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There has been a lot of enthusiasm in the stock market recently for banking group Lloyds (LSE: LLOY). The company’s share price is 48% higher than it was a year ago, at the time of writing this article earlier today. Despite that, a lot of investors continue to see value in the Lloyds share price, which this week hit a new 12-month high. What currently excites me are the prospects for the 2022 Lloyds dividend. I think that may further help the share price. Here is why.

Large, profitable business

The foundation of any company’s dividends is the success or otherwise of its business. If a company generates large profits and free cash flow, it can fund a generous dividend.

That is not guaranteed, though: many businesses choose not to pay dividends. But Lloyds has committed itself to a dividend. Indeed, the bank has what it describes as a “progressive” dividend policy. In layman’s terms, that means that it aims to increase its dividend each year. Note again, though, that this is only an aim. A progressive dividend policy does not guarantee that dividends will increase.

For the first nine months of last year, the company reported post-tax profits of £5.0bn. I expect that the fourth-quarter results, due next month, will show continued strength. Lloyds is currently a very profitable money-making machine. That could be good news for shareholders.

Cautious dividend

But in fact the past several years have not been very rewarding for Lloyds shareholders in terms of dividends. First, the bank was forced by its regulator to suspend dividends after the start of the pandemic, in line with other British banks. Then, when it did reintroduce them, it paid out at a sharply reduced rate compared to previously. Last year’s interim dividend was 0.67p per share compared to 1.12p per share a couple of years previously. That is a 40% reduction in size.

That may be prudence on the part of the bank, as it continues to navigate an uncertain economic outlook. While last year saw strong performance, big risks remain. An economic downturn could eat into Lloyds’s revenues and profits. As it is the nation’s biggest mortgage lender, any weakening in customers’ ability to repay loans could badly damage profits.

2022 Lloyds dividend outlook

Meanwhile, the company has been stockpiling cash. Even after paying the dividends, its huge profits mean it has lots of spare money. That has pushed up its financial cushion, something known in banking terms as the CET1 ratio.

The company could pay a much bigger dividend but still comfortably stay at its target CET1 ratio level. Next month I expect it to announce a dividend raise alongside its final results, in line with its progressive policy. But I think the strong share price performance over the past year means that the City is already factoring in a dividend raise.

The question is how big the 2022 Lloyds dividend raise will be. If it restores the dividend to pre-pandemic levels, for example, I reckon there could still be substantial upside in the Lloyds share price even now. But a modest increase might disappoint shareholders and lead to a sell off. For now, I will continue to hold Lloyds shares in my portfolio. But I will be keeping a close eye on next month’s dividend news.

Christopher Ruane owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Netflix (NASDAQ:NFLX) share price crashed by 20% in after-hours trading on Thursday evening after publishing its fourth-quarter earnings report. The online media streamer reported slowing subscriber growth. Netflix added 8.3m net subscribers in the fourth quarter, missing its own forecast of 8.5m subscribers. This itself isn’t much cause for concern, in my opinion. I calculate that Netflix has missed its subscriber forecast 35% of the time over the past five years. It hasn’t stopped the tech giant’s share price from growing over 250% during that period.

Why is the Netflix share price sinking?

What is more concerning, in my opinion, is the outlook for the upcoming quarter. For the first quarter of 2022, Netflix now forecasts paid net subscribers of 2.5m. This is far below the 4m it achieved a year ago in Q1 of 2021. The streaming giant says that this lowered guidance reflects “a more back-end weighted content slate in Q1’22”, but I believe a similar picture was painted going into Q4 of 2021.

I reckon there are several other reasons for slower growth. First, the pandemic created a surge in demand for streaming services. Maintaining that strong momentum was always going to be a challenge, in my opinion. It also pushed competitors to launch and advance their own services. For instance, companies like Apple and Disney provided more choice to global TV viewers. While engagement appears to be healthy, acquisition growth hasn’t returned to pre-Covid levels yet. Netflix puts this down to factors including Covid effects and economic hardship in some parts of the world.

A content creating machine

So where are things going well? Netflix continues to churn out a variety of quality TV shows and movies. In 2021, six out of the 10 most searched for shows online were made by Netflix. Some of these are incredibly successful. Some big hits in 2021 included Squid Game, which generated 1.65bn hours of viewing time in its first four weeks. This made it Netflix’s biggest TV season ever.

The numbers

Let’s look at how these translated into sales and profits. Sales in Q4 grew 16% year-on-year to $7.7bn. But profit margin fell to 8% from 14% in the same period in 2020. This was attributed to a large content slate in Q4 of 2021. Stepping back, I’d note that over the years Netflix has steadily grown its business into a multi-billion-dollar giant. It’s impressive in any business to see earnings that have grown eight-fold over the past five years.

What was once a high-growth and volatile tech company is now a more mature giant with some good-quality attributes. For instance, it offers a return on capital employed of 19%. But being a larger, more mature business hasn’t prevented large swings in the Netflix share price. After an 11% share price gain in 2021, it’s now fallen by 35% so far in 2022.

Should I buy now?

So is the recent share price weakness an opportunity for me to buy? For now, I’m happy to watch from the side lines. It looks like the US technology sector is currently undergoing a correction and I reckon I should focus my efforts in other sectors for now. The drop in the Netflix share price has brought it down to a more appealing level, but I’d prefer to wait to see some stabilisation in subscriber growth over the coming months.

Harshil Patel owns Apple. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The FTSE 100 index is littered with stocks that could boost my portfolio in 2022 and beyond. One tech stock I can’t ignore, and would add to my holdings is Avast (LSE:AVST). Here’s why.

FTSE 100 newbie

Avast operates in the lucrative and burgeoning cyber security market. It is known for its free antivirus software it offers to consumers for their personal use. It also offers paid complex bespoke security solutions for home and business users. Avast adopts cutting edge cloud-based and data-driven technology in its solutions.

I consider Avast a relative newbie to the FTSE 100. After all, it only listed on the London Stock Exchange in 2018. To be promoted to the premier index after such a short spell on the whole is impressive.

As I write, shares in Avast are trading for 604p. At time last year, the shares were trading for 523p, which is a 15% return over a 12-month period. The shares have surpassed 2020 market crash lows and are currently trading at all-time highs.

Drawbacks to investing

Competition in the tech market is fierce. Although Avast is a company with its own track record and history, it is perhaps not a well known brand, compared to some of its competitors. One name in the same market that pops into my head is Kaspersky. Brand recognition is extremely important. Avast could build this up in 2022 and beyond but it could offer competitive advantages here and now.

The Avast share price is currently trading at all-time highs. I am usually wary of this with FTSE 100 stocks when I am bullish on a stock. Is the growth priced in? Could there be a share price dip on the back of any news? I will keep an eye on developments.

Why I like Avast

I find it rare that when someone establishes a business, they are still very much hands on involved in the business nearly 25 years later. This is the case with Avast CEO Ondrej Vlcek. The firm has recently been taken over by competitor NortonLifeLock in a deal worth $8bn or so. This new ownership could catapult Avast to new heights with access to new customers and markets. One of the reasons I can’t ignore Avast is its performance and growth record. I understand past performance is not a guarantee of the future, however. I can see that revenue and operating profit have increased year on year for the past four years.

As well as Avast’s performance and new ownership, it also pays a dividend. This helps me make a passive income if I own shares. As I write, its dividend yield stands at 2%. This is just below the FTSE 100 average of 3%. In addition to this, the shares look good value with a price-to-earnings ratio of 29.

Overall I do believe Avast is a top tech stock on the FTSE 100. It has been taken over by a larger competitor but looks like it will operate as its own company. Avast has a good track record of performance and has carved its own corner in a lucrative market. I only see Avast moving on an upwards trajectory in 2022 and beyond which could offer me a lucrative return.

Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Avast Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The past few weeks have seen a fall in the price of many tech shares. I see that as a buying opportunity for my portfolio. I have shortlisted two tech shares to buy now for my portfolio after their recent price falls.

Digital commerce giant

Online commerce giant Amazon (NASDAQ: AMZN) is a popular tech stock, but its performance lately has been underwhelming. Indeed, over the past year, the Amazon share price has fallen 8%, at the time of writing this article earlier today. It has fallen around 18% just in the past couple of months.

There has been a growing bearishness about many tech stock valuations recently. I am not surprised that Amazon has seen its shares go down in that environment, as it is one of the world’s leading tech stocks. The current market capitalisation is a staggering $1.6trn. That sort of size can attract regulatory concern. One risk with Amazon is that it may be forced to break up its business in future to avoid it being too dominant in the market.

But I reckon Amazon’s best days may be ahead of it. It continues to add customers to its Amazon Prime service in the US, which should help increase the average spend of more and more customers. Overseas markets offer substantial potential for the growth of that service. The company’s cloud computing services continue to grow at speed. With revenue growth of 38% last year, Amazon remains firmly in growth mode.

That does not mean the shares are cheap, with a price-to-earnings valuation of 73. But I reckon the company’s installed customer base offers it a base for strong future earnings growth. It is on my list of shares to buy now for my portfolio.

UK shares to buy now for growth

On this side of the pond, 2022 has started badly for S4 Capital (LSE: SFOR). The digital ad agency holding group has already lost 8% of its value in 2022. That means that over the past year, the S4 share price has grown just 2%.

But S4 is a different beast to a year ago. In its third-quarter trading update, the company reported like-for-like revenue growth of 56% compared to the same period the prior year. The company made acquisitions throughout 2021, so the overall revenue growth in the quarter was 106%. S4 has continued its acquisition strategy in 2022, announcing this month that it was buying a US data consultancy.

Director buying

Another purchase that attracted my attention was S4 boss Sir Martin Sorrell buying 10,000 S4 shares this week as the price fell. That is the second time this month he has bought S4 shares. Admittedly the size is small beer as Sir Martin already owned over 54m S4 shares before the latest transaction. But putting more of his own money in the company suggests he sees the shares as attractively priced.

With strong growth forecasts for both revenue and gross profit, I see S4 as one of the UK market’s most interesting tech shares to buy now for my portfolio. I do see risks, however. For example, the rapid acquisition rate has seen headcount balloon. The costs of integrating and managing thousands of people could eat into profits. But I see current price weakness as a buying opportunity for my portfolio and am considering increasing my existing S4 holding.

Christopher Ruane owns shares in S4 Capital. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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Could there be a stock market crash in 2022? What could cause it? If there is a crash, here’s one stock I’d buy for my holdings. 

Stock market crash ahead?

Soaring inflation (rising consumer prices) is a major concern right now, especially in one of the biggest economies in the world, the US. In December of last year, the Consumer Price Index (CPI) rose by 7%. This was the highest rise since June 1982. Inflation could hamper US economic post-pandemic recovery. This could cause a repeat of the crash in 1982 in the US. When one major economy crashes, others tend to follow, causing a stock market crash.

Due to the pandemic, many governments and central banks needed to print money, more technically known as quantitative easing, to boost liquidity. This has supported equity markets since the pandemic began. Near-zero interest rates have led to a surge in investors buying stocks. With interest rates on the rise and less quantitative easing, investors could sell stocks, causing a market crash.

The Chinese economy is viewed as one of the largest in the world. Any issues there could cause knock-on effects for the rest of the world. Recently, the Chinese economy’s growth has slowed which is a concern. In Q4, China’s gross domestic product (GDP) growth was recorded at 4% year on year. This was its slowest pace in 18 months. An additional crisis in the Chinese real estate market could also trigger a crash.

It is worth noting all of the above reasons are currently speculation and there is no way of determining if a stock market crash will definitely occur. 

1 share I’d buy

If there were a crash and shares cheapened, I would look to add Ashtead (LSE:AHT) shares to my portfolio. Ashtead is an international construction equipment rental firm. It has a presence in the UK, US, and Canada. As I write, it has over 800,000 customers on its books and is recognised as a major player in its sector. It is worth noting renting equipment is often more cost effective than buying equipment in the construction industry.

If there were a stock market crash in 2022, Ashtead shares would most likely fall and the company’s fundamentals look good to me. As I write, shares are trading for 5,230p, which is a 258% return from March 2020 crash lows of 1,457p.

Demand for construction equipment has been rising in recent years, and post-pandemic recovery has seen it soar even further. Ashtead’s recent and past performance has been positive reflecting favourable market conditions and its own dominance in the market. In addition to this, Ashtead has a decent dividend yield that could make me a passive income. This dividend could be cancelled if a crash occurred, albeit temporarily, however.

As well as the issues that come with a crash, including slowed growth and performance, Ashtead could see other issues. New Covid restrictions could also hamper recovery and growth as well.

History has taught me that when a stock market crash occurs, construction is one of the sectors that usually bounces back quickly, hence why I like Ashtead shares in the event of a crash. The need to build infrastructure and stimulate the economy is vital to the world economy rebounding. Ashtead shares could be a good addition to my portfolio if a crash does occur.

Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

There are some years that are more suited for specific types of investment than others. For instance, last year was a great one for many recovery stocks. The year before was an exceptional one for cyclical stocks like real estate and mining. And this year, I think could be a good one for me to make passive income investments. Here are three reasons why. 

#1. FTSE 100 dividends are rising

2021 was already a good year for dividends, as would have been expected. 2020 was a disaster when it came to passive income. Dividends were reduced, cancelled and suspended as Covid-19 created heightened uncertainty for the global economy. But as things started improving, dividends made a return. The FTSE 100 average dividend yield now stands at 3.4%, which is not too bad. 

And it appears that 2022 could be even better. According to AJ Bell, the FTSE 100 dividend yield for the year should rise to 4.1%. And this is despite the fact that stocks with the biggest current dividend yield could see some softening in dividends. I am talking about miners like Evraz, BHP and Rio Tinto. The stocks paid out huge dividends as commodities rallied well into 2021. However, with their somewhat dimmer prospects for 2022, their dividends might not be quite the same as they were last year. And BHP is set to exit the London Stock Exchange altogether. 

If the overall Footsie’s dividend yield is expected to rise despite this, it suggests to me that other stocks’ yields could rise higher. I would expect oil biggies and retailers to be among them, going by their recoveries so far. This expands my choices for high-yield dividend investments. 

#2. Passive income to the rescue as inflation rises

With inflation on the rise, the real value of my earned income is declining. According to the Office of Budget Responsibility, inflation will average 4% in 2022. This essentially means that my consumption spending is likely to rise. It would be nice to be able to supplement it with dividend income. If this more than makes up for the rise in inflation, there need not be any change in my standard of living because of rising inflation. 

#3. FTSE 100 stocks are still priced low

Despite all the recovery that has been seen in stock markets, some FTSE 100 stocks are still priced below their pre-pandemic levels. Two prominent examples for me are those of the oil giants BP and Royal Dutch Shell. As I was saying earlier, both stocks’ dividend yields are more likely to rise during 2022. Oil prices are expected to stay strong this year as travel inches back towards pre-pandemic levels and economic recovery continues. Because of this, I think there is significant upside to oil stocks’ prices. And this might be a good time for me to buy more of them to get the best dividend yields from them in 2022.

Wrapping up

While I am convinced that dividend yields are set to rise, I am aware of the fact that the pandemic is not entirely over yet and the economy might still be on shaky ground. However, much like the stock market crash taught me that bad times are actually good times to invest, I think an uncertain stock market could also be a great time to buy dividend stocks that would earn me a solid passive income over the years. 

Manika Premsingh owns BP, Evraz, Rio Tinto, and Royal Dutch Shell B. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

When buying stocks, many investors follow a strategy of targeting growth at a reasonable price (GARP) — including me.

It means I’m often rarely involved in the fastest-growing businesses when their valuations are astronomically high. But maybe that’s a good thing because popular and expensive stocks can handbrake turn on a penny if investor sentiment turns against them. In many ways, such beasts can be risky investments.

Businesses turning around

But one of the advantages of GARP investing is it can catch businesses on the turn — when they might be emerging from a troubled operational period into a new phase of growth. And sometimes, GARP stocks can go on to become popular and pricey growth stocks when the ‘story’ becomes well known in the investment community. However, that doesn’t always happen, of course.

I think GARP investing best describes the strategy that famous and successful investor Warren Buffett has been following for decades. And I also believe it’s what many investors in America mean when they speak of value investing. Buffett’s early investing style of looking for deep value situations went out of the window decades ago. And the father of value investing — Benjamin Graham — declared the strategy dead way back in the 1970s when the opportunity pipeline dried up.

After all, deep-value investing relies on mispricing by the stock market. And for many years, higher market participation and better information transfer have ironed out many mispriced situations before they can dig in.

Meanwhile, one stock I consider to be a GARP situation today is pharmaceutical company Indivior (LSE: INDV). The stock suffered some heavy blows from generic competition and legal challenges that sunk its earnings in 2019. But lately, it’s been rebuilding profits in its field of treating addiction and serious mental illnesses.

An upbeat outlook

In late October 2021 with the third-quarter results report, chief executive Mark Crossley was upbeat. The company reported “another quarter of good growth and further strengthening of our leadership in addiction treatment.”  And the success arose because of the “strong” commercial execution behind the company’s injection product Sublocade. And there was also “resilience” from the legacy film business in the US.

Looking ahead, Crossley said the firm’s ongoing strategy involves focusing on the “large and growing”opportunity in organised health systems (OHS).  He reckons the approach has already delivered five consecutive quarters of double-digit growth in underlying net revenue from Sublocade. And the business has “strong momentum” for 2022.

Meanwhile, with the share price near 240p, the forward-looking earnings multiple for 2022 is just above 15. And that’s when set against City analysts’ expectations for a more than 40% uplift in earnings this year. I think the valuation looks fair. And if I adjust for the cash pile sitting on the balance sheet, the rating can be lowered by around 30%.

There is some risk here because of the company’s narrow product focus. And we’ve seen recently what can happen when such risks bite. But I bought the stock recently to hold for the long term.

Kevin Godbold owns shares in Indivior. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Royal Mail (LSE:RMG) share price has been on a wobbly but relatively healthy run lately. The stock is up just over 12% in the last 12 months. And the momentum seen throughout 2020 has pushed its valuation well above pre-pandemic levels.

What’s behind this upward trajectory? And can it continue in 2022? Let’s explore.

A successful turnaround

Between 2018 and 2019, this business was running into quite a bit of trouble. Costs were on the rise, while productivity went out of the window. And the end result was the bottom line shrinking by around 32%. Disgruntled investors decided to jump ship, and the Royal Mail share price collapsed by nearly 60% over the two-year period.

As it turns out, the pandemic created a near-perfect environment for management to change tactics and get the business back on track. With everyone stuck at home, the rising popularity of e-commerce drove demand for parcels delivery solutions through the roof.

Looking at the latest half-year report, parcels volumes were up 33% versus pre-pandemic levels. And these have continued to climb by a further 8% versus 2020. As a result, analysts have forecast earnings to reach 62p per share by the end of its 2022 fiscal year (spanning March to March). That’s almost a 190% jump versus pre-pandemic levels.

The surge in cash flows halved the group’s net debt, drastically improving Royal Mail’s financial health. And with surplus cash, the management team has announced plans to return £400m to shareholders through a share buyback programme, as well as a special dividend.

This is obviously a positive sign. And providing the fundamentals continue to improve, with parcel volumes staying elevated, I think it’s likely the Royal Mail share price will continue to climb higher in 2022.

The Royal Mail share price could become volatile

As encouraging as it is to see some stellar performance after years of lacklustre results, there are some potential threats to consider. My primary concern surrounds the group’s labour force. The pandemic has led to an elevated number of absences through illness, while Brexit triggered a national labour shortage. As such, finding enough warehouse workers and drivers is proving challenging for many companies.

Demand for its services may be high, courtesy of the e-commerce boom. But if the firm cannot complete deliveries on time, online retailers will likely start taking their business elsewhere. Needless to say, that could significantly interrupt the group’s recent growth trajectory, probably sending the Royal Mail share price in the wrong direction.

Time to buy?

All things considered, my opinion on this business has improved over the last year. And with both revenues and earnings on track to continue rising, I believe the Royal Mail share price can continue to ascend in 2022. Having said that, I’m not tempted to buy any shares today simply because I think there are better investment opportunities for my portfolio elsewhere.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.