Goldman says this ASX 200 share can rise 20% and offer a juicy dividend yield

This blue chip could be a top buy according to the broker.

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There are few things better than making an investment in an ASX 200 share that delivers strong returns and an attractive dividend yield.

Well, the good news is that Goldman Sachs thinks it has found one that does exactly that. In addition, it boasts a market leadership position and defensive earnings.

Which ASX 200 share offers all this?

The ASX 200 share in question is Dan Murphy's and BWS owner Endeavour Group Ltd (ASX: EDV).

According to the note, Goldman was pleased with the company's quarterly sales update, noting that it revealed a second consecutive quarter of market share gains in the alcohol retail market. It said:

EDV reported in-line 3Q24 results of A$2.9B sales +2.2% YoY, where the key highlight was Retail reversion back to market share gain vs COL for second consecutive quarter and Hotel gaming revenues turning back into slight positive, implying margin support for 2H.

In light of the latter, the broker reiterates its view that the market is undervaluing its Hotels business. It adds:

Bottom line, we continue to believe that EDV's Hotel's business is under-valued with current market cap implying 4.0x FY25 EV/EBIT. As company continues to focus on driving higher ROIC from a range of options illustrated at the Hotels Strategy Day, we expect the stock to re-rate.

Big returns ahead

The note reveals that Goldman Sachs has reaffirmed its buy rating on the ASX 200 share with an improved price target of $6.30. Based on the current Endeavour share price of $5.24, this implies a potential upside of 20% for investors over the next 12 months.

But wait, there's more! As I mentioned at the top, Goldman is tipping this ASX 200 share to provide investors with an attractive dividend yield.

The note shows that the broker is forecasting fully franked dividend yields of 4.1% in FY 2024, 4.2% in FY 2025, and then 4.6% in FY 2026. This boosts the total potential 12-month return beyond 24%.

Commenting on why it thinks Endeavour would be a top pick right now, the broker concludes:

Our Buy thesis on the stock is based on the following key drivers: 1) Market share gain (already 40% market share) in defensive alcohol retail from consumer data and loyalty advantages; 2) Organic reopening beneficiary with its hotels/pubs business back to pre-COVID sales/property. We believe EDV is trading at a relatively attractive valuation, with potential downside from EGM tax changes already fully priced in. We are Buy rated on EDV.

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

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