Dividends are one of the essential factors for Australian investors, particularly those who want to live off the income generated by their investments. Because well-established blue-chip organizations, such as banks, are less likely to enjoy significant share price rises over time, dividends are sometimes cited as a primary motivation to invest in them.
We thought we'd put up a list of non-banking dividend equities to keep an eye on in 2022, given the significance of dividends and the trouble investors have had finding a sustainable yield owing to COVID-19 in recent years.
To assist us in coming up with a list, we contacted Bell Direct's head of distribution, Tim Sparks, who offered us a list of 20 idea starters to keep an eye on in 2022.
As you may be aware, there is no "best stock." There are many ways to approach dividend stocks. A stock that is fantastic for one individual may be a horrible one for you.
While dividend yield and dividend per share are important considerations in-stock selection, there's no guarantee that the following five years will provide similar outcomes (or better or worse).
Instead, while looking for great dividend companies in 2022, according to Sparks, investors should look for three crucial characteristics:
Debt levels are low. This might be seen in the company's earnings statistics, released twice a year, or in the debt-to-equity (D/E) ratio.
Profits that keep coming in. Companies may only pay dividends if they are profitable, and the longer they have been, the more likely they are to do so this year.
After COVID, everything is back to normal. The business is still doing strong or has witnessed an increase in activity.
According to Sparks, investors should also seek companies that are improving their cash flows since this will lead to dividend increases in the long run.
"When shopping for dividend stocks, investors should seek firms that generate continuous, dependable cash flows from a product or service with a distinct competitive edge." "In the end, profits from these financial flows will result in dividends," adds Sparks.
He also warned investors about the dangers of dividend traps, emphasizing the need to examine two critical measures before buying dividend stocks.
"The first step is to check the company's previous dividends to ensure that they are consistent. "
The second step is to check the company's dividend payment ratio to make sure it hasn't jumped due to a one-time incident, as Sparks says.
"An ASX 200 company's average dividend yield is around 4%." If a company yields 15%, it is doubtful that this would be sustained, and the stock should be investigated further to prevent disappointment."
In 2022, lithium's momentum is expected to continue. Prices soared to all-time highs in late March and early April, and although they've since leveled down, they're still up considerably year-to-date.
Lithium and other battery metals are critical to the future of sustainable energy and electric vehicles. Furthermore, even though Russia is not a major lithium producer, its conflict with Ukraine has significantly impacted markets and commodities.
Many ASX-listed lithium firms are riding the wave, with some enjoying year-to-date returns of more than 100%.
The Investing News Network examines the top five ASX-listed lithium firms in terms of year-to-date gains. The following list was created on June 19, 2022, using TradingView's stock screener, and comprises firms with market capitalizations of more than AU$10 million at the time.
Pilbara Minerals (ASX: PLS)
PLS is well-positioned as a low-cost, long-term sustainable lithium producer since it is "ready for the global energy shift." It bills itself as the "world's biggest, independent hard-rock lithium enterprise" and claims to be the "top ASX-listed pure-play lithium company."
It has Ganfeng Lithium and General Lithium as partners in its Pilgangoora mine in the Pilbara area, which produces spodumene and tantalite concentrate. Its long-term plan is to become an 'integrated lithium raw materials and chemicals provider in the next years' to become a key participant in the lithium supply chain, fueled by rising demand for sustainable energy technology.
Sayona Mining (ASX: SYA)
SYA is a lithium producer with assets in Western Australia and Quebec, Canada. After acquiring North American Lithium, it cooperated strategically with Piedmont Lithium in Quebec. It also intends to combine the neighboring Authier and Tansim projects and its 60% stake in the Moblin project to form a global center.
The miner is 'dedicated to downstream processing in Quebec to serve the rapidly developing North American battery and electric vehicle industry.' It also has a sizable gold and lithium tenement property in Western Australia.
Core Lithium (ASX: CXO)
The Finniss Project in the Northern Territory is being developed by CXO and is one of Australia's most capital-efficient spodumene lithium projects. According to the prospector's formal feasibility assessment, the mine contains 173,000tpa of lithium concentrate and has a 10-year mine life.
In the face of a very high lithium pricing and high operating margin scenario, Managing Director Stephen Biggins' primary mandate is to produce the first production of high-quality lithium concentrate from the Finniss Project this year.
According to the company, the mine offers 'probably the finest supporting infrastructure and logistical chain to Asia of any Australian lithium project,' according to the company. Darwin Port, the nearest port to Asia, is barely 88 kilometers away.
Piedmont Lithium (ASX: PLL)
PLL aims to build a "world-class integrated lithium industry in the United States." It has stakes in North Carolina's Carolina Tin Spodumene Belt, dubbed "the birthplace of the lithium industry." The miner has a good chance of becoming one of the lowest-cost manufacturers of lithium hydroxide and is well-positioned to enter the U.S. electric car supply chain.
It is also establishing interests in Quebec with its partner Sayona.
The Ioneer (ASX: INR)
INR will be the first new lithium chemical production in the United States in more than 60 years. The miner has a 100 percent stake in the Rhyolite Ridge Lithium-Boron project in Nevada, which is one of only two known lithium-boron deposits worldwide.
It confirmed the site as a world-class project with a globally important deposit that may position it as a key lithium supplier for decades in its 2020 feasibility assessment. It has agreed to deliver NexTech batteries from the mine, and the U.S. Department of Energy has encouraged it to undertake due diligence for a major financing program.
AVZ Minerals (ASX: AVZ)
AVZ Minerals is solely focused on developing its Manono project in the Democratic Republic of Congo, which has the potential to be one of the world's biggest lithium-rich LCT pegmatite deposits. The miner's goal is to progress its 75 percent ownership of the project up the value curve by using its DRC, financial, and project development capabilities.
It is, however, up against a legal struggle. China's biggest gold miner, Zijin Mining, is claiming a 15% stake in the project, which AVZ has dubbed "spurious and irrelevant." This problem may take some time to resolve.
Mineral Resources (ASX: MIN)
MIN has a rapidly expanding world-class portfolio of operations in various commodities, but its key interests are iron ore and lithium mining in Western Australia and the Northern Territory.
Wodgina Lithium, the world's biggest hard-rock lithium deposit, is estimated to have a 30-year mining life. It runs the project alongside U.S. conglomerate Albemarle, and despite a production halt, it plans to restart mining in Q3. In addition, it has a 50 percent stake in the Mount Marion lithium project, which it shares with Ganfeng Lithium.
MIN's diversification into iron ore and connections with global companies make it a safer bet for risk-averse investors.
Liontown Resources (ASX: LTR)
The mission of LTR is to 'identify, develop, and provide battery minerals to the rapidly increasing Electric Vehicle and Energy Storage sectors.'
It has two lithium resources in Western Australia and is working to diversify its portfolio via new exploration, collaborations, and acquisitions. The Kathleen Valley project, one of the world's biggest and highest-grade hard rock lithium deposits, is its cornerstone.
When production begins in 2024, the project is planned to deliver 500,000 tonnes of 6% lithium oxide concentrate per year during a 23-year mine life. Buldania, the company's second project, contains about 15 million tonnes of 1% lithium oxide.
Allkem (ASX: AKE)
AKE was founded last year when Orocobre and Galaxy Resources merged to become AKE. It currently has a worldwide portfolio of high-quality lithium compounds in various forms. It is based in Buenos Aires and runs lithium projects in Argentina, Australia, and Japan, with development ongoing to meet large market growth expectations.
Toyota, the provincial government of Jujuy, and Prime Planet Energy & Solutions are among the company's partners. It also intends to triple output by 2026, extracting 10% of the world's lithium.
Lake Resources (ASX: LKE)
LKE is a lithium developer that creates high-purity battery-quality lithium carbonate using a patented clean extraction method. Lilac Solutions, the company's technology partner, has developed a "benign water treatment" that returns all water (brine) to the source without modifying its chemistry, making it significantly more ecologically beneficial than traditional brine evaporation or hard rock mining. Lilac is sponsored by the Breakthrough Energy Fund, which Bill Gates directs.
Global Lithium
Global Lithium (ASX: GL1) concentrates on its 100%-owned Marble Bar lithium project in Western Australia's North Pilbara Craton, with the property's Archer deposit serving as the principal exploration target. Breaker Resources (ASX: BRB) sold Global Lithium an 80 percent stake in the Manna lithium property in December 2021, and the two businesses aim to collaborate on development in 2022.
Suzhou TA&A Ultra Clean Technology (SZSE:300309), Global Lithium's biggest stakeholder, inked a 10-year offtake agreement for spodumene concentrate on March 3. Suzhou TA&A also plans to assist with construction financing. The firm presented its half-year financial report for December 31, 2021, in mid-March. It followed up with an exploratory report on its Marble Bar and Manna lithium properties a week later. Following the publication of the financial report, the company's stock soared to a year-to-date high of AU$2.73 on April 4.
The business disclosed substantial high-grade lithium samples at Marble Bar, including a highlight of 3 meters with 2.5 percent Li2O, at which time the stock price of Global Lithium has trended lower. The business hired a contractor to start drilling at the Manna project on May 19.
Jindalee Resources
Jindalee Resources (ASX: JRL), formerly an explorer focusing on Australia and the United States, said on April 12 that it is pivoting and repositioning as a pure-play U.S. lithium firm. The business has chosen to concentrate its efforts on the McDermitt lithium project in Oregon, which it claims as "one of the greatest lithium resources in the United States." The corporation will spin off its Australian assets into a new company listed on the Australian Stock Exchange.
The company's stock price has been increasing in April, going from AU$3.42 on April 1 to AU$4.80 on April 19, it's year-to-date high. On April 29, the business updated its quarterly operations, including "outstanding" findings from drilling at McDermitt.
Morella (ASX:1MC)
Morella (ASX:1MC) is a battery metal exploration and developer with lithium as its principal aim. Sayona Mining has agreed to provide the business a 51 percent stake in the lithium rights of the latter's Pilbara and Gascoyne lithium projects in exchange for an earn-in agreement. Morella is now concentrating its efforts on the Mallina lithium project in Western Australia. Morella also has a 60 percent earn-in option agreement with Lithium Corporation (OTCQB: LTUM) for the Fish Lake Valley lithium project in Nevada.
Morella reported in mid-March that it had completed all of the essential environmental, social, and governance requirements before commencing its drilling program at Mallina, which began a week later. The company's stock touched an all-time high of AU$0.04 this year, something it has done multiple times before. In 2022, Morella will continue concentrating on Fish Lake Valley, expanding its project area by 60% and discovering additional drill targets.
What is the best way to trade or invest in ASX lithium stocks?
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Lithium equities on the ASX may be purchased via share trading or derivatives trading. When you trade stocks, you get direct ownership of the stock. On the other hand, derivatives trading, such as CFD trading, enables you to bet on the price movement of a company's shares without owning them.
Nickel-based batteries are currently the best lithium substitute. However, lithium batteries charge faster and have no memory concerns, and thus each charging cycle has no effect on their full charging capacity. Nickel batteries can become hotter faster, necessitating a cooling device.
On the other side, lithium's instability makes manufacturing lithium batteries roughly 50% more costly, which influences the cost of an E.V. Also, lithium batteries have a shorter shelf life than nickel batteries before they need to be replaced. Nickel is also more frequently utilized, so it can already be recycled economically.
However, unless there is a major scientific breakthrough, lithium is likely to be the metal that will fuel the E.V. revolution.
To get a sense of the E.V. revolution's potential, consider that market leader Tesla's market valuation, although variable, normally hangs around $1 trillion, about equal to the total market worth of all other automakers combined. In 2021, it produced fewer than one million vehicles, compared to 57 million passenger automobiles, according to the OICA.
'Do you enjoy minting money?' Tesla CEO Elon Musk said on the company's Q1 earnings call. The lithium industry, on the other hand, is for you.'
Despite Tesla's quarterly earnings, the worldwide scarcity is driving lithium prices to new highs, threatening to halt the company's once-unstoppable expansion. Over the last five years, the metal's price has soared from $12,000 per tonne in 2017 to $78,000 per tonne. Musk has even considered forming his lithium mining firm to ensure supply.
According to the International Energy Agency, the number of electric vehicles manufactured in 2021 will quadrupled to 6.6 million. Lithium consumption is expected to grow tenfold by 2030, according to experts, when legislation forbidding the future production or sale of ICE vehicles is approved throughout wide swaths of the globe, including the E.U., U.K., USA, and even China.
China now controls 80 percent of battery cell manufacturing and is the world leader in lithium refining. The conflict in Ukraine, along with the pandemic shutdown in Shanghai, has caused corporations all across the globe to review the robustness of their supply networks and maybe pay extra for greater supply security.
President Biden has already used emergency powers granted by the Cold War-era 1950 Defense Production Act. 'To lessen our dependence on China and other nations for the minerals and commodities that will power our clean energy future,' he wants to expand the production of crucial metals like lithium.
Another issue with lithium is that it is quite plentiful all around the planet, and however, availability is limited due to two factors. The first is that lithium must be sufficiently concentrated to be worth mining and exploratory initiatives are frequently costly and have a high failure rate.
The second issue is that lithium mining is complex and time-consuming, with new mines needing up to 10 years to be up and running. Corporations all around the globe are attempting to establish their mining and processing enterprises. The demand for lithium is expected to outstrip supply growth. The International Energy Agency (IEA) predicts a 900 percent increase in lithium consumption by 2030 and a 4,000 percent increase by 2040.
Indeed, according to Rivian CEO R.J. Scaringe, "all of the world's cell manufacturing combined equals little under 10% of what we will require in 10 years.
'Ninety percent to ninety percent of the supply chain is non-existent.'
Lithium prices are, of course, as unpredictable as the metal itself. For example, China's 'zero-covid' approach has caused lithium processing to cease in certain sections of the nation. In contrast, E.V. manufacturers such as Tesla have been forced to halt factory output.
Finally, ASX lithium stocks may be purchased in a variety of ways. Lithium is produced from three kinds of deposits: brine, pegmatite lithium, and sedimentary lithium, with Australia producing the majority of the sedimentary lithium in the world. Many lithium investors diversify their portfolios by investing in all three forms.
To acquire exposure to lithium while lowering overall risk, many investors prefer to purchase shares in a diversified miner like Rio Tinto. Of course, this is a two-edged sword since diversified miners are unlikely to reap the full benefits of any future price increase. And most of the companies on our 'top 13' list are large-cap miners with the potential for long-term share price increases due to exclusive project rights. On the other hand, small-cap lithium stocks might be more profitable while being riskier.
Pure-play ASX lithium companies, on the other hand, provide the fascinating long-term potential for the daring investor.
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