Tag: The Motley Fool Australia

Investors have been flooding into the uranium industry in large numbers over the last 12 months.

You only need to look at the performance of the ASX uranium stocks such as Boss Energy Ltd (ASX: BOE) and Deep Yellow Limited (ASX: DYL) to see this.

Over the period, these uranium stocks are up a remarkable 155% and 94%, respectively.

But if you thought the gains were over, think again.

One little known ASX uranium stock has just been named as a buy and tipped to rise strongly from current levels.

Which ASX uranium stock is a buy?

According to a note out of Bell Potter, its analysts think that Lotus Resources Ltd (ASX: LOT) could be a top option right now.

It owns an 85% interest in the Kayelekera Uranium Project in Malawi, Africa, and a 100% interest in the Letlhakane Uranium Project in Botswana, Africa.

The broker was pleased with the recent mineral resource estimate (MRE) update for the the Letlhakane project. It commented:

The updated MRE stands at 155.3Mt at 345ppm U3O8 for a total contained 118.2Mlbs U3O8, inclusive of 34.4Mlbs in Indicated Resources, which is a reduction on the original ACB [previous owner] MRE (2015) of 190Mlbs at 321ppm U3O8. The main difference between the two estimates is the hypothesised operations, which infer the economic cut-off grade. Under ACB, LM was a large-scale, low-grade two stage heap leach operation. In our February initiation on LOT, we didn’t see this as the path forward for the project. Our initial interpretation was that LOT would look to focus on the highgrade portions of the deposit and utilise ore-sorting to increase the milled grade over +600ppm. With a starting point of +400ppm, a conservative estimate of 40% mass rejection could achieve this we hypothesised. Today’s announcement is a step towards proving that thesis.

Big returns

In response to the news, the broker has reaffirmed its speculative buy rating on the ASX uranium stock with an improved price target of 60 cents.

Based on its current share price of 44.5 cents, this implies potential upside of 35% for investors over the next 12 months.

Commenting on its recommendation, the broker said:

We maintain a Speculative Buy recommendation and our valuation lifts to $0.60/sh (previously $0.50/sh). Our valuation lift comes from an extension of potential operations at LM beyond our initial forecast (initial LOM production of 61Mlbs). We see positive catalysts at KM including 1) MDA finalisation, 2) FID and 3) offtake negotiations. Successful navigation of these hurdles will place LOT in the best position to advance project funding for KM, all whilst LM advances in the background.

Though, it is worth highlighting the broker’s speculative rating. This means it would only be suitable for investors with a high risk tolerance.

The post The little known ASX uranium stock that could rise 35% appeared first on The Motley Fool Australia.

More reading

• How to invest in uranium on the ASX
• Is ASX uranium the new lithium?
• Here are the top 10 ASX 200 shares today
• Why Amcor, Boss Energy, DroneShield, and Woolworths shares are rising today
• Why are ASX uranium shares going gangbusters today?

The VanEck Morningstar Wide Moat ETF (ASX: MOAT) is a popular exchange-traded fund (ETF) and investment on the ASX.

We have tracked this ETF for a while now, noting that it remains a strong choice for many Australian investors. This is arguably thanks in part to an enviable record of delivering market-beating returns.

A high-flying ASX ETF

To illustrate, the MOAT ETF has returned 17.59% over the 12 months to 30 April. It has also delivered an average of 14.83% per annum over the past five years, as well as 15.62% per annum since its ASX inception in 2015.

This ETF has been able to achieve such stellar results by investing in a concentrated portfolio of US shares that are all selected on their perceived possession of what is known as an economic moat.

A moat is a term first used by legendary investor Warren Buffett. It refers to a company’s inbuilt protections against competition. The wider this moat is, the more able a company is to maintain dominance in its field.

This moat could come in the form of a strong brand (Coca-Cola or Apple are classic examples), or else a low-cost advantage that a company possesses at the expense of its competitors (Amazon or Costco).

It could also take the shape of a good or service that consumers simply find too difficult to stop buying or using (Microsoft‘s Office or Adobe‘s Photoshop).

Companies with the widest and most durable moats often make for the best long-term investments, as Warren Buffett has proven. Buffett has spoken extensively about the importance of an investment possessing a moat.

We can see this strategy playing out in the current MOAT portfolio. At this ASX ETF’s most recent filing, its top holdings included the likes of Google-owner Alphabet, Campbell Soup, Nike, Pfizer, Disney and Buffett’s own Berkshire Hathaway.

So we’ve established that this ETF is a high flyer when it comes to returns. But let’s talk about dividends.

What kind of ASX dividend income does the Wide Moat ETF pay?

It’s fair to say that US shares are not known for their dividend firepower. Sure, there are many strong income payers on the US markets. But thanks to a number of factors, including the absence of a franking system, it’s not too common to find yields of 4% or 5% in the top echelons of the US markets, as it is on the ASX.

An ASX index fund typically offers a 3%-5% starting dividend yield. However, a US index fund will be closer to 1%-2%.

So what about the ASX’s MOAT ETF?

Well, an ETF can fund dividend distributions in two ways. The first is passing on any dividend income its underlying holdings payout. The second is distributing the profits from the regular rebalances that most ETFs conduct every quarter in order to reflect their underlying indexes.

The VanEck Wide Moat ETF does a little of both. This means that its annual dividends (yes, investors receive just one dividend distribution every year) can vary rather wildly from year to year.

To illustrate, MOAT units paid out a chunky $8.15 per unit in 2023.

However, in January 2022, investors bagged just 98.11 cents per unit. The year before that, the figure came in at $1.01, whilst in 2020, investors received 88.1 cents per unit.

So today, MOAT units are technically trading on a trailing dividend distribution yield of 6.48%.

But given this ASX ETF’s volatile dividend distribution history, I wouldn’t be counting on this continuing over 2024.

The post Does the VanEck Wide Moat ETF pay a decent ASX dividend? appeared first on The Motley Fool Australia.

More reading

• 2 ASX ETFs to buy and hold forever in your investment portfolio
• Here’s why the ASX’s VanEck Wide Moat ETF had such an awful April
• 3 ASX ETFs I’d buy to try to become a millionaire
• If you invested $10,000 in VanEck Wide Moat ETF (MOAT) nine years ago, here’s what it would be worth now
• Buy these ASX ETFs to supercharge your investment portfolio

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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 Sebastian Bowen has positions in Adobe, Alphabet, Amazon, Apple, Berkshire Hathaway, Coca-Cola, Costco Wholesale, Microsoft, Nike, VanEck Morningstar Wide Moat ETF, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adobe, Alphabet, Amazon, Apple, Berkshire Hathaway, Costco Wholesale, Microsoft, Nike, Pfizer, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2025 $47.50 calls on Nike, long January 2026 $395 calls on Microsoft, and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Adobe, Alphabet, Amazon, Apple, Berkshire Hathaway, Microsoft, Nike, VanEck Morningstar Wide Moat ETF, and Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Pilbara Minerals Ltd (ASX: PLS) shares are a popular option for investors that are looking for exposure to lithium.

But just because the ASX 200 lithium stock is popular, doesn’t necessarily mean it is the best way to invest in lithium right now.

For example, the team at Bell Potter currently has a hold rating and $3.60 price target on Pilbara Minerals’ shares. This is notably lower than its current share price of $4.17.

But one ASX 200 lithium stock that the broker is bullish on and tipping to rise materially from current levels is Arcadium Lithium (ASX: LTM).

Why is it an ASX 200 lithium stock to buy?

Bell Potter was pleased with Arcadium Lithium’s first quarter update this week, noting that it delivered earnings ahead of its expectations but in line with consensus estimates. It said:

LTM reported Q1 2024 revenue of US$261m (BP est $268m) and Adjusted EBITDA of US$109m (BP est. $68m); overall the result was broadly in line with consensus.

It also notes that the company is forecasting more of the same over the remainder of FY 2024. Though, this will be dependent on realised lithium prices, which were strong during the first quarter. It adds:

The company has held full year 2024 scenarios for revenue (US$1.25-1.9b) and adjusted EBITDA (US$420-1,000m) based on market pricing ranges of US$15,000-25,000/t LCE. LTM achieved a Q1 2024 realised price of $20,500/t for carbonate and hydroxide products, materially higher than published indices due to fixed pricing and floors on a large proportion of hydroxide volumes.

Big returns

In response to the update, the broker has retained its buy rating with a trimmed price target of $9.50.

With the ASX 200 lithium stock currently trading at $7.07, this implies potential upside of 34% for investors over the next 12 months.

To put that into context, a $10,000 investment would be worth almost $13,500 by this time next year if Bell Potter is on the money with its recommendation.

Explaining its bullish view on the lithium miner, the broker concludes:

LTM provides the largest, most diversified exposure to lithium in terms of mode of upstream production, asset locations, downstream processing and customer markets. It is a key large-cap leverage to lithium prices and sentiment, which we expect to improve over the medium term. In supportive markets, LTM’s growth pipeline could see the company more than double production over the next three years.

The post Forget Pilbara Minerals and buy this ASX 200 lithium stock instead appeared first on The Motley Fool Australia.

• Why Pilbara Minerals shares are a buy for this lithium short seller
• Bell Potter names more of the best ASX 200 stocks to buy
• These are the 10 most shorted ASX shares
• Here are the top 10 ASX 200 shares today
• What would I have now if I’d invested $10,000 into Pilbara Minerals shares in April?

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.

Just 30% of Australians know their superannuation balance to the nearest $1,000, according to new research from Findex Group.

A further 30% have only a vague idea or no idea of their superannuation balance today.

The results show a lack of engagement in superannuation planning and management within the Australian population, Findex says.

Let’s investigate.

Do you know how much you’ve got in superannuation?

The survey shows that the knowledge gap is more pronounced among women and younger Australians.

Baby Boomers were the most likely to know their superannuation balance to the nearest $1,000. Fifty-one per cent of boomer respondents said they could name the number.

Gen Zs were the least likely generation to know their superannuation balance. The survey found that 26% had a vague idea, and 22% had no idea at all.

Of course, it’s not surprising that baby boomers are more acutely aware of their superannuation balances.

Born between 1946 and 1965, the bulk of this generation is already well into their retirement years.

The youngest group within the baby boomers is turning 63 years old this year.

Their ‘retirement age’ — meaning the year they are eligible to receive the age pension — is only four years away at 67. So, they’re much more likely to be crunching the numbers now to prepare for this change.

And with the Bank of Mum and Dad expanding into superannuation, many baby boomers have already shared some of their super monies with their kids to help them buy a house.

Why don’t you know your super balance?

Perhaps one of the reasons why so many Australians cannot name their super balance is because they don’t know where to start in managing their superannuation.

The survey also revealed that 64% of respondents, or almost two-thirds of the population, do not feel confident about managing and growing their superannuation.

As we’ve recently covered, Australians tend to overestimate how much money they need in retirement.

A survey by Colonial First State revealed that, on average, Australians think they need $1.6 million in superannuation or savings for a comfortable retirement.

No, no, no.

Not according to the official guidelines!

How much do you need for a comfortable retirement?

The Association of Super Funds of Australia (AFSA) publishes a regularly updated Retirement Standard.

The standard says couples aged 65 to 84 years who own their own homes without debt need $690,000 in superannuation, plus a part-pension, to fund a ‘comfortable lifestyle’.

Annual living expenses for a comfortable existence are estimated at about $72,000 per couple.

Single retirees aged 65 to 84 years who own their own homes without debt need $595,000 in superannuation. Their living expenses run to about $51,000 per annum for a comfortable retirement.

ASFA also provides guidelines for a ‘modest retirement’.

In this case, both singles and couples need $100,000 in superannuation and a part pension to pay the bills. They also need to own their homes without a mortgage.

AFSA estimates living expenses of $46,944 for couples and $32,666 for singles aged 65 to 84 years.

AFSA’s estimates assume you will draw down all your super capital, invest it, and receive a 6% return per annum.

Do you have enough in superannuation yet?

If you’re an ‘average’ Aussie aged 65 to 69 years, then you probably do.

The latest Australian Taxation Office (ATO) figures tell us the average superannuation balance for people aged 65 to 69 years is $428,738.

The average for men is $453,075, and the average for women is $403,038.

The post Guess how many Australians know their superannuation balance? appeared first on The Motley Fool Australia.

• Do CBA shares justify their ‘valuation premium’ following the bank’s Q3 update?
• Morgans names the best ASX dividend shares to buy in May
• Where I’d invest $7,000 in ASX dividend stocks right now
• 5 things to watch on the ASX 200 on Friday
• Is it time to start buying up ASX small-cap shares?

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 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.

Commonwealth Bank of Australia (ASX: CBA) shares were under pressure on Thursday.

The banking giant’s shares ended the day over 2% lower at $117.09.

Investors were hitting the sell button in response to the bank’s third quarter update.

CBA reported a 1% decline in operating income for the three months ended 31 March. This reflects one less day in the quarter and slightly lower net interest margins due to continued competitive pressures and customers switching to higher yielding deposits.

This ultimately led to Australia’s largest bank reporting an unaudited statutory net profit after tax of $2.4 billion. This is down 3% on the first half average and 5% on the prior corresponding period.

Also weighing on CBA shares were its rising arrears. While its balance sheet remains strong, CBA’s arrears increased across home loans, credit cards, and personal loans. This was largely blamed on cost of living pressures.

Has this pullback created a buying opportunity for investors or should they stay clear of the big four bank? Let’s find out.

Are CBA shares good value or overvalued?

The team at Goldman Sachs has been looking over the result and was reasonably impressed, noting that its profits are run-rating ahead of second-half expectations. The broker said:

Cash profit from continuing operations in 3Q24 of c. A$2.4 bn was down 3% vs. 1H24 quarterly average and run-rating c. 4% ahead of what was implied by our prior 2H24E forecasts largely due to outperformance on the BDD charge. PPOP was in line with expectations.

However, unfortunately this still doesn’t justify the significant premium that CBA shares trade at compared to the rest of the big four banks. Goldman adds:

While CBA’s volume momentum in housing lending has improved and BDDs charges remain benign, we do not believe this justifies the extent of its valuation premium to peers, and note the 52% 12-month forward PPOP premium it is currently trading on versus peers (ex-dividend adjusted), compared to the 24% 15-year average.

In light of this, the broker has reiterated its sell rating with an improved price target of $82.61 (from $81.98). Based on the current CBA share price of $117.09, this implies potential downside of approximately 30% for investors over the next 12 months.

The broker then concludes:

Coupled with i) a business mix that leaves it more exposed to the current competitive environment, and ii) while CBA has historically done a good job in balancing investment and productivity, we do not think it can escape elevated FY24E cost pressures given heightened inflation; we reiterate our Sell recommendation.

The post Do CBA shares justify their ‘valuation premium’ following the bank’s Q3 update? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Why are CBA shares sliding following the bank’s quarterly update?
• CBA share price on watch following $2.4b third quarter profit
• 5 things to watch on the ASX 200 on Thursday
• Are CBA shares a buy or a sell ahead of Thursday’s update?

There are plenty of quality ASX dividend shares to choose from on the Australian share market.

But which ones are buys?

Three that have been tipped as best ideas by analysts at Morgans in May are listed below. Here’s why they could be worth a look:

Dalrymple Bay Infrastructure Ltd (ASX: DBI)

The first ASX dividend share to look at according to Morgans is coal terminal operator Dalrymple Bay Infrastructure. It has an add rating and $3.03 price target on its shares.

The broker notes that the lack of appetite from ESG-focused investors means its shares are trading on low multiples and offering big yields. It said:

While DBI faces coal-related ESG headwinds, we think the stock may be attractive to income-oriented investors given its attractive cash yield (21.5 cps DPS guidance for the 12 months to June 2024). Furthermore, its CPI-linked and high margin revenues and numerous risk mitigants are enticing attributes for investors looking for a defensive element to their portfolios. Potential share price catalysts are value accretive organic capital investment and takeover potential.

Morgans expects dividend yields of 7.6% in FY 2024 and 7.8% in FY 2025.

QBE Insurance Group Ltd (ASX: QBE)

Morgans believes that QBE would be a great option for income investors. It has an add rating and $17.96 price target on its shares.

This bullish view is due largely to its attractive valuation, rate increases, and cost reductions. The broker explains:

With strong rate increases still flowing through QBE’s insurance book, and further cost-out benefits to come, we expect QBE’s earnings profile to improve strongly over the next few years. The stock also has a robust balance sheet and remains relatively inexpensive overall trading on 8x FY24F PE.

Its analysts are forecasting partially franked dividend yields of 5.6% in FY 2024 and 6.1% in FY 2025.

Woodside Energy Group Ltd (ASX: WDS)

The broker also has this energy giant’s shares on its best ideas list with an add rating and $36.00 price target.

Its analysts think Woodside could be an ASX dividend share to buy thanks to its quality earnings and recent share price weakness. They said:

A tier 1 upstream oil and gas operator with high-quality earnings that we see as likely to continue pursuing an opportunistic acquisition strategy. WDS’s share price has been under pressure in recent months from a combination of oil price volatility and approval issues at Scarborough, its key offshore growth project. With both of those factors now having moderated, with the pullback in oil prices moderating and work at Scarborough back underway, we see now as a good time to add to positions.

Morgans is forecasting fully franked dividend yields of 4.4% in FY 2024 and then 5.6% in FY 2025.

The post Morgans names the best ASX dividend shares to buy in May appeared first on The Motley Fool Australia.

More reading

• Where I’d invest $7,000 in ASX dividend stocks right now
• Woodside share price smashes benchmark as government demands ‘more gas!’
• 5 things to watch on the ASX 200 on Thursday
• Woodside shares are down 17% in 6 months. Is now the right time to buy?
• Morgans names the best ASX 200 stocks to buy in May

Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. 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.

Looking for some welcome extra passive income from ASX dividend stocks?

Well then, you really are living in the lucky country.

The ASX offers a range of high-quality dividend stocks you may wish to add to your portfolio.

And unlike many international exchanges, like stock markets in the United States, many ASX-listed companies pay franked dividends. That can come in quite handy when it comes time to pay the ATO its pound of flesh each year.

If I had a spare $7,000 to invest right now, I’d lean towards buying larger companies listed on the S&P/ASX 200 Index (ASX: XJO). ASX 200 dividend stocks tend to have less volatile share price moves than their smaller peers. And many have lengthy track records of delivering reliable passive income to their shareholders.

I’d also prefer companies that pay franking credits. And I’d aim to invest in ASX dividend stocks that I believe will grow their payouts over the time they’re in my portfolio without sacrificing share price growth.

With $7,000 to invest, I’d likely only buy two stocks right now to get a decent exposure without burning too much on brokerage fees.

You’ll notice both these companies operate in distinctly different sectors. Over time, I’d look to build up my income portfolio to 10 or so stocks for some proper diversification.

With that said…

Two ASX dividend stocks I’d buy now for passive income

The first ASX dividend stock I’d buy for passive income now is ASX 200 bank stock Australia and New Zealand Banking Group Ltd (ASX: ANZ).

ANZ reported its half-year results on Tuesday.

The big four bank’s cash profit was down 1.0% year on year to $3.55 billion. However, management pleased shareholders by raising the interim dividend by 2.5%. That came in at 83 cents per share, franked at 65%.

The good news is there’s still time to grab that payout. Though not much!

ANZ shares will trade ex-dividend on Monday. Meaning if I want to bank that passive income, I’d need to own shares at market close today. I can then expect to be paid on 1 July.

Atop the interim dividend, ANZ paid a partly franked final dividend of 94 cents per share on 22 December.

This equates to a full-year payout of $1.77 per share.

At yesterday’s closing price of $28.79, that works out to a yield (partly trailing, partly pending) of 6.15%.

Which brings us to the second ASX dividend stock I’d buy now with my spare $7,000, ASX 200 oil and gas stock Woodside Energy Group Ltd (ASX: WDS).

Woodside’s dividends have come down over the past 12 months amid lower energy prices. The company was also struggling with regulatory approvals for its massive offshore Scarborough Energy Project.

But Scarborough is now proceeding to plan again, and the oil price is firming up.

The outlook for share price and income growth from this ASX dividend stock also improved yesterday. That followed Federal Resources Minister Madeleine King’s strong support for the long-term role of Australian gas in providing jobs and energy and helping the nation and its trading partners through the global energy transition.

As for the past 12 months, Woodside paid an interim dividend of $1.243 per share on 28 September and a final dividend of 91.7 cents per share on 4 April, both fully franked.

At yesterday’s closing price of $28.10, this ASX dividend stock trades on a fully franked trailing yield of 7.69%.

The post Where I’d invest $7,000 in ASX dividend stocks right now appeared first on The Motley Fool Australia.

More reading

• Woodside share price smashes benchmark as government demands ‘more gas!’
• 5 things to watch on the ASX 200 on Thursday
• Woodside shares are down 17% in 6 months. Is now the right time to buy?
• Analysts give their verdict on ANZ shares: Should you buy?
• Morgans names the best ASX 200 stocks to buy in May

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.

On Thursday, the S&P/ASX 200 Index (ASX: XJO) ran out of steam and sank deep into the red. The benchmark index fell 1% to 7,721.6 points.

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

ASX 200 poised to rebound

The Australian share market looks set to end the week on a positive note thanks to a strong session on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open 19 points or 0.25% higher this morning. On Wall Street, the Dow Jones was up 0.85%, the S&P 500 rose 0.5%, and the NASDAQ was 0.3% higher.

Oil prices rise

ASX 200 energy shares such as Beach Energy Ltd (ASX: BPT) and Karoon Energy Ltd (ASX: KAR) could have a good finish to the week after oil prices edged higher overnight. According to Bloomberg, the WTI crude oil price is up 0.8% to US$79.60 a barrel and the Brent crude oil price is up 0.7% to US$84.19 a barrel. Oil prices have been pushing higher since the US revealed lower than expected stockpiles.

Life360 results

The Life360 Inc (ASX: 360) share price will be one to watch when the location technology company releases its first quarter update. Last month, the company revealed that it had delivered record numbers during the quarter. This includes increasing its global monthly active users (MAU) by 4.9 million to 66.4 million. However, it didn’t reveal what impact this had on its revenue and earnings. That will be unveiled with today’s update.

Gold price rises

ASX 200 gold shares including Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a very good session after the gold price surged higher overnight. According to CNBC, the spot gold price is up 1.3% to US$2,352.9 an ounce. This was driven by the release of US jobs data, which was supportive of rate cuts.

Sell CBA shares

Goldman Sachs has run the ruler over the Commonwealth Bank of Australia (ASX: CBA) quarterly update. Unfortunately, the broker has seen nothing to change its mind that the banking giant’s shares are overvalued at current levels. It has reiterated its sell rating with an improved price target of $82.61. It said: “While CBA’s volume momentum in housing lending has improved and BDDs charges remain benign, we do not believe this justifies the extent of its valuation premium to peers.”

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

More reading

• Here are the top 10 ASX 200 shares today
• Here’s where the ASX 200 will finish the year: AMP
• Why are CBA shares sliding following the bank’s quarterly update?
• CBA share price on watch following $2.4b third quarter profit
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Life360. 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.

ASX small-cap shares have a history of being volatile, but it’s also the place where we can find the major winners of tomorrow. After everything that’s happened recently, is this the right time to hunt for hidden gems?

Names like Altium Limited (ASX: ALU), Pro Medicus Ltd (ASX: PME) and REA Group Ltd (ASX: REA) were all very small businesses over a decade ago. Now they’re all multi-billion dollar companies. Not every company will turn out as successful as that, but the small end of the market can be an exciting hunting ground.

Difficult environment for ASX small-cap shares

The market has faced a lot of disruption and volatility over the last two or so years because of elevated inflation and higher interest rates.

Fund manager Monash Investors has suggested over the last two years it has taken the market longer than usual to reward stocks that experience a (positive) step change in their outlook. This is because of a lower risk tolerance due to the “upward momentum in inflation and interest rates“.

In this situation, Monash Investors said, the ASX large-cap stocks have tended to do well because of their “strong balance sheets, more stable businesses and better share market liquidity“.

Inflation has supposedly largely benefited the revenue growth and profits of large companies, which are “more likely than small companies to have the pricing power to pass on inflationary pressures to preserve, or even grow, their margins”.

Is this the time to invest?

Monash Investors certainly thinks so, commenting:

However, now that inflation is moderating and the market is anticipating interest rate cuts, we are moving into a much more favourable environment for small caps. Looking forward the large cap stocks generally have modest growth outlooks, while the headwinds to small cap growth are abating. If history is any guide to the future, investors will increasingly look to invest in the smaller end of the market.

Some of the positions that appeared to be in the Monash Investors Sml Companies Trust (Hedge Fund) (ASX: MAAT) portfolio within the last couple of months included Johns Lyng Group Ltd (ASX: JLG), Credit Corp Group Limited (ASX: CCP), Austin Engineering Ltd (ASX: ANG), NRW Holdings Limited (ASX: NWH) and Monadelphous Group Ltd (ASX: MND).

I recently wrote two articles, here and here, about ASX small-cap shares that I thought (and still think) look like excellent longer-term opportunities for investors. I’ve already bought two of them for my portfolio.

The post Is it time to start buying up ASX small-cap shares? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• This ASX 200 stock crashed 12% in April. Is it now on the rebound?
• 2 under-the-radar ASX growth shares I just bought for my investment portfolio
• Here are the top 10 ASX 200 shares today
• 1 ASX stock to consider buying that could be the next Brickworks

Motley Fool contributor Tristan Harrison has positions in Altium and Johns Lyng Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, Johns Lyng Group, Pro Medicus, and REA Group. The Motley Fool Australia has recommended Johns Lyng Group, Pro Medicus, and REA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Telstra Group Ltd (ASX: TLS) shares have been a popular pick for dividend income for a while. There are plenty of reasons why this could be the best time to invest for years.

The ASX telco share is best known for its mobile network, but the business has a few other segments that also seem appealing to me. Before I get to that, let’s look at the dividend credentials of Telstra.

Growing dividend

The NBN transition was a difficult period for Telstra and its dividend, with the dividend and profit taking a hit.

However, now that the business is through that challenging change, it’s seeing regular profit growth and dividend increases. That’s what I want to see from a good ASX dividend share, particularly in this period of elevated inflation – dividend growth can offset higher expenses in our personal lives.

The Telstra interim dividend was increased by 5.9% to 9 cents per share. This translates into an annualised grossed-up dividend yield of 7%, which is materially more than what anyone can get from a savings account at the moment.

Estimates on Commsec suggest it could pay a grossed-up dividend yield of 7.4% in FY25 and 7.8% in FY26.

Infrastructure and data

I think there is one key factor that will help Telstra continue to deliver profit growth and dividend growth for the foreseeable future. It’s the ongoing growth of subscriber numbers – it seems many people are attracted to the telco’s market-leading network reliability and coverage. That helps attract subscribers and allows the business to keep investing in its network, keeping it at the number one spot.

There are two other promising areas that I’ll point to for the future of Telstra shares.

The first is that it is working on growing its wireless home broadband offering. If it can get more people using this 5G-powered broadband, Telstra will be able to capture a lot of the margin that is currently going to the NBN. Higher profit margins could help grow the net profit after tax (NPAT).

Another very promising development is the massive amount of data that is being used and processed in Australia (eg AI). That data has to get into Australia somehow, and Telstra owns a significant amount of subsea cable. Telstra is also investing in its own fibre network for extra capacity between capital cities. The huge growth of data centres could lead to more demand that Telstra carries through its networks, which is likely to be a boost for earnings over the long term.

I think the Telstra share price is compelling for the company’s defensive nature. According to Commsec, Telstra shares are valued at 17x FY26’s estimated earnings. I think it’s a very good time to invest for the long-term.

The post Are Telstra shares a top buy for dividend income? appeared first on The Motley Fool Australia.

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