1) In a welcome relief to the recent battering, the S&P/ASX 200 Index (ASX: XJO) is trading higher on Tuesday with energy stocks powering the benchmark index northwards.
This came despite United States markets again heading lower overnight Monday, albeit modestly so compared to Friday night's violent sell-off, where the S&P 500 lost 3.4% and the NASDAQ slumped 3.9%.
Doing the damage late last week was US Federal Reserve Chair Jerome Powell saying:
While higher interest rates, slower growth, and softer labour market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation.
So much for the economic soft landing so hoped for by the stock market bulls. The bond market, as demonstrated by an inverted yield curve, is signalling recession. The stock market is shooting first, asking questions later.
The best case scenario could be for a mild US recession, with a commensurate mild stock market correction. The S&P 500 index is already down 16% so far in 2022, having been down as much as 23% in June. Those lows could come back into play as Powell brings "some pain", starting with the next interest rate hike – either 50 or 75 basis points – on 20-21 September.
2) Here in Australia, the ASX 200 is down only 6% so far in 2022.
It could have been far worse were it not for energy stocks, primarily coal and oil.
The Whitehaven Coal Ltd (ASX: WHC) share price is up over 200% year to date, with the New Hope Corporation Limited (ASX: NHC) share price also burning higher, up 124% so far this year.
The Woodside Energy Group Ltd (ASX: WDS) share price has also had a stellar 2022, up 63%. Not bad for a company with a market capitalisation of $67 billion!
Powering Woodside shares higher today is a bumper set of results, including declaring its largest interim dividend since 2014. The dividend is US$1.09 per share, well up on the 30 US cents paid in FY21. On a trailing basis, Woodside shares trade on a dividend yield of 8.5%.
The Australian Financial Review (AFR) declared earnings season a "windfall" for ASX dividend share investors, saying Australian companies are on track to pay out more than $100 billion in dividends in the 2023 financial year.
So much for a recession here in Australia.
3) It's not just energy companies that trade on very attractive dividend yields.
The Best & Less Group Holdings Ltd (ASX: BST) share price is up 5% today to $2.75 after the discount retailer reported a "resilient trading performance" with revenue down just 6% despite 11% lost trading days.
Discretionary retailers are often hardest hit during periods of economic slowdown as consumers tighten their belts.
Exhibit A is the Premier Investments Limited (ASX: PMV) share price, down 33% so far in 2022, a highly unusual experience for shareholders in arguably one of the country's leading retailers.
Exhibit B is the City Chic Collective Ltd (ASX: CCX) share price, down 33% since reporting lacklustre results just last week, and down a very painful 70% year to date.
Retailing is a tough and fickle business at the best of times, let alone in times of lockdowns, supply chain challenges, staff shortages, rising inflation, and an economic slowdown. Good luck fighting those gale-force headwinds.
But Best & Less is powering forward, saying: "As we move further into an uncertain economic environment, with rising interest rates and cost-of-living pressures placing families under increasing financial strain, we expect an acceleration in the migration to value that is already underway."
With 90% of items sold being priced under $20, Best & Less says it expects Australian families facing cost of living pressures to increasingly prefer its specialty value offer.
Best & Less declared a fully franked final dividend of 12 cents per share, bringing the full year dividend to 23 cents. With Best & Less shares currently $2.75, they trade on a fully franked dividend yield of 8.4%.
4) Best & Less is one of those rare recent initial public offerings (IPOs) that is trading above its issue price, having raised $60 million at $2.16 per share.
Spare a thought for shareholders in well-and-truly-busted recent IPOs, Booktopia Group Ltd (ASX: BKG) and Adore Beauty Group Ltd (ASX: ABY), down 88% and 76% respectively from their 2020 issue prices.
Always on the lookout for a bargain, I've been sniffing around for anything that I think might have been a baby thrown out with the bathwater.
After experiencing a modicum of success in the June sell-off, the unforgiving market has recently dealt me some punishment, handing me back some of my short-lived gains, sometimes with interest.
Stock picking can be a very humbling endeavour.
5) One recent IPO that I don't own, but looks interesting in more than just name, is BirdDog Technology Ltd (ASX: BDT). The company describes itself as a global video technology company that enhances the quality, speed, and flexibility of video.
The BirdDog Technology share price is down 72% from its 65-cent IPO issue price in November 2021, some of it deservedly so given a financial performance that has been underwhelming. But with a host of new video technology products, and an acceleration of key strategic partnerships, BirdDog looks to be well placed to deliver strong organic growth in the coming year.
The BirdDog share price trades at 18 cents and the company is capitalised at just $36 million. Of that, as at 30 June 2022, $23 million was in cash and $18 million was in current inventory.
With the company trading at around breakeven in Q4, the downside looks to be limited, to say the least.
