8 per cent. Also, any asset sales to lower debt would be positive for the stock.

No doubt Charter Hall investors will welcome this sunny appraisal. However, whilst longer-term investors have enjoyed healthy dividend income recently, the Long WALE REIT remains down 23.49% over the past five years. Only time will tell if Evans is on the money with this one.

The post Buy this ASX REIT for 99% occupancy and a 7.8% dividend yield! appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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.