The S&P/ASX 200 Index (ASX: XJO) has kicked off this Friday’s trading on a shaky note. At the time of writing, the ASX 200 has slipped a tentative 0.05% to just over 7,353 points. But let’s talk about the Australian Foundation Investment Co Ltd (ASX: AFI), or AFIC, share price.

This venerable listed investment company (LIC) closed at $7.27 a share yesterday. But this morning, AFIC shares opened at just $7.06 each and are currently trading at $7.04, down a hefty 2.36%.

This is a highly unusual move for the AFIC share price. After all, this conservative LIC holds a portfolio of blue-chip ASX 200 shares. As such, its share price tends to move up and down more or less alongside what the broader markets are doing. So why are AFIC shares underperforming the markets by more than 2% this Friday?

Well, it’s for a reason that most investors would actually welcome. As we warned yesterday, today is AFIC’s ex-dividend date for its upcoming final dividend.

AFIC share price falls as LIC trades ex-dividend

When a company announces a dividend, it must also select an ex-dividend date to precede the payment date. This date effectively cuts off new investors from receiving the dividend. So if you owned AFIC shares as of yesterday’s close, you are in line for the LIC’s latest payout. If you bought shares this morning though (or buy them from now on), you miss out this time.

As such, AFIC shares inherently became less valuable overnight as they, as of today, now do not come with the rights to this latest dividend. That’s why we are seeing such an obvious (and seemingly unprovoked) fall in the AFIC share price today. It’s a very normal reaction for an ASX share to have upon trading ex-dividend.

AFIC announced its latest final dividend back on 26 July, which we covered at the time. Investors will receive a payment of 14 cents per share, fully franked, in exactly three weeks from today, on 1 September next month.

This happens to be the eleventh year in a row that AFIC has paid out a final dividend of 14 cents per share. Yep, investors got exactly the same payout back in August of 2013.

That might have come as something of a disappointment for AFIC investors, who were treated to a dividend pay rise six months ago when AFIC paid out an interim dividend of 11 cents per share. That was 10% above the 10 cents investors got last year.

On current pricing, AFIC shares remain down by 5.6% in 2023 to date, as well as by 11.3% over the past 12 months:

Right now, the AFIC share price has both a trailing and forward dividend yield of 3.55%.

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

More reading

• Hoping to bag the latest AFIC dividend? You’d better hurry
• Returning capital: These ASX companies have been buying back their shares in 2023
• Own AFIC shares? Here’s what you need to know about the latest dividend

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.

The Newcrest Mining Ltd (ASX: NCM) share price is seeking direction on Friday, wobbling from modest losses to modest gains.

Shares in the S&P/ASX 200 Index (ASX: XJO) gold stock closed yesterday trading for $25.95. In morning trade on Friday, shares are swapping hands for $25.85, down 0.4%.

This follows the release of Newcrest’s full financial year results for the 12 months ending 30 June (FY23).

(*Note all figures in US dollars.)

Newcrest share price wobbles on mixed results

• Underlying profit of $778 million, down from $872 million in FY22
• Revenue of $4.5 billion, up 7% year on year
• Earnings before interest, taxes, depreciation and amortisation (EBITDA) of $2.1 billion, in line with FY22
• Net debt up 10% year on year to $1.5 billion
• Free cash flow of $404 million
• Fully franked final dividend of 20 US cents per share; total FY23 dividends of 55 US cents per share up 16% year on year

What else happened during the year?

Newcrest reported an 8% increase in gold production over the year to just over 2.1 million ounces. Copper production was up 10% from the prior year to 133,000 tonnes.

But the Newcrest share price won’t be getting any tailwinds today from the 11% fall in full-year profits. The company said that was mainly due to lower copper prices than it realised in FY22, along with higher operating costs. Profits were also impacted by inflation and increased finance costs for its higher levels of debt.

Investors who want to grab the final dividend will need to own Newcrest shares at market close next Thursday. The ASX 200 gold stock trades ex-dividend on 18 August. Those dividends will hit eligible investors’ bank accounts on 18 September. Payments made in Australian dollars will be converted from US dollars at the prevailing exchange rate on 21 August.

Among the biggest news of the year was Newcrest’s binding scheme implementation deed with United States-based gold giant Newmont Corporation (NYSE: NEM) for Newmont to acquire 100% of Newcrest’s shares by way of a scheme of arrangement. Newmont’s initial expressions of interest earlier in the year sent the Newcrest share price sharply higher.

The Newcrest board has unanimously recommended shareholders vote in favour at a Scheme Meeting, which management expects to hold in October.

What did management say?

Commenting on the results that are giving the Newcrest share price a case of the wobbles in morning trade today, interim CEO Sherry Duhe said:

Our balance sheet remains in excellent shape, sitting comfortably within all our financial policy targets as we continued to invest in our organic portfolio of value generating projects…

We made significant progress against our growth strategy with key study milestones achieved at Cadia and Lihir, the signing of the Framework MOU at the world-class Wafi-Golpu copper-gold deposit, and continued success realised through the Brucejack transformation program.

Citing a number of other exploration successes over the year, Duhe added, “Our global gold and copper portfolio is very well placed for the future.”

What’s next?

Looking at what might impact the Newcrest share price in the year ahead, the company is forecasting 2.0 million to 2.3 million ounces of gold production and 120,000 to 140,000 tonnes of copper production, largely in line with FY23’s results.

Newcrest expects an all-in-sustaining cost (AISC), which includes sustaining capital expenditure, of $2.2 billion to $2.6 billion.

Newcrest share price snapshot

The Newcrest share price is up 35% in a year, not including the two dividend payouts.

The post Newcrest share price dips amid higher FY23 dividends but lower profits appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• 3 things ASX investors should watch this week
• 5 things to watch on the ASX 200 on Friday
• Are ASX 200 gold shares in for this ‘additional upside’ in 2023?
• Why are ASX gold shares losing their shine on Friday?

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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 Allkem Ltd (ASX: AKE) share price looks set to end the week on a positive note.

In morning trade, the lithium miner’s shares are up 3% to $14.96.

Why is the Allkem share price rising?

Investors have been buying the company’s shares today after it announced a mineral resource upgrade to its James Bay Lithium Project in Canada.

According to the release, the updated mineral resource is now 110.2 Mt at 1.30% Li2O. This includes 54.3 Mt at 1.30% Li2O in the Indicated category and an additional 55.9 Mt at 1.29% Li2O in the Inferred category.

Management believes this solidifies the status of the James Bay Lithium Deposit in Québec as a tier-1 lithium pegmatite mineral resource and long-life asset.

The good news is that it may not stop there. The company notes that the maiden inferred mineral resource in the NW Sector remains open along strike and at depth with excellent growth potential.

Allkem revealed that a significant campaign of infill and extensional drilling is planned during the Canadian winter. This will test for along-strike and down-dip extensions of the pegmatite dykes beyond the area included in this mineral resource estimate.

‘Amongst the best in the world’

Allkem’s managing director and CEO, Martin Perez de Solay, was pleased with the news. He believes the company has one of the best assets in the world in its portfolio. The CEO said:

James Bay is now one of the largest spodumene lithium assets and clearly has the potential to grow even further as the boundaries of mineralisation are tested through an additional drilling program commencing later in the year.

The size and grade of this resource is amongst the best in the world and will underpin Allkem plans for future production and processing of lithium in Québec.

The Allkem share price is now up 20% over the last 12 months.

The post ‘Amongst the best in the world’: Why the Allkem share price is charging higher today appeared first on The Motley Fool Australia.

More reading

• These ASX lithium shares could rise 30%+: analysts
• Own Allkem shares? Here’s what to expect from its FY23 results
• ‘Sudden and volatile’: Is a lithium price shock coming for ASX 200 lithium shares?
• Bell Potter names 2 of the best ASX 200 shares to buy in August
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has positions in Allkem. 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 REA Group Ltd (ASX: REA) share price is on the move on Friday following the release of the company’s FY 2023 results.

At the time of writing, the property listings company’s shares are up 1% to $159.89.

REA share price higher on FY 2023 results

• Revenue up 1% to $1,183 million
• Operating expenses up 7% to $532 million
• Earnings before interest, tax, depreciation and amortisation (EBITDA) down 3% to $651 million
• Net profit down 9% to $372 million
• Earnings per share down 9% to $2.82
• FY 2023 dividend down 4% to $1.58 per share

What happened during the year?

For the 12 months ended 30 June, REA reported a 1% increase in revenue to $1,183 million.

This was driven by the strong performance of REA India, with revenue up 46% year on year. Australian revenue declined by 1%, with yield growth across advertising products being more than offset by the challenging market. The latter saw national listings fall 12% in FY 2023.

Supporting its Australian revenue was its leadership position. A total of 12.1 million people visited each month on average during FY 2023, which represents 61% of Australia’s adult population. Furthermore, there were 120.6 million average monthly visits, which is 3.3 times more visits than the nearest competitor each month on average.

REA’s operating costs increased by 7% to $532 million. While Australian operating costs growth was restricted to 1% thanks to the tight management of employee costs and lower marketing spend, its Indian operation was not as tightly controlled. It reported higher costs from continued investment in people, increased marketing, and growth in revenue-related costs.

This ultimately led to the company posting a 3% decline in EBITDA to $651 million and a 9% reduction in net profit to $372 million.

In light of this profit decline, the REA board cut its FY 2023 fully franked dividend by 4% to 158 cents per share. This includes an 83 cents per share final dividend.

How does this compare to expectations?

While its performance might not be much to write home about, it has come in a touch ahead of what the market was expecting.

Goldman Sachs was expecting REA to report revenue of $1,182 million, EBITDA of $636 million, and a net profit of $367 million. Whereas the market was looking for EBITDA of $633 million.

This earnings beat could be boosting the REA share price today.

Market-beating returns

The housing market may not have been on fire over the last 12 months, but the REA share price certainly has. As you can see on the chart below, it is now up 20% since this time last year.

Management commentary

REA CEO Owen Wilson was pleased with the company’s performance in a difficult market. He said:

Our year-on-year performance reflects the comparatively very strong listings environment in 2022.

Despite the significantly lower listings in FY23, REA Group’s result demonstrates the strength and resilience of our business as customers continued to prioritise our premium products, leading platforms, and superior audience.

Our Indian business continued to deliver exceptional revenue growth and extended its leadership position as the No.1 property portal by audience in the Indian market.

Outlook

Wilson appears optimistic about the future and believes the company is well-positioned for growth.

The company is also doing its bit with costs and is targeting positive operating jaws (revenue growing quicker than costs) for the group. That’s despite management expecting operating cost growth for both Australia and India in the high single-digits to low double-digits. This reflects employee cost increases and technology cost inflation.

Mr Wilson commented:

The fundamentals of the Australian property market remain healthy. We are continuing to see strong demand and a return to price growth, and this is converting to a more attractive market for sellers. We believe stabilization of interest rates is within sight and expect this will lead to an increase in market activity.

In this environment, REA Group is well positioned for growth. We are focused on delivering products that provide the greatest value to customers and enhance the experience of our audience, and we see significant opportunities in the year ahead.

The post REA share price higher on FY23 earnings beat appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• 3 things ASX investors should watch this week
• 6 ASX 200 shares smashing new 52-week highs on Tuesday
• 5 things to watch on the ASX 200 on Tuesday

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

The Baby Bunting Group Ltd (ASX: BBN) share price is falling on Friday following the release of the company’s FY 2023 results.

In early trade, the baby products retailer’s shares are down 10% to $1.91.

Baby Bunting share price sinks on FY 2023 results

• Total sales up 1.7% to $515.8 million
• Comparable store sales down 3.6%
• Online sales down 8.6% to $103 million
• Gross margin down 118 basis points to 37.4%
• Pro forma net profit after tax down 51% to $14.5 million
• Full-year dividend down 51.9% to 7.5 cents per share (final dividend of 4.8 cents per share)

What happened in FY 2023?

For the 12 months ended 30 June, Baby Bunting delivered a 1.7% increase in total sales to $515.8 million.

This was driven by seven new store openings, which offset a 3.6% decline in comparable store sales and an 8.6% fall in online sales to $103 million. The latter now represents 20% of total sales. While this is down since last year, it remains up markedly from pre-COVID times.

Baby Bunting’s margins came under pressure in FY 2023, which weighed heavily on its profits. Management notes that its costs of doing business were up $16.5 million against the prior corresponding period. The key contributors were new and annualising stores, cost inflation, and one-off establishment costs associated with the launch of Baby Bunting marketplace and its New Zealand operations.

This ultimately led to the company’s pro forma net profit after tax falling 51% to $14.5 million, which forced the Baby Bunting board to cut its dividend by 51.9% to a fully franked 7.5 cents per share.

Thrown out with the bath water

It hasn’t been a good 12 months for shareholders. As you can see on the chart below, the Baby Bunting share price is now down 60% since this time last year.

Management commentary

Baby Bunting’s acting CEO, Darin Hoekman, commented:

We have continued to grow market share and experienced positive sales growth despite the increasing macroeconomic factors impacting the retail sector. While our category is less discretionary, our customers are not immune to cost-of-living pressures and we experienced sales decline towards the end of the year as consumer spending slowed.

[W]e have moved to focus on lowering our cost of doing business and managing our working capital to align to sales and the ongoing uncertainty around the trading environment. We are holding the right levels of inventory with minimal seasonal and clearance stock. Our net debt is modest and we have plenty of headroom in our banking facility. We have taken steps in July to reduce overheads and to manage cost inflation in stores and in our supply chain.

Outlook

Possibly weighing on the Baby Bunting share price today has been the company’s outlook commentary.

It reveals that during the last six weeks of trading, the company’s sales have fallen 4% over the prior corresponding period, with comparable store sales down 9%.

In light of the continued economic uncertainty and challenging trading environment, Baby Bunting has elected to not provide earnings guidance for FY 2024.

Hoekman concludes:

Baby Bunting has the leading position in our category and our strategy remains sound. We will continue to invest to grow and strengthen our market share with plans to open five new stores in Australia and New Zealand in FY24 and we will expand our product range and our marketplace offer.

The post Baby Bunting share price sinks 10% as profits crash appeared first on The Motley Fool Australia.

More reading

• Why AGL, Baby Bunting, Weebit Nano, and Westgold shares are dropping today
• Why 29Metals, Baby Bunting, Lynas, and Patriot Battery Metals are storming higher
• ‘Premium warranted’: Why this ASX 300 share just surged 23%
• 5 things to look for this ASX reporting season

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.

Interest rates have shot higher since mid-2022 as the Reserve Bank of Australia (RBA) tries to lower inflation. With the RBA cash rate now sitting at 4.1%, term deposits are offering investors a much higher rate of return and it’s more competitive with ASX shares.

Savers can now get an interest rate from term deposits of more than 5% (according to Canstar), which may be appealing considering it’s risk-free. This is much better than what was on offer at the start of 2022.

This is great for households that don’t want to see their wealth exposed to volatility. But there are some hidden risks to term deposits.

Term deposits vs ASX shares

Capital preservation may be the most important thing for some people, which is fine.

But if we think about what’s going on with inflation, a 5% interest rate isn’t actually enough to compensate the saver for the decline in ‘real’ value of those dollars.

According to the Australian Bureau of Statistics (ABS), the annual CPI inflation figure for the 12 months to June 2023 was 6%. Unless we get a 6% interest rate, the value of our cash has been eaten away by however much lower than 6% the term deposit rate is.

Putting $5,000 into a term deposit with a 5% interest rate would mean inflation eats away 1%, or $50, of the $5,000. The saver’s cash would be worth $4,950 after adjusting for inflation.

The only return that we can get from a term deposit is the interest.

Good ASX shares may be able to deliver a combination of both dividends and long-term capital growth. No one can say what return ASX shares are going to produce in the short-term, but the longer term has usually been positive.

For example, the Vanguard Australian Shares Index ETF (ASX: VAS), which tracks the performance of 300 of the largest Australian businesses, has returned an average of 8.8% per annum (not including the franking credits) since it started in May 2009.

There have been plenty of other investments that have delivered stronger rates of long-term returns than what the VAS ETF has, such as the exchange-traded fund Vanguard MSCI Index International Shares ETF (ASX: VGS) or the diversified investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

As a whole, ASX shares have outperformed the current (high) inflation rate and delivered good dividends. However, it must be said that the ASX share market returns are certainly not guaranteed to beat 6%, particularly in shorter time periods.

Emergency funds are important

Keeping some cash aside for an emergency is important. We never know when an emergency is going to happen – that’s why it’s an emergency!

Each Aussie adult needs to decide how much cash they need in an emergency fund – it may need to be enough to replace a car, or perhaps amount to multiple months of living expenses in case of a job loss.

For the purposes of an emergency fund, it’s worth considering a high-interest savings account that we can easily withdraw from (without losing interest). Pulling money out of a term deposit for an emergency could mean forfeiting all of the interest generated during the term.

Compounding can make a big difference

If we were to assume that a term deposit would pay a 5% interest rate for the next 20 years, which is definitely not a guaranteed thing if inflation falls and the RBA cuts rates, then a $5,000 term deposit would grow into $13,266.

Investing the $5,000 into ASX shares that make an annual return per annum of 9% over 20 years would grow into $28,000. Finding some good (ASX) shares that are able to compound the $5,000 at a rate of 11% per annum could turn into $40,000 after 20 years.

The post The risks of investing in term deposits over ASX shares in 2023 appeared first on The Motley Fool Australia.

More reading

• Why is the AFIC share price tumbling today?
• Newcrest share price dips amid higher FY23 dividends but lower profits
• ‘Amongst the best in the world’: Why the Allkem share price is charging higher today
• REA share price higher on FY23 earnings beat
• Baby Bunting share price sinks 10% as profits crash

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 Vanguard Msci Index International Shares ETF and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended 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.

An ASX-listed online retail platform that’s seen its stock price rocket 726% over the last 13 months has seen its founder overnight offload $100 million of shares.

Cettire Ltd (ASX: CTT) chief executive and founder Dean Mintz, as first reported in the Financial Review, on Thursday night sold 33.3 million shares for $3 each to professional investors.

That represents roughly 8.7% ownership of the luxury goods retailer.

Is it the real deal?

Cettire listed on the ASX in December 2020, and has polarised investors ever since.

The platform sells luxury goods like shoes, coats and handbags to the public. Makers of such items don’t have as large an online presence as cheaper brands, so Cettire is certainly filling a niche.

However, it has had battles in the past from reluctant vendors. Cettire also itself doesn’t carry any stock, and earns its revenue from acting as a middle man.

The share price was as high as $4.32 in November 2021 before plunging in the growth sell-off during 2022.

However, from a bottom of 38 cents in mid-July last year, it is now flying high to trade at $3.14.

Sell high

It looks like Mintz was making an opportunistic liquidation, with Cettire shares soaring more than 11% on Thursday after a buoyant annual report.

Sales had doubled for the 2023 financial year and the delivered margin was up 156%.

The outlook for the coming year isn’t bad either.

“FY 2024 has started strongly. Management advised that the positive trading momentum continues into FY 2024 as healthy demand remains,” reported The Motley Fool’s James Mickleboro.

“During the month of July, Cettire delivered positive adjusted EBITDA, with sales revenue increasing by approximately 120% over the prior corresponding period.”

The post This ASX stock’s rocketed 726% since last July. Now look what the founder’s done appeared first on The Motley Fool Australia.

More reading

• Why AMP, Boral, Cettire, and Lake Resources shares are racing higher today
• Cettire share price jumps 11% on dazzling FY23 growth
• Sell your Telstra shares to buy these ASX tech shares: Bell Potter
• Times are tough: Should I avoid ASX retail shares right now?
• ‘Unrelenting focus’: Why this ASX All Ords share is primed for market dominance

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

There are some ASX share investment decisions that I’ve made that I’d call contrarian, and they have done well for me so far.

Being contrarian is making investments that seem to go against the sentiment of the market. Sometimes it can mean investing in an individual ASX share that has been sold off, or perhaps investing when the whole market has declined.

Warren Buffett’s advice about when to invest (and not to) is very relevant here:

Be fearful when others are greedy and greedy when others are fearful.

Although I didn’t invest in it, an example of being contrarian about AGL Energy Ltd (ASX: AGL) shares in February has been the right call (so far).

Having a contrarian opinion is not about being contrarian for the sake of it, but because I/we think that the market is wrong or being too short-term about a company’s prospects.

Having said that, these are two ASX share investments that I have made in recent years that I’d call contrarian which have turned out well.

Fortescue Metals Group Ltd (ASX: FMG)

I think the best time to invest in many ASX mining shares is to invest with a contrarian mindset.

Commodity prices change all the time and seem to go through cycles. It’s unpredictable when the rises and falls are going to happen. But I believe that it’s when times look bleak for the commodity that it’s the best time to be looking at investing in an ASX mining share like Fortescue, BHP Group Ltd (ASX: BHP) or Rio Tinto Ltd (ASX: RIO).

Fortescue shares dropped to close to $14 in October 2021. That’s when there was a lot of uncertainty surrounding the Chinese real estate market, with multiple names (such as Evergrande) running into financial troubles.

I thought it looked good value after a heavy share price fall. I also liked that it was (and still is) investing heavily in green energy production, which could be a long-term value booster for shareholders.

At that lower level, I liked that I was getting cheaper exposure to Fortescue Future Industries (FFI) and a good future dividend yield. I also believed the iron profit would bounce back.

Since that investment, the Fortescue share price has risen 52% and I’ve also received fully franked dividends amounting to a 20% return.

Brickworks Limited (ASX: BKW)

Brickworks is one of the largest building manufacturers in Australia. How the housing market and interest rates are going can have a big effect on the (perceived) outlook for this company.

Roughly a year ago, the Brickworks share price fell as investors worried about the impacts of all of the interest rate hikes, for both the wider market and Brickworks, leading to the Brickworks share price falling to just $20 after being above $24 earlier in 2022.

I believe building products is another cyclical industry, and the best time to invest is when the market is bearish about housing and construction.

Not only was the Brickworks share price down, but it was trading at a large discount to the underlying value of its Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares and industrial property holdings. I think that backdrop provided plenty of protection against the volatility, and gave me a good margin of safety to invest. My contrarian ASX share investment here has risen by 26% in less than a year. I’ve also received 64 cents of dividends since then, being a fully franked dividend yield of 3.1%.

The post 2 contrarian ASX share investment decisions that have paid off big for me appeared first on The Motley Fool Australia.

More reading

• Top ASX shares wealthy young investors are buying right now
• What might Chinese deflation mean for ASX 200 iron ore shares?
• Here’s Goldman Sachs’ latest forecast for the iron ore price
• Turning an empty ASX share portfolio into $20,000 of yearly passive income… in just 15 years
• Rio Tinto boss ‘cautiously optimistic’ on China. What does it mean for ASX iron ore shares?

Motley Fool contributor Tristan Harrison has positions in Brickworks, Fortescue Metals Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks 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.

Turning a small investment into a substantial portfolio might sound like a financial fairy tale, but in the world of ASX shares, this dream can become a reality.

The magic ingredients? Consistency, patience, a buy and hold attitude, and compounding.

Investing $500 a month

Although a $500 investment might seem insignificant, it’s the consistent application of this amount that works wonders over time. Regular monthly investments into ASX shares allow you to capitalise on the power of compounding and dollar-cost averaging. The latter is a strategy where you invest a fixed amount at regular intervals, regardless of market fluctuations. This approach not only reduces the impact of market volatility but also encourages a disciplined investment habit.

Diversification

Diversification is the backbone of a strong investment portfolio. Allocating your $500 monthly investment across a diversified group of quality ASX shares helps mitigate risks and capture opportunities across various sectors. Thankfully, the Australian share market offers exposure to a range of sectors including finance, technology, retail, healthcare, and resources. They can all play a role in your diversified portfolio, allowing you to tap into the broader growth potential of the Australian economy. Investors could also leverage exchange-traded funds (ETFs) to gain access to other markets.

The buy and hold mindset

One of the most critical components of turning a small investment in ASX shares into a substantial portfolio is embracing the buy and hold approach. Warren Buffett famously said, “The stock market is a device for transferring money from the impatient to the patient.” By resisting the urge to frequently trade based on short-term market fluctuations, you give your investments the time they need to weather market cycles and realise their full potential. In addition, the longer you invest, the more you can benefit from the power of compounding.

Reaching your $500k goal

With an average total return of 9.6% per annum since 1993, history shows that investing $500 into ASX shares each month could have turned into $500,000 in a little over 23 years. That means a 30-year-old could have built up a sizeable nest egg not long after turning 50 if they had followed this strategy. And while it is impossible to say what the market will do over the next 30 years, these returns are in line with the historical average. I feel this makes it a realistic goal for investors to target in the future.

The post Turning a small investment in ASX shares into a $500k portfolio appeared first on The Motley Fool Australia.

More reading

• Why is the AFIC share price tumbling today?
• Newcrest share price dips amid higher FY23 dividends but lower profits
• ‘Amongst the best in the world’: Why the Allkem share price is charging higher today
• REA share price higher on FY23 earnings beat
• Baby Bunting share price sinks 10% as profits crash

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.

Owners of Westpac Banking Corp (ASX: WBC) shares need to know about what was revealed in the Commonwealth Bank of Australia (ASX: CBA) report.

Westpac’s financial year runs on a different calendar to CBA. The Westpac financial year runs to September, whereas the CBA financial year finishes on 30 June 2023.

We won’t know what’s in the Westpac result for another three-ish months, but we can gain some insights into what’s going on in the banking sector by looking under the hood of CBA.

Arrears are rising

There has been a lot of talk and focus on household finances after all of the interest rate rises. How will Aussies handle the tightening being done by the Reserve Bank of Australia (RBA)?

CBA is starting to see a rise in arrears. In terms of home loans that are overdue by at least 90 days, the percentage increased from 0.43% at December 2022 to 0.47% at June 2023. But this wasn’t much of a change. The percentage of home loans overdue by 30 days increased materially more, going from 0.82% to 0.92%.

The personal loan arrears overdue by 90 days has increased by even more, from 0.95% at December 2022 to 1.19% at June 2023.

While CBA and Westpac may have different borrowers, I don’t think it would be too much of a stretch to suggest that Westpac may also be seeing a rise in its loan book arrears as well. This could have a key future influence on the Westpac share price.

NIM is being challenged

CBA revealed that the net interest margin (NIM) rose by 17 basis points (0.17%) over the 2023 financial year to 2.07%.

The increase in the NIM was explained by the rising interest rate environment. Some banks took longer to pass on interest rate rises to savers than borrowers, and banks can also earn more on transaction accounts where they don’t pay interest to customers.

I think it’s likely that Westpac will also have seen a higher NIM in FY23 than FY22, with the same dynamics at play.

However, CBA also said that its NIM decreased in the second half by 5 basis points compared to the first half of FY23. CBA said that its NIM was challenged by increased competition, particularly in home lending.

The monthly ‘spot’ margin “peaked in late 2022” and it’s continuing to manage headwinds for the margin.

Many ASX bank shares have been talking about increased competition, and Westpac may also be suffering the same headwinds for its margins, which may impact its share price.

There’s room for the dividend to grow

CBA’s board decided to increase the final dividend from $2.10 per share to $2.40 per share, an increase of 14%. The full-year dividend of $4.50 per share was an increase of 17%. That was despite the full-year cash net profit after tax (NPAT) only rising by 6% to $10.16 billion. Commsec estimates suggest that Westpac shares are going to generate earnings per share (EPS) of $2.12, which can fund an increase to the dividend per share of $1.40. That would represent an increase of 12% year over year and would be a grossed-up dividend yield of 9%.

The post What can owners of Westpac shares learn from the CBA result? appeared first on The Motley Fool Australia.

More reading

• Building a passive income from ASX shares the Warren Buffett way
• Own CBA shares? Broker warns that profits won’t reach FY23 levels again until 2028
• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• Why is the ANZ share price trailing the other ASX big four banks today?

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

The Webjet Limited (ASX: WEB) share price has been in fine form over the last 12 months.

Since this time last year, the online travel agent’s shares have raced 50% higher.

Where next for the Webjet share price?

The good news for investors is that one leading broker still sees plenty of room for Webjet’s shares to climb from current levels.

According to a recent note out of Morgans, its analysts have an add rating and $8.97 price target on the company’s shares. Based on the current Webjet share price of $7.70, this implies potential upside of more than 16% for investors over the next 12 months.

And while the broker isn’t expecting any dividends this year, it does see potential for them to return in FY 2024. It has pencilled in a 19 cents per share dividend for that financial year, which represents a 2.5% dividend yield.

Morgans believes that the company is well-placed after coming out of the COVID crisis with a much stronger business. It said:

In our view, WEB hasn’t wasted a crisis and will come out of COVID with a materially lower cost base, consolidated systems and a large business in the US.

Is anyone else bullish?

It isn’t just Morgans that sees value in the Webjet share price.

A recent note out of Citi reveals that its analysts have a buy rating and $8.80 price target on its shares, whereas UBS has a buy rating and $8.60 price target on them. This implies potential upside of 14% and 12%, respectively, over the next 12 months.

All in all, it seems that Webjet shares could still have plenty left in the tank based on what these brokers are saying.

The post Up 50% in a year, has the Webjet share price got any fuel left in the tank? appeared first on The Motley Fool Australia.

More reading

• Morgans says these are ASX 200 stocks to buy in August
• Experts forecast the ASX 200 winners and losers this earnings season
• Analysts are tipping big returns from these ASX 200 growth shares
• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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.

A number of ASX lithium shares have been generating big returns for their shareholders over the last 12 months.

The good news is that according to analysts, there are still plenty of potential gains to come.

For example, analysts say the three ASX lithium shares listed below could have 30% upside or more from current levels. Here’s what you need to know:

Allkem Ltd (ASX: AKE)

The first ASX lithium share that could be a buy with big potential returns is Allkem. It is the lithium miner behind the Mt Cattlin and Olaroz operations. Bell Potter is a fan of the company. It notes that “AKE is our preferred lithium exposure noting it is a top 5 global producer and its slated merger with Livent is expected to bring US$125 million per annum in synergies and expedite expansions.”

Bell Potter has a buy rating and $18.90 price target on its shares. This suggests potential upside of 30% for investors over the next 12 months.

Azure Minerals Ltd (ASX: AZS)

Bell Potter is also feeling very bullish on this lithium explorer due to the huge potential of the 60%-owned Andover Lithium project. Its analysts believe that the project is comparable to the Wodgina Lithium Project owned by Mineral Resources Ltd (ASX: MIN) and Kathleen Valley owned by Liontown Resources Ltd (ASX: LTR).

The broker has a speculative buy rating and $5.15 price target on its shares. This implies approximately 100% upside from current levels.

Pilbara Minerals Ltd (ASX: PLS)

The team at Macquarie remains very positive on this ASX lithium share and continues to rate it as its top pick in the industry. The broker was impressed with the company’s recent drilling results which have given the Pilgangoora Project mineral resource estimate a huge boost.

So much so, earlier this week, the broker retained its outperform rating with an improved price target of $7.50. This implies almost 40% upside for investors from current levels.

The post These ASX lithium shares could rise 30%+: analysts appeared first on The Motley Fool Australia.

More reading

• ‘Amongst the best in the world’: Why the Allkem share price is charging higher today
• 3 ASX mining shares up 500% to 2,000% in a year
• ‘Presents uncertainty’: What’s worrying the Pilbara Minerals CEO this week?
• Own Allkem shares? Here’s what to expect from its FY23 results
• Top ASX shares wealthy young investors are buying right now

Motley Fool contributor James Mickleboro has positions in Allkem. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Three ASX mining shares have absolutely shot the lights out over the past full year, with one posting gains north of 2,000%.

To put that into some context, the All Ordinaries Index (ASX: XAO) is up 4% in a year.

In a better comparison of like for like, the S&P/ASX 300 Metals & Mining Index (ASX: XMM) has gained 14% over this period.

So, which three ASX mining shares are leaving those gains well and truly in the dust?

Three ASX mining shares I wish I’d bought last year!

I don’t own any of these Aussie miners. But I sure wish I’d bought some of their stock a year ago!

The ‘laggard’ of the pack is Winsome Resources Ltd (ASX: WR1), posting a 532% gain over the last 12 months.

Investors began really bidding up the ASX lithium share in November on the back of a series of promising announcements. Those enticing announcements have continued apace this year.

On 13 June, Winsome reported “further strong intersections of lithium mineralisation” from the Main Zone at its Adina project in Quebec, Canada. Investors reacted by once again bidding up the stock.

The second ASX mining share I wish I’d bought last year is Azure Minerals Ltd (ASX: AZS), which is up 874% in 12 months.

Like Winsome, Azure has been stoking investor interest with some successful lithium exploration drilling programs.

The stock really began to rocket in June. And it’s maintained its momentum. On 14 July, Azure reported that assays at its joint venture Western Australian Andover Project confirmed two more “very broad intersections” of lithium mineralisation.

The company noted:

In conjunction with the strongly mineralised intersections previously reported, the new results continue to define strong continuity of broad widths of high-grade lithium mineralisation.

Which brings us to the third ASX mining share I’d like to have added to my portfolio a year ago, the aptly named Meteoric Resources NL (ASX: MEI), up an eye-popping 2,120% in 12 months.

The Meteoric share price really began to lift off in December. That’s when the miner reported it had acquired the Caldeira Project, a potential “world-class” ionic clay rare earth element project located in Brazil.

And the ASX mining share has continued to impress in 2023 with a series of positive announcements.

Atop its rare earths ambitions, Meteoric has been spurring investor interest with promising gold exploration results at its Palm Springs Gold Project, located in Western Australia.

The post 3 ASX mining shares up 500% to 2,000% in a year appeared first on The Motley Fool Australia.

More reading

• These ASX lithium shares could rise 30%+: analysts
• Top brokers name 3 ASX shares to buy today
• Why Azure Minerals, James Hardie, Pilbara Minerals, and Red 5 shares are rising
• Broker tips huge upside for this insanely hot ASX lithium share
• 3 ASX mining shares brokers rate as buys

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.

If you’re looking for dividends to boost your income, then you may want to consider the two ASX 200 shares listed below.

Both of these ASX 200 dividend shares have been named as buys by Goldman Sachs and tipped to provide investors with attractive fully franked yields. Here’s what you need to know about these shares:

Endeavour Group Ltd (ASX: EDV)

Goldman Sachs thinks that Endeavour could be an ASX 200 dividend share to buy.

The broker likes the company due to its industry-leading position and attractive valuation following recent weakness. It explains:

EDV, which has been over-sold on recent Victorian gaming restriction news that is unlikely to have a significant impact on earnings and hence we reiterate Buy, and now add to Conviction List given attractive valuation for a clear leader in a staples Retailer; and 2) accelerated consolidation opportunity remains in tougher hotels environment.

In respect to dividends, Goldman is forecasting fully franked dividends of approximately 21 cents per share in FY 2023 and 22 cents per share in FY 2024. Based on the current Endeavour share price of $6.02, this equates to yields of 3.5% and 3.65%, respectively.

Goldman has a buy rating and $7.00 price target on the company’s shares.

Super Retail Group Ltd (ASX: SUL)

Another ASX 200 dividend share that Goldman Sachs is positive on is Super Retail. It is the retailer behind the BCF, Macpac, Rebel, and Super Cheap Auto brands.

The broker believes Super Retail’s shares are great value at the current level, especially given the resilience of its businesses and its loyalty program. Goldman expects the latter to be a big competitive advantage. It explains:

We believe that the company’s positive trading update continues to display resilience that is built upon its competitive advantage of high loyalty (~10m active members accounting for >70% of sales) and this will be further bolstered in 2H23 as the company launches the Rebel loyalty program and continues to build personalisation capabilities.

Goldman is expecting this to underpin fully franked dividends per share of 71 cents in FY 2023 and then 63 cents in FY 2024. Based on the current Super Retail share price of $12.40, this will mean yields of 5.7% and 5.1%, respectively.

Its analysts have a buy rating and $13.60 price target on its shares.

The post 2 ASX 200 dividend shares with fully franked yields to buy: analysts appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• 7 mighty companies I’d invest in to build a defensive ASX portfolio
• 2 high-yield ASX dividend stocks analysts rate as buys
• This pair of ASX 200 shares are at the top of my watchlist for August. Here’s why
• 9 ASX shares Goldman Sachs tips to positively surprise this earnings season

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 and Super Retail Group. The Motley Fool Australia has positions in and has recommended Super Retail Group. 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) was on form and pushed higher. The benchmark index rose 0.25% to 7,357.4 points.

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

ASX 200 expected to fall

The Australian share market looks set to end the week in a subdued fashion despite Wall Street rising overnight. According to the latest SPI futures, the ASX 200 is expected to open 20 points or 0.25% lower this morning. In the United States, the Dow Jones was up 0.15%, the S&P 500 rose 0.05% and the NASDAQ climbed 0.1%.

REA results

REA Group Ltd (ASX: REA) shares will be on watch on Friday when the realestate.com.au operator releases its full-year results. According to a note out of Goldman Sachs, its analysts are expecting REA to report revenue of $1,182 million, EBITDA of $636 million, and a net profit of $367 million. The latter will be down from $407.5 million a year earlier.

Oil prices fall

ASX 200 energy shares such as Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a poor finish to the week after oil prices tumbled overnight. According to Bloomberg, the WTI crude oil price is down 1.8% to US$82.87 a barrel and the Brent crude oil price is down 1.3% to US$86.39 a barrel. Concerns over Chinese demand weighed on oil prices.

Gold price falls

ASX 200 gold miners including Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Ltd (ASX: NCM) could have a soft finish to the week after the gold price edged lower overnight. According to CNBC, the spot gold price is down 0.25% to US$1,945.9 an ounce. This follows the release of US inflation data.

Liontown rated neutral

Goldman Sachs has been running the rule over Liontown Resources Ltd (ASX: LTR) shares following a site visit. This has led to the broker retaining its neutral rating with a trimmed price target of $1.40. This implies almost 50% downside from current levels. Goldman said: “On our LT spodumene price of US$1,000/t (real 2027), LTR is trading at a premium to our NAV at 1.7x (peer average ~1.2x), and remains at a premium to peers on implied LT spodumene price of ~US$1,500/t (peer average ~US$1,200/t).”

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

More reading

• Newcrest share price dips amid higher FY23 dividends but lower profits
• REA share price higher on FY23 earnings beat
• Here’s what happens when you cash out your ASX dividends
• Here are the top 10 ASX 200 shares today
• 7 ASX 200 shares dodging the doldrums to crack new 52-week highs

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

Investors keep hearing that the ASX is dominated by miners and banks, which is undoubtedly true.

But that means it’s easy to forget there are plenty of finance stocks to buy that aren’t one of the big banks.

The major players, although stable and reliable, are working with very static market share. They may hand out reasonable dividends, but growth is anaemic.

If you want a chance at really cashing in during these times of steeply rising interest rates, it’s worth considering smaller-cap ASX finance shares.

Here are two that the team at Celeste Funds Management is backing right now:

‘Extremely conservative guidance’

Debt buying business Credit Corp Group Limited (ASX: CCP) enjoyed a whopping 19.2% gain in its share price last month.

Celeste analysts attributed this to “industry feedback that the pricing of new debt ledger purchasers in the US had begun to soften”, which is a great omen for Credit Corp’s future earnings.

Unfortunately, just last week Credit Corp shares gave back much of those July gains after its annual financial report.

The Celeste team is not in the least bit worried though, with the stock remaining the fourth largest holding in the fund.

“While the FY23 result was solid, meeting market expectations, the outlook for FY24 was weaker than expected due to what we view as extremely conservative guidance.”

According to CMC Markets, four analysts believe Credit Corp is a strong buy, while four others insist it’s a hold.

Over the past year, the Credit Corp share price has dropped around 11%.

‘46% growth over the last 12 months’

Small business lender Judo Capital Holdings Ltd (ASX: JDO) could face some short-term problems with borrowers who may default during the difficult economic conditions.

Regardless, the stock rocketed 15.2% over July after revealing gross loans had reached $8.9 billion at the end of June.

“This 46% growth over the last 12 months was driven by increased banker activity and ongoing market share growth.”

Similar to Credit Corp, the hot July performance has been cancelled out somewhat by a 9.7% drop so far this month.

The Celeste team has highly positive conviction about Judo’s potential in the coming years.

“While current market conditions are likely to see loan losses increase for the system, we believe that Judo is well placed to navigate these headwinds and use the well capitalised balance sheet to fund future growth.”

Judo Capital has other fans among the professional ranks, with five out of eight analysts currently surveyed on CMC Markets rating it a buy.

The post 2 ASX finance shares (not the big banks) Celeste is riding to the moon appeared first on The Motley Fool Australia.

More reading

• 9 ASX shares Goldman Sachs tips to positively surprise this earnings season
• Here are the top 10 ASX 200 shares today
• Why Credit Corp, Mesoblast, Talon Energy, and Weebit Nano shares are falling
• Credit Corp share price crashes 14% as full-year dividends cut
• 3 things ASX investors should watch this week

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

When it comes to wealth-building strategies, few names stand as tall as Warren Buffett. The Oracle of Omaha’s legendary approach to investing has consistently yielded impressive results. You only need to look at the most recent Berkshire Hathaway (NYSE: BRK.B) letter to shareholders to see this.

And while Buffett hates to pay dividends, he certainly loves to receive them.

This makes him a great investor to follow if you want to generate a passive income stream from ASX shares.

Let’s take a look to see how anyone can build a Buffett-inspired dividend-focused ASX share portfolio with an eye on long-term growth.

Investing in high-quality ASX dividend shares

Warren Buffett is well-known for his love of quality and value. To set the stage for building a passive income, investors may want to focus on buying shares of companies with solid fundamentals, robust market positions, and a history of consistent dividend payouts. Think of household names like Coles Group Ltd (ASX: COL) or Telstra Group Ltd (ASX: TLS).

The power of long-term compounding

One of Buffett’s most famous quotes is: “My favourite holding period is forever.” It isn’t hard to see why given the power of compounding. ASX shares have delivered an average total return of 9.6% per annum over the past 30 years. This would have turned a single investment of $50,000 in 1993 into almost $800,000 today. In addition, let’s not forget the passive income you could now generate with a portfolio of this size. With an average dividend yield of 4%, a $50,000 investment would generate $2,000 of dividend income. Whereas a portfolio of $800,000 would be pulling in approximately $32,000 of income with a 4% yield.

You don’t have to settle for average

While the ASX’s average dividend yield hovers around 4%, it’s entirely possible to construct a portfolio with even higher-yielding dividend shares when the time is right. This is particularly the case within the banking sector, which Buffett has plenty of exposure to, which has historically been a key contributor to dividend income in Australia. Banks such as Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) typically offer above-average yields. Were you to generate a 5% yield on your $800,000, you would generate $40,000 of passive income.

Final word

To truly channel the Warren Buffett way, investors should adopt his patient and disciplined investment approach. Buffett’s philosophy revolves around buying and holding quality assets for the long haul. The good news is that this mindset complements the goal of creating a passive income from ASX shares beautifully. The key is to come up with a plan and then stick with it for the long term.

The post Building a passive income from ASX shares the Warren Buffett way appeared first on The Motley Fool Australia.

More reading

• What can owners of Westpac shares learn from the CBA result?
• Own Telstra shares? Here’s your FY23 results preview
• Own CBA shares? Broker warns that profits won’t reach FY23 levels again until 2028
• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today

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

One of the things that ASX investors love the most would have to be dividends. Most ASX shares on the Australian stock market pay out some form of dividend to their investors.

This passive income from your shares forms a major component of the overall returns you can expect from your investing portfolio.

How dividends work

Dividends are cash payments made to the owners (shareholders) of a company out of its profits. Most ASX shares pay a dividend every six months. However, some investments offer quarterly or even monthly payments.

In Australia, a dividend might also come with franking credits too if the company has paid Australian tax on its profits. These franking credits can boost your investing returns even further. That’s either by giving you a tax deduction or else by allowing a cash refund for certain investors.

How can you receive ASX dividends?

Every company that pays out a dividend will give you the option to receive the payment in cash. This typically comes via an electronic funds transfer these days.

But some companies also give investors the option to opt for a dividend reinvestment plan (DRP) instead. If you go with a DRP, instead of receiving a cash payment, your dividend will be used to purchase additional shares in the company. This can help to boost the compounding process. That’s thanks to your new shares paying you out the next time it’s dividend payday.

Keep in mind that you still have to declare your dividends as income for tax purposes, even if you opt for the DRP. Sorry, there’s no free lunch there.

Using a DRP

Some investors love the simplicity of a DRP and its ‘hands-off’ nature. However, there can be a strong case made for either employing a DRP or cashing out your dividends.

On one hand, using a DRP does streamline the investing process. You are never tempted to pull your dividend cash out of your brokerage account on a big night out. Or else use the money for any other purpose that you might regret later. And DRPs do help to harness the power of compound interest very effectively, as you don’t usually have to pay brokerage charges on your new shares.

Additionally, there is an opportunity cost to investing. Every dollar you don’t reinvest is another dollar that isn’t working in the markets for you. The stock market tends to go up far more often than it goes down and has never failed to exceed a previous all-time high.

By that logic, it doesn’t make much sense to hoard money in your brokerage account and not put it to work. That’s the cost of cashing out your ASX dividends.

Should you cash out your ASX dividends?

But on the other hand, many investors like to exercise full control over their own buying and selling actions. You might be waiting for an opportunity to buy a company for a bargain share price. As such, it might be useful having that dividend cash lying around in case there is a big share market sale.

And you are still buying shares for all intents and purposes when you use a DRP. What are the chances that on the day your dividends reinvest into a company, it would be the single best investment idea that you could think of at that moment for your money? Chances are the stars won’t always be perfectly aligned.

So at the end of the day, using a DRP for your ASX dividends has both benefits and drawbacks. It will probably have to come down to your own personal investing style when deciding whether to cash out your dividends or not.

The post Here’s what happens when you cash out your ASX dividends appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• 7 ASX 200 shares dodging the doldrums to crack new 52-week highs
• Here are the top 10 ASX 200 shares today
• What might Chinese deflation mean for ASX 200 iron ore shares?

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.

Passive income investors may be interested to know that top broker Goldman Sachs is expecting National Australia Bank Ltd (ASX: NAB) shares to pay an annual dividend of $1.66 per share in FY23 and FY24.

Today, NAB shares closed the session at $28.60 a piece, which means a dividend yield of 5.6%.

ASX 200 bank stocks are a traditional favourite choice among investors seeking to maximise their passive income from share investments.

Currently, the big four ASX 200 bank shares are tipped to pay dividend yields of between 4.2% and 6.9%.

On top of these yields is 100% franking, which goes a long way to reducing the tax investors have to pay.

With NAB expected to release its 3Q FY23 update next Tuesday, is it time to buy NAB shares for a passive income boost?

Let’s review what the experts have been saying about NAB bank lately.

But first, prospective investors might like to see a comparison of FY24 dividend predictions for the big four banks.

So, let’s start there.

NAB shares to pay third highest passive income of the Big 4

Morgans is tipping Westpac Banking Corp (ASX: WBC) shares to pay $1.52 per share in dividends in FY24. That’s a 6.87% dividend yield based on today’s closing price of $22.14.

Goldman reckons Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares will pay $1.62 per share in dividends in FY24. That’s a 6.37% dividend yield based on today’s closing price of $25.40.

Commsec estimates suggest Commonwealth Bank of Australia (ASX: CBA) shares will pay $4.35 per share in dividends in FY24. That’s a 4.16% dividend yield based on today’s final price of $104.47.

What are the brokers saying about NAB shares?

It’s worth noting that NAB shares have had a run in recent months.

They’ve risen 13.95% from their 52-week low of $25.10 in June.

Currently, Goldman has a buy rating on NAB shares and a 12-month share price target of $30.69.

This suggests a potential upside of 7.3% from current levels.

That’s not much, but we have to remember that ASX 200 bank shares do not have a strong history of capital growth. They are generally valued by investors as dividend shares.

The exceptions are CBA and Macquarie Group Ltd (ASX: MQG), which are considered the growth shares among the ASX 200 banks.

Goldman likes NAB shares over the other banks because it sees “volume momentum over the next 12 months as favouring commercial volumes over housing volumes, and we believe NAB provides the best exposure to this thematic”.

Macquarie is neutral on the ASX 200 banks, but it ranks NAB the best of the bunch.

Macquarie says:

We see limited scope for banks to re-rate from current levels …

In the medium term, while banks appear cheap on an absolute basis and compared to their recent history relative to the broader market, we expect discounted valuations to persist until there is more clarity on the economic outlook.

History of NAB dividends and passive income for investors

The chart below shows the 20-year history of NAB dividends.

It shows the dividend amount paid and the percentage change compared to the year before.

As you can see, NAB shares have been a reasonably reliable passive income generator for investors.

NAB has a history of increasing or maintaining dividend levels in most years, with a few exceptions.

The most notable, of course, was in 2020, the year the COVID-19 pandemic hit us.

What’s the latest news from NAB?

NAB will deliver its third-quarter update next Tuesday.

As my Fool colleague James reports, Goldman has a few specific expectations.

For one, it’s expecting NAB to record a net interest margin (NIM) of 1.75% in FY23.

During the first half, NAB’s NIM came in at 1.77%.

Goldman is expecting NAB’s NIM to fall to 1.67% in FY24 and then 1.62% in FY25.

In terms of earnings, Goldman expects full-year FY23 cash earnings of $7,726 million.

In 1H FY23, NAB reported cash earnings of $4,070 million, up 17% on the prior corresponding period.

If Goldman is on the money, second-half cash earnings will be about $3,656 million.

Australia’s biggest bank, CBA, reports on a different timeline to NAB and other ASX 200 bank shares.

CBA just dropped its FY23 full-year results this week.

It reported a NIM of 2.07%. That was up by 17 basis points year-over-year, but there was also a decline in the second half by five basis points.

The full-year report was in line with expectations, and the CBA share price rose by 2.74% on the day.

The post Is now the time to buy NAB shares for passive income? appeared first on The Motley Fool Australia.

More reading

• Own NAB shares? Here’s what to expect from the bank’s Q3 update
• Experts forecast the ASX 200 winners and losers this earnings season
• How many NAB shares would I need to buy for $500 in monthly dividend income?
• My favourite ASX dividend stock to buy for reliable income
• Forget ‘saving’ for retirement. I’d buy undervalued ASX shares instead

Motley Fool contributor Bronwyn Allen has positions in Anz Group, Commonwealth Bank Of Australia, Macquarie Group, and Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Income investors are a lucky bunch! That’s because there are a great number of ASX 300 dividend shares to choose from.

But which could be buys? Two that brokers say could be dividend shares to buy are listed below:

Accent Group Ltd (ASX: AX1)

The first ASX 300 dividend share that could be a buy is Accent. Bell Potter believes the footwear-focused retailer is a buy with a $2.50 price target.

Importantly, for income investors, as well as material upside, the broker is expecting some big dividend yields in the near term.

Its analysts are forecasting fully franked dividends per share of 16.1 cents in FY 2023 and then 11.9 cents in FY 2024. Based on the latest Accent share price of $1.84, this represents dividend yields of 8.75% and 6.5%, respectively.

Sonic Healthcare Limited (ASX: SHL)

Another ASX 300 dividend share that could be a buy is Sonic Healthcare. Citi is positive on the medical diagnostics company and has a buy rating and $40.50 price target on its shares.

Its analysts believe that Sonic is well-positioned for long-term growth. Particularly given its strong balance sheet, acquisition opportunities, and organic growth.

In respect to acquisitions, the broker highlights Sonic’s opportunity in Germany. It notes that “SHL estimates that the top-5 players in Germany only have a 40-50% market share (SHL being #1), leaving room for further consolidation.”

Another positive is that the broker is forecasting a growing stream of dividends in the coming years. It expects fully franked dividends per share of 104 cents in FY 2023, 112 cents in FY 2024, and then 120 cents in FY 2025. Based on the current Sonic share price of $34.27, this will mean yields of 3% and 3.2%, and 3.4%, respectively.

The post Retail and health: Analysts say these ASX 300 dividend shares are buys appeared first on The Motley Fool Australia.

More reading

• 3 ASX 300 dividend shares to buy: analysts
• Brokers name 3 ASX 300 dividend shares to buy next week
• Top ASX shares to buy in August 2023
• How I’d start earning passive income from ASX shares to supplement my wages
• 3 ASX dividend shares analysts rate as buys

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