Question 1: Are the coal stocks, in particular New Hope and Whitehaven, a buy now?
Answer: I missed the “coal boom”, so I am a little hesitant to get involved now, particularly as in the long term, there will be significant ESG/green headwinds. Michael Gable, the MD of Fairmont Equities, was on Switzer TV on Monday (https://switzer.com.au/the-experts/switzer-tv/what-do-the-charts-say-about-the-us-market-reporting-season-hits-and-misses/ [1]). From a technical perspective, he nominated Whitehaven Coal (WHC) as one of his top picks.
As for the brokers, they are bullish on coal stocks. According to FN Arena, for WHC, the target price is $10.35, about 37.8% higher than the last ASX price of $7.51. There are 6 “buy” recommendations and 1 “sell” recommendation. For New Hope Corporation (NHC), the target price is $6.32, about 21.6% higher than the last ASX price of $5.20. All “buy” recommendations.
Question 2: We currently manage our own portfolio of 10 funds including the Switzer Dividend Growth Fund. We will be going into a retirement village and want to gradually transfer our shares into a managed fund to give us a monthly income. Which would be the best fund to give us dividends and income?
Answer: If you are just looking at equity funds and want the least cost, simplest solution, then I wouldn’t look any further than Vanguard’s Australian Shares Index ETF (VAS), an index fund that tracks the performance of the ASX 300. The management fee is just 0.10% pa, you are guaranteed to get “index performance” less a tiny fraction, and you will get “index” income – a yield circa 4%, with franking to about 75%.
The downside is that you won’t get outperformance.
If you want higher income, you could consider VHY, their Australian Shares High Yield Fund. You could do exactly the same for other asset classes, such as International Shares, Fixed Income and Infrastructure. Vanguard also has “pre-mixed” portfolios – for example, you can buy one relatively low-cost index fund that allocates monies in accordance with a “balanced” or “growth” risk profile. The balanced fund trades on the ASX under the code VDBA, the Vanguard Diversified Balanced Index ETF. If this sounds like an advertisement for Vanguard it is not meant to be…they are clearly the leaders in this area.
Question 3: A consortium has lodged a revised takeover offer for Origin Energy (ORG) at $8.90 per share, yet on the ASX, the shares are trading at $7.90. Why is there such a big difference?
Answer: Brookfield Asset Management and its partners are offering $8.90 per share, less any dividends paid. Origin has declared an interim dividend of 16.5c, so the effective offer price is $8.735.
The offer is conditional and indicative, but it is “firmer” than their first offer of $9.00 per share. If they go ahead, they propose to implement it through a scheme of arrangement, which will require 75% of Origin shareholders who vote to support.
The reason that the shares aren’t trading around the implied offer price is that there is some risk that a regulator will say “no” to some part of the transaction. Brookfield will need to get consents from both the ACCC and FIRB (Foreign Investment Review Board). If these consents aren’t forthcoming, the deal will fall away – in which case Origin’s share price would fall to “pre-bid” levels around $6.00.
Question 4: What is the last day to buy BHP’s share and get the dividend? When will it be paid?
Answer: BHP is paying an interim dividend of US 90c per share, or approximately A$1.32 (exact conversion amount to be determined). It will trade ‘ex’ the dividend on 9 March, so the last day to buy shares and receive the dividend is Wednesday 8 March.
Payment of the dividend will be made on 30 March. If you want to participate in the dividend re-investment plan (DRP), the last date to advice the share registry is by Monday 13 March.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.