1) The BHP Group Ltd (ASX: BHP) share price has jumped 4.5% higher to around $40.70 on Tuesday after the mining giant reported the second biggest profit in the company's history. The mining giant declared a final dividend of $US1.75 bringing the full-year BHP dividend to $US3.25, nicely ahead of analyst consensus.
On a trailing basis, the BHP share price trades on a fully franked dividend yield of over 11% and a price-to-earnings (P/E) multiple of just six times earnings. No wonder BHP shares are jumping higher, although the BHP share price still remains down 11% over the past 12 months.
Looking ahead, BHP said, "growth momentum has slowed across many key regions, and caution remains due to geopolitical uncertainty as well as COVID-19."
Profits and dividends are likely to be lower next year as costs rise and global growth slows, making the historical valuation metrics just that — historical. Still, absent a collapse in commodity prices, BHP shareholders are likely to bank nice fully franked dividends well into the future.
With the Commonwealth Bank of Australia (ASX: CBA) share price looking downright expensive, and its dividend yield somewhat modest, it could be a case of BHP — despite its cyclicality — being a better dividend play than the banks going forward.
2) Who'd be a stock picker in this current economic environment?
Are we heading for a recession? Hard or soft one?
Will the consumer put the brakes on discretionary spending, and by how much?
How high will inflation go, and therefore interest rates?
For some companies, comparisons to prior periods are virtually depending on whether we were on the COVID cycle.
Take Temple & Webster Group Ltd (ASX: TPW), the leading pure-play online retailer in the furniture and homewares market. Although it reported revenue growth of 31% for FY22, July trading is down 21% year over year, with August (to 14th) down 17%.
If I was a betting man, I'd have bet the Temple & Webster share price might have taken a turn south on today's trading update.
And I'd have been wrong, big time. The Temple & Webster share price has soared more than 20% to $5.43 in Tuesday trading with investors seemingly taking a long-term positive view of the company's prospects. Wonders will never cease…
Perhaps it's that Temple & Webster said, "month-to-month seasonality suggests a return to double digit growth during FY23 once we finish lapping COVID lockdowns from the year before".
Perhaps it's that Temple & Webster has upgraded its EBITDA margin guidance for FY23 from 2%–4% to 3%–5%.
Perhaps it's that the Temple & Webster share price is down 60% from its September 2021 highs, and bargain hunters are out in force. The company is capitalised at $635 million of which $101 million is in cash.
Long-term, Temple & Webster says the Australian furniture and homewares market significantly lags the online penetration of other countries such as the United States and United Kingdom. Compared to Wayfair, the US online market leader, Temple & Webster has the opportunity to almost treble its market share in the years ahead.
Retailing is tough. Selling discretionary items in a period of lower consumer confidence and higher interest rates is even tougher. Today's jump in the Temple & Webster share price may be more a relief rally than anything else. It's not one for me.
3) For the past few months, I've been fishing around amongst the wreckage that is the bombed out recent-IPO sector.
Plenty of COVID beneficiaries rushed to market last year, taking advantage of once-in-a-generation trading conditions to raise a shedload of cash.
Good for them, but very unfortunate for shareholders who bought into long-term growth stories which ultimately turned out to last as long as COVID lockdowns.
The poster child for this might be Step One Clothing Ltd (ASX: STP), a direct-to-consumer online retailer selling men's and women's underwear.
After a series of profit warnings, the Step One share price has collapsed from a high of $3 in November last year to trade at just 31 cents today, a devastating fall of 90%.
Step One is not a company I'll be buying. It operates in a very competitive market, and it relies on influencers and paid advertising on Facebook for its new customers, something that worked well in a locked-down world, but not so well now underwear is being worn, you know, under clothes again.
Yet, Step One sports a market cap of $58 million, of which $27 million was in cash as at 30th April 2022. It is forecasting sales of $73 million for FY22 and EBITDA of around $8 million, albeit almost all that was earned in the first half of the year.
By all measures, Step One shares look cheap. The company continues to talk a good game, with the Step One founder and CEO, Greg Taylor saying in May he remains confident in its "unique product proposition" and is "laser focused on our long-term growth ambitions."
Step One reports on Tuesday 23 August. Do you feel lucky? Like Temple & Webster shares today, I wouldn't be surprised to see Step One shares jump higher. I'll be watching, with interest, from the sidelines.
