Day: 12 May 2020

The S&P/ASX 200 Index (ASX: XJO) dropped over 1% today by market close. The ASX 200 fell to 5,403 points.

The coronavirus continues to dominate news headlines, but there’s growing concern about China hurting Australia’s exports of barley and beef.

Here’s what happened in the ASX 200 today

There was a full year result and a few interesting updates.

CSR Limited (ASX: CSR) reports

The ASX 200 construction business announced its FY20 report today. The CSR share price went up by over 10%.

CSR reported that net profit after tax (NPAT) of $125.3 million rose from $78 million in the prior year which included an impairment last year.

NPAT from continuing operations (before significant items) of $134.8 million was down from $181.7 million in FY19.

CSR decided not to pay a final dividend.

Altium Limited (ASX: ALU) update

The ASX 200 electronic PCB software business announced another coronavirus update earlier today.

It’s starting to feel some of the effects of the coronavirus, causing it to lower prices and extend payment terms. It doesn’t think it can reach its US$200 million revenue target this year. May and June are typically important months for sales for the company and things are only getting tougher rather than easier. 

However, it said that it has a cash balance of US$77 million and it’s working hard to invest in cloud offering Altium 365.

The ASX 200 software business fell by around 4% today.

Premier Investments Ltd (ASX: PMV) says stores to re-open

The major retailer said that store closures had significantly impacted global sales with total sales down 74% for the six weeks to 6 May 2020 compared to the prior period. The global retail store network sales were down 99%, but online sales have risen 99%.

Premier Investments has announced that the balance of its stores in Australia will reopen from 15 May 2020, although airports and some CBD stores will remain closed. All New Zealand stores will reopen from 14 May 2020.

The company said it will pay rent in arrears for all stores at a gross percentage of sales.

The Premier Investments share price was essentially flat today for the ASX 200 retailer.

More reading

• Short sellers are going after Afterpay’s rivals and these ASX shares
• 3 top-notch ASX shares on my May watchlist
• ASX stock of the day: This ASX construction share jumped 10% today on a 61% surge in profits
• Is the Altium share price a buy after today’s update?
• Is this ASX healthcare share about to soar?

Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia owns shares of Altium. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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2020 is shaping up to be a year to forget when it comes to dividends. We have seen ASX companies cut dividends across the board this year, including from some ASX income heavyweights.

Dividends from ASX banks like Westpac Banking Corp (ASX: WBC) have gone up in smoke. It’s the same with distributions from real estate investment trusts (REITs) like Scentre Group (ASX: SCG) and would-be dividend aristocrat Ramsay Health Care Limited (ASX: RHC).

It’s a brave new world for income investors, that’s for sure.

That’s why I think a great strategy for investors seeking dividend income in 2020 is to go for diversification. With an exchange-traded fund (ETF), you can buy dozens (if not hundreds) of income-paying companies within one share!

Here are 3 ideas to get you started:

Vanguard Australian Shares High Yield ETF (ASX: VHY)

This ETF from Vanguard aims to hold a large basket of ASX dividend-paying shares. It currently holds 62 ASX-listed companies, which include the big banks, BHP Group Ltd (ASX: BHP), Telstra Corporation Ltd (ASX: TLS) and Wesfarmers Ltd (ASX: WES).

Although many of these holdings will be pulling back on their dividends in 2020, many will not as well. All in all, I see this ETF as a collection of some of the best yielders on the ASX.

SPDR S&P Global Dividend Fund (ASX: WDIV)

This ETF can be used as a great compliment to VHY as it invests in top-notch dividend payers from around the world.

WDIV only holds stocks that have maintained or increased their dividends over the past 10 years – which is a great filter in my view. There are many defensive companies here, ranging from the utilities sector to energy, REITs and ‘sin stocks’.

WDIV has a trailing dividend yield of 6.33%, which isn’t bad at all and will provide a solid stream of passive income. Such diversity can do wonders for an ASX-dominated dividend portfolio in my view and as such, I think this ETF is one that any income investors should consider.

iShares S&P/ASX 20 ETF (ASX: ILC)

This ETF from BlackRock is very simple – it simply holds the top 20 companies on the ASX. CSL Limited (ASX: CSL) is, of course, the top holding, followed by the big 4 banks, BHP and Woolworths Group Ltd (ASX: WOW).

So why this ETF over VHY? Well, it’s a more conservative choice in that it is defined by holding the largest companies on the ASX – all of which pay dividends. It is a little concentrated in the banking and resources sectors, but the largest holding, CSL, is a notable exception. ILC boasts a trailing dividend yield of 5.52%, which also comes with some franking credits.

More reading

• 3 top ASX dividend shares to buy right now
• 3 ASX dividend shares I would buy immediately
• How to earn more frequent retirement income from ASX shares
• 3 top ASX dividend shares to buy during the COVID-19 crisis
• How to generate a passive income of $50,000 a year with ASX shares

Motley Fool contributor Sebastian Bowen owns shares of SPDR S&P Global Dividend Fund and Vanguard Australian Shares High Yield Etf. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Forget the ASX banks! Here are 3 ETFs I would buy for income instead appeared first on Motley Fool Australia.

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Short-sellers are stepping up their attack on ASX shares over the past month even as the S&P/ASX 200 Index (Index:^AXJO) recovers from the coronavirus fallout.

The total number of shares short-sold jumped by 3% over the past month and is close to 4% more than at the start of this calendar year.

It’s usually a good idea to keep an eye on what these bearish traders are doing as they tend to be more sophisticated than the average investor.

Short-sellers are those who borrow a stock to sell on-market with the aim of buying it back at a lower price later to profit from the difference.

Shorting the BNPL sector

One of the interesting things short-sellers appear to be betting against are the rivals to Afterpay Ltd (ASX: APT) even as they stepped back from shorting the buy now pay later (BNPL) industry leader.

Those who shorted Afterpay are probably nursing big losses as the stock hit a record high on Monday.

This might have convinced them to go after its weaker rivals instead as the sector, which is linked to discretionary spending, is under a cloud. The ones most likely to use such services are more likely to be impacted by job losses.

Targeting the weaker players

Based on the latest ASIC short-selling data that runs to May 5 (the data is always a week old), short-interest in Zip Co Ltd (ASX: Z1P) and FlexiGroup Limited (ASX: FXL) jumped.

Zip Co’s short-interest, which is the percentage of Zip shares in the hands of short-sellers, rose 165 basis points (1.65 percentage points) to 8.9%.

Flexigroup isn’t far behind. The proportion of its shares being shorted increased 136 basis points to 1.9%.

It looks like Zip Co is the more popular short target with close to 10% of its shares being shorted. That’s a relatively high percentage.

Biggest increase in shorts

However, these shares aren’t the flavour of the month as short-sellers have been more aggressively increasing their bearish bets against other ASX stocks.

Top of the list is gold miner KIRKLAND/IDR UNRESTR (ASX: KLA) with short-interest in the stock surging 758 basis points over the month from nothing. Short-sellers may be using it as a hedge against the rallying gold price.

Retailers are a moving target

Second on the list is embattled department store group Myer Holdings Ltd (ASX: MYR). Short-interest in the stock jumped 437 basis points to just over 14%.

I suspect the sudden and sharp rally in Myer shares on Monday may be due to short-covering where short-sellers rush to buy back the stock to close their position.

The reopening of Myer stores and the easing of social restrictions is triggering a re-rating in ASX retail stocks.

Holding a large short position in Myer must be causing pain with the stock surging 44% over the past month.

The short trade in the sector could become a widow maker if short-sellers don’t go after the right candidates.

More reading

• 3 top-notch ASX shares on my May watchlist
• Is this ASX healthcare share about to soar?
• Where to invest $10,000 in ASX 200 shares immediately
• Leading brokers name 3 ASX shares to sell today
• ASX 200 sinks 1.3%: Big four banks drag ASX lower & Altium issues sales warning

Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended FlexiGroup Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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How many ASX shares should you have in your portfolio?

It’s a tricky question, to be sure! That’s partly because everyone has a different answer. Some people are happy with 4, others have more than 40.

Some experts will tell you to have as many as you can for diversification’s sake, others like Warren Buffett will tell you that “diversification is protection against ignorance. It makes little sense if you know what you are doing.”

So what is one to do?

What does diversification bring to a portfolio?

Diversification is a term bandied around a little much these days, in my opinion. But the basic idea is that diversification helps you reduce risk. The more companies, industries, and even countries you are invested across, the less likely a significant event in any one of these will derail your returns.

Take the recent shocks we’ve seen in the oil markets as an example. If someone just had Woodside Petroleum Limited (ASX: WPL), Beach Energy Ltd (ASX: BPT) and Caltex Australia Limited (ASX: CTX) in their portfolio, they would have been smashed by the descent of oil prices into negative territory. Having shares outside the oil sector would have helped insulate this portfolio considerably.

Of course, if you diversify too much, you will just end up with a return similar to what a broad market index fund will give you.

How many shares are enough?

Keeping all this in mind, having a share portfolio of 15 shares would be ideal (in my opinion), but anywhere between 10-20 is probably the right balance for most investors.

But just having 15 isn’t enough. If you had 15 oil companies or 15 banks, it wouldn’t be a diversified portfolio at all.

So a further caveat: having 15 companies could be considered ideal, but so is making sure this stable covers a broad swathe of at least the Australian economy is also important.

And if you still feel your portfolio is still too concentrated, you can easily bump up your diversification with an exchange-traded fund (ETF) or two.

But don’t let an arbitrary share limit dictate how you choose to invest if you don’t wish. There’s nothing wrong with owning one company just like Warren Buffett (provided you know it inside out). Equally, there’s nothing wrong with owning 40 if it helps you sleep better at night. Investing is a personal journey and one that you have to do your own way!

More reading

• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 Weekly Wrap: New ASX bull run continues
• 5 things to watch on the ASX 200 on Monday
• What to watch on the ASX 200 next week
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post How many ASX shares should you have in your portfolio? appeared first on Motley Fool Australia.

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May has proved an interesting month so far on the S&P/ASX 200 Index (ASX: XJO). After the lows we saw in March, May has (thus far) continued the positive momentum we saw throughout April – with a few hiccups along the way (today being one of them).

So here are the 3 ASX shares that I’ve got on my May watchlist. I’m hoping for a great price to buy them this month, but we’ll have to wait and see if that eventuates!

BetaShares Nasdaq 100 ETF (ASX: NDQ)

This exchange-traded fund (ETF) from BetaShares tracks the 200 largest companies in the US Nasdaq exchange, which is known for its ‘tech-heavy’ composition. Its largest holdings are names like Microsoft, Amazon.com, Apple and Alphabet (Google), so you know you are getting quality here.

NDQ has rebounded strongly since the lows we saw in March, so I’m waiting for a dip for this one. Nonetheless, it’s a fund I would love to see in my portfolio this May. Most of the companies that are shaping and changing the world can be found within this ETF and so I think it’s a great long-term growth investment.

Afterpay Ltd (ASX: APT)

I’m still kicking myself that I missed out on loading up on Afterpay shares when the buy now, pay later pioneer was (ever so briefly) under $9 a share in March. Today, it stands at over $41 after we heard last week that Chinese giant, Tencent Holdings has acquired a 5% stake in Afterpay.

I’m not finding the current price too exciting, but I would love to buy into Afterpay if the price dips back down to anywhere near the levels we saw in March. I think this company is one of the most exciting growth stories on the ASX and I’m hoping to get a slice of it this May.

MFF Capital Investments Ltd (ASX: MFF)

MFF is a listed investment company (LIC) that focuses on the top companies in the US. I love that its top holdings are the payment giants Mastercard and Visa, 2 companies that are growing at breakneck speed. Other holdings include Wells Fargo and Microsoft. As such, I think this company is a great share to use for portfolio diversification and long-term capital growth.

I already have some MFF shares but would love to pick up some more if the price dips back down this month. March saw lows around $2.20 – a level I would love to see again for a buying opportunity in May.

More reading

• Short sellers are going after Afterpay’s rivals and these ASX shares
• Is this ASX healthcare share about to soar?
• Where to invest $10,000 in ASX 200 shares immediately
• Leading brokers name 3 ASX shares to sell today
• ASX 200 sinks 1.3%: Big four banks drag ASX lower & Altium issues sales warning

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares), Magellan Flagship Fund Ltd, Mastercard, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Mastercard, and Visa. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Alphabet (A shares) and Mastercard. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 3 top-notch ASX shares on my May watchlist appeared first on Motley Fool Australia.

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I think that high-yield dividend shares can be detrimental to building your wealth, particularly if you choose the wrong ones.

Reason 1: Tax

Taxes are the subscription fee for being part of a good society, but you don’t need to be handing over extra when you don’t need to.

Unless you’re in a low tax bracket (such as within superannuation or a low income earner), any dividends you receive may be taxed at around a third or even more.

If you get a sustainable 10% return from a high-yield dividend share then you could be handing over a third of it to the tax man each year. Compare that to a 10% capital growth from something like Xero Limited (ASX: XRO) or A2 Milk Company Ltd (ASX: A2M) – you don’t pay any tax unless you actually sell the share. I think it makes a big difference over time.

Obviously there’s the benefit of dividend franking credits which reduces your taxes owed, but you still have to make up the extra tax unless you’re in that lower tax bracket position where the franking credit rate is higher than your tax rate.

Sometimes paying the tax can be worth it if you just want a high net yield from your investments and you can find a reliable dividend payer.

Reason 2: It may be a bad investment

Having a high-yield dividend share shouldn’t mean you overlook all the other areas of a business. Does it have a good balance sheet? Is there good prospects for the business and its industry as a whole?

A high yield may mean little growth, which suggests the business could be mature or challenged.

If it’s a bad investment then you could easily suffer wealth destruction from falling earnings and a falling share price. And the dividend could be cut. There’s not much point going for the big dividend if the dividend is then cut a year or two later.

Just look what has happened to Telstra Corporation Ltd (ASX: TLS) and National Australia Bank Ltd (ASX: NAB). Lower share prices and lower dividends compared to a few years ago. Over time it’s the ‘growth’ businesses that will keep paying larger dividends so you can receive a good yield on cost. Plenty of high yield dividend shares are actually yield traps, particularly in these coronavirus times. 

What high yield dividend shares are worth buying?

It depends how high of a yield you want to go and if you don’t mind paying the elevated levels of tax.

Rural Funds Group (ASX: RFF) has a FY21 distribution yield of 5.9%.

Brickworks Limited (ASX: BKW) has a grossed-up dividend yield of 6.3%.

WAM Microcap Limited (ASX: WMI) has a grossed-up dividend yield of 7.4%.

Future Generation Investment Company Ltd (ASX: FGX) has a grossed-up dividend yield of 7.9%.

WAM Research Limited (ASX: WAX) has a grossed-up dividend yield of 10.9%.

Naos Emerging Opportunities Company Ltd (ASX: NCC) has a grossed-up dividend yield of 13.25%.

At the current prices I’d probably be happy to go for WAM Microcap, Brickworks and Future Generation as my preferred three high yield dividend share picks because the yields aren’t too high. But all of them could be good long-term picks for dividends.

More reading

• Is it time to buy ASX small caps for your portfolio?
• 3 must-read investing books for new investors
• UBS picks the real ASX winners from the COVID-19 grocery boom
• ASX 200 sinks 1.3%: Big four banks drag ASX lower & Altium issues sales warning
• These were the top 10 ASX 200 shares over the last year

Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO, RURALFUNDS STAPLED, and WAM MICRO FPO. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, and Telstra Limited. The Motley Fool Australia owns shares of A2 Milk and Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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