Day: 19 December 2020

If you’re approaching retirement, then now could be the time to shift away from growth shares and start focusing more on capital preservation and income.

But which shares should you buy to accomplish this? The two blue chip ASX shares listed below could be worth a closer look:

Goodman Group (ASX: GMG)

Goodman Group is an integrated commercial and industrial property group. It owns, develops, and manages industrial real estate in 17 countries. Goodman has been growing at a solid rate over the last decade thanks to the diversity of its operations and its exposure to quick growing markets such as ecommerce. Pleasingly, the latter market has resulted in strong demand from blue chip customers such as Amazon, Coles Group Ltd (ASX: COL) and Walmart. This appears to have positioned Goodman for sustainable growth over the 2020s.

One broker that certainly believes this to be the case is Morgan Stanley. It was pleased with its development work, sky high occupancy rates, and the yields it is commanding. In light of this, it put an overweight rating and $20.90 price target on its shares. It is also expecting a 30 cents per share distribution this year. Based on the current Goodman share price, this represents a 1.6% yield.

Woolworths Limited (ASX: WOW)

This retail conglomerate is another popular option for retirement portfolios. This is due to Woolworths’ strong brands, entrenched customer base, and defensive qualities. Combined, they have allowed the company to deliver robust earnings and dividend growth over the last decade.

Analysts at Citi are positive on the future and recently reiterated their buy rating and $44.50 price target on Woolworths shares. They were pleased with the company’s strong performance in the first quarter and lifted their earnings forecasts to reflect this. Citi is forecasting a $1.16 per share fully franked dividend in FY 2021. Based on the latest Woolworths share price, this equates to a 2.9% yield.

More reading

• How useful is the P/E ratio in assessing ASX shares?
• These are the 5 best ASX real estate shares of 2020
• Citigroup picks the best ASX retail stocks to own for 2021
• 2 blue chip ASX dividend shares to buy today
• Woolworths (ASX:WOW) buyout makes ACCC anxious

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Buying today’s top stock picks could prove to be a profitable move in 2021 and beyond. In most cases, they are likely to be high-quality companies that trade at low prices. As such, their valuations may not take into account their long-term financial prospects.

Furthermore, the track record of the world economy suggests that it is very likely to deliver an improving performance after a challenging 2020. This could lead to stronger operating conditions for many businesses, as well as improving investor sentiment that has the potential to lift valuations across the stock market.

Buying today’s top stock picks

Many of today’s top stock picks are likely to be high-quality companies that offer wide margins of safety. In other words, investors are currently not taking into account their potential to deliver improving financial performances after a tough 2020. Therefore, they could offer upward rerating potential over the course of 2021 and beyond that leads to a rising share price and capital growth for investors.

Of course, in the near term their valuations could come under further pressure. Risks such as Brexit and coronavirus look set to remain in place in 2021. However, the track record of the stock market shows that stock valuations have generally reverted to their long-term averages over the long run. This could mean that today’s top stock picks offer a significant amount of capital appreciation potential over the coming months and years due to their currently low share prices.

The prospect of an economic recovery

Today’s top stock picks could also experience improving operating conditions in 2021 and over the long run. This year has seen many companies operating in a wide range of industries struggle to produce positive sales and profit growth.

While this situation may persist in the near term, the track record of the world economy suggests that a return to stronger conditions is very likely. After all, no recession or economic slowdown has ever lasted in perpetuity.

Improving operating conditions and a stronger economic outlook may help to boost investor sentiment. They may become more bullish about the outlook for a wide range of stocks and sectors – especially high-quality businesses with competitive advantages. This may help to lift the stock market, and may mean that today’s top stock picks deliver attractive rates of capital growth.

Managing risk in 2021

Clearly, the outlook for today’s top stock picks remains uncertain. However, investors can reduce overall risks through buying a diverse range of companies and holding them for the long run. Having a broad range of stocks within a portfolio can reduce an investor’s reliance on a small number of businesses for their returns.

Meanwhile, holding shares for the long run can mean that an investor is less impacted by short-term volatility and paper losses. They may also benefit from a likely rise in the stock market over the coming years, as it recovers from the difficulties experienced in 2020.

More reading

• 2 of the best ASX growth shares to buy for 2021 and beyond
• Top brokers name 3 ASX shares to buy next week
• Stock market crash 2020: how I’d capitalise on a rare chance to get rich
• 2 ASX dividend shares with 4%+ yields
• 3 recovery ASX shares to buy for 2021

Motley Fool contributor Peter Stephens 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.

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Looking to add a few growth shares to your portfolio next week? Then you might want to get better acquainted with the ones listed below.

The two shares listed below have been growing strongly and have been tipped to continue doing so in the future. Here’s what you need to know about them:

Appen Ltd (ASX: APX)

The first growth share to look at is Appen. It is the global leader in the development of high-quality, human annotated datasets for machine learning and artificial intelligence. Given the explosive growth of these markets, it has been growing at a strong rate over the last few years. While the pandemic is putting a dampener on things in FY 2021, management appears confident that demand will accelerate once the crisis passes and its strong form will resume.

According to a note out of Citi from last week, its analysts have a buy rating and $32.60 price target on the company’s shares. This compares to the latest Appen share price of $24.85. They believe recent share price weakness is a buying opportunity and remain very positive on its long term growth prospects.

ResMed Inc. (ASX: RMD)

Due to the growing demand for its industry-leading products in the fast-growing sleep treatment market, ResMed is another company which has been growing strongly in recent years. In fact, this strong form even continued in FY 2020 despite the pandemic. And with trading conditions improving, FY 2021 looks set to be another positive year of growth.

One broker that is very positive on the company’s future is Credit Suisse. Last month it upgraded the company’s shares to an outperform rating with a $31.00 price target. Its analysts believe ResMed is very well placed to benefit from a shift to home healthcare following the pandemic. Overall, it believes the company is capable of delivering double digit earnings growth for a number of years. The ResMed share price last traded at $28.25.

More reading

• How to turn $20,000 into over $250,000 in 10 years with ASX shares
• The ResMed (ASX:RMD) share price is up 25% in 2020
• ASX healthcare shares could outperform in 2021: Fundie
• Top ASX shares to buy in 2021
• Should you buy the Appen (ASX:APX) share price dip?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen Ltd. The Motley Fool Australia has recommended ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Last week saw a large number of broker notes hitting the wires once again. Three buy ratings that caught my eye are summarised below.

Here’s why brokers think investors ought to buy them next week:

Altium Limited (ASX: ALU)

According to a note out of Morgan Stanley, its analysts have retained their overweight rating and $40.00 price target on this electronic design software platform provider’s shares. This follows the announcement that Altium is selling a non-core business to focus on its key Altium 365 platform. Morgan Stanley was encouraged by management’s comments on the platform and expects it to be the key driver of growth in the future. The broker was also pleased to see the company reiterate its full year guidance. Especially given the challenging operating environment. The Altium share price ended the week at $34.68.

Bapcor Ltd (ASX: BAP)

A note out of Citi reveals that its analysts have retained their buy rating and lifted the price target on this auto parts retailer’s shares to $8.85. The broker made the move following the release of a trading update which revealed stronger than expected sales growth. Citi expects this to result in a solid half year result in February. In addition to this, the broker likes Bapcor due to its defensive qualities, favourable tailwinds, and international expansion. The Bapcor share price was trading at $7.65 on Friday.

Zip Co Ltd (ASX: Z1P)

Analysts at Morgans have retained their add rating but trimmed the price target on this buy now pay later provider’s shares to $8.89. The broker made the revision to its price target to account for Zip’s $150 million equity raising last week. It notes that the funds will be used partly to support its growth in the key US market. Morgans was pleased with the accompanying update on its US business and the more than tripling of its transaction value in the country during November. Overall, the broker remains positive on the company’s future and sees strong growth ahead. The Zip share price ended the week at $5.44.

More reading

• Could this be the saving grace for the Zip Co Ltd (ASX:Z1P) share price?
• Why Bapcor, Fortescue, Nufarm, & Saracen shares are pushing higher
• Here’s how ASX buy now, pay later (BNPL) shares have performed in 2020
• 2 ASX growth shares to buy that keep delivering wins
• ASX 200 rises on Thursday

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Many shares have not yet recovered from the 2020 stock market crash. Despite improving investor sentiment and the prospect of a brighter economic outlook in the long run, some stocks continue to trade at cheap prices.

Buying them could prove to be a profitable long-term move. Through building a diverse portfolio of high-quality companies that are presently experiencing weak operating conditions, it may be possible to generate a surprisingly large nest egg in the coming years.

Buying high-quality shares after the stock market crash

A number of today’s cheap shares are still unpopular many months after the stock market crash because of their weak near-term outlooks. Some sectors, such as energy, financial services and leisure, are facing unprecedented challenges at the present time. In many cases, their potential to grow sales and profit in the short run is very limited. As such, investor sentiment towards them is weak. This has caused their share prices to lag the wider index in many cases.

Buying such companies may not seem to be an attractive idea to many investors. However, those companies that have difficult operating conditions, while also having solid financial positions and a competitive advantage, may offer recovery potential over the long run. They may emerge in a stronger position after the stock market crash relative to their weaker sector peers. This may enable them to deliver improving financial performances in the coming years that translates into rising stock prices.

Diversification in a stock market recovery

It is easy to become complacent as a stock market recovery replaces a stock market crash. This may lead to a portfolio that lacks diversity, in terms of the number and range of companies that are held within it.

However, as this year’s market decline showed, a bull market can quickly turn into a bear market without warning being given. Therefore, while it may be tempting to only invest in the very best shares available at the present time, ensuring a portfolio is diversified could be crucial in generating high returns in the coming years. After all, it is unclear which companies and sectors will deliver growth in what could be a fast-paced and different economic outlook in a post-coronavirus world.

A long-term approach to buying cheap shares

Of course, a second stock market crash could occur in the near term. Risks such as Brexit and the coronavirus pandemic may remain in place for some time. They could prompt a period of weaker investor sentiment and a more challenging period for the world economy’s performance.

As such, taking a long-term view of any stocks purchased at the present time could be important in generating high returns. The stock market has always posted new record highs after its various declines. Using a buy-and-hold strategy may enable an investor to take advantage of a similar outcome after the 2020 stock market crash.

More reading

• 2 ASX dividend shares with 4%+ yields
• 3 recovery ASX shares to buy for 2021
• How useful is the P/E ratio in assessing ASX shares?
• Top brokers name 3 ASX shares to sell next week
• 4 rock-solid ASX dividend shares to buy for 2021

Motley Fool contributor Peter Stephens 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 Stock market crash 2020: how I’d capitalise on a rare chance to get rich appeared first on The Motley Fool Australia.

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According to the latest cash rate futures, there market is pricing in a 65% probability of the Reserve Bank taking rates to zero in February.

Whether or not this transpires, time will tell. But one thing that is for sure, is that rates are unlikely to be going higher for a long time to come.

In fact, the latest Westpac Banking Corp (ASX: WBC) economic report reveals that its team expect rates to stay where they are until at least the end of 2022, but probably longer.

In light of this, if you want to overcome low interest rates, then you might want to add some dividend shares to your portfolio.

Two ASX dividend shares with generous yields are listed below:

National Storage REIT (ASX: NSR)

National Storage is one of the region’s largest self-storage providers. From its 200+ centres across Australia and New Zealand, the company tailors self-storage solutions to residential and commercial customers.

It has been growing at a solid rate over the last decade thanks to a combination of organic and inorganic growth. While trading conditions are tough at present because of the pandemic, it continues to supplement its growth with acquisitions. Looking beyond the pandemic, the future looks positive due to its exposure to ecommerce and a potential rebound in the housing market in 2021.

Management recently provided guidance for earnings per share to be at the upper end of its guidance range of 7.7 cents per share to 8.3 cents per share. It is also expecting an FY 2021 distribution of 90% to 100% of its underlying earnings. Based on this and the latest National Storage share price, this will mean a ~4% dividend yield in FY 2021.

Rural Funds Group (ASX: RFF)

Another option for investors to look at is property company Rural Funds. It owns a diversified portfolio of high quality Australian agricultural assets that are leased to experienced agricultural operators. The company’s revenues are derived from long-term leases across five sectors: almonds, cattle, vineyards, cropping and macadamias.

Given their ultra-long leases and built-in rental increases, Rural Funds appears well positioned to continue growing its rental income and distribution at a solid rate over the next decade. That certainly will be the case this in FY 2021. The company plans to increase its distribution by 4% to 11.28 cents per share. Based on the latest Rural Funds share price, this equates to a generous 4.3% yield.

More reading

• 4 rock-solid ASX dividend shares to buy for 2021
• 2 ASX dividend shares for 2021’s zero interest rate world
• Why the National Storage (ASX:NSR) share price is dropping lower
• Why the IOOF (ASX:IFL) share price is one to watch on Friday
• 2 quality ASX dividend shares with 5%+ yields

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The price-to-earnings (P/E) ratio is one of the most oft-quoted statistics in the world of investing, usually coming after an ASX share’s price, and perhaps its market capitalisation.

This is justified to an extent – the P/E ratio can be a very useful metric to examine when you’re deciding whether to invest in a particular company. But it can also be misleading. So let’s look at some ways to use the P/E ratio, and when you shouldn’t.

P/E ratios: An introduction

So let’s first examine exactly what the P/E ratio tells us. The ratio represents the relationship between a company’s annual earnings, measured by its earnings per share (EPS), to its market capitalisation, measured by the share price. A company with a high P/E ratio will have lower earnings compared with its market capitalisation than a company with a low P/E ratio.

Let’s look at an example. So Coles Group Ltd (ASX: COL) reported an earnings per share metric of 73.3 cents for FY2020 back in August. That means the company brought in 73.3 cents in earnings for every share outstanding. So at the time of writing, the Coles share price is trading at $18.35. If we divide $18.35 (the price) by 0.733 (the earnings), we get a P/E ratio of 25.03.

How do we use this ratio?

The P/E ratio can be especially useful for comparing different companies within the same sector, or comparing a company to the broader S&P/ASX 200 Index (ASX: XJO). A dollar of earnings is a consistent metric (since every dollar is worth the same value across all companies).

Thus, since Coles has a P/E ratio of 25.03, and its rival Woolworths Group Ltd (ASX: WOW) currently has a P/E ratio of 43.66, we can say that the market is valuing each dollar that Woolworths earns at a higher rate than Coles’. In other words, the market is placing a premium on Woolies’ shares (why the market is choosing to do this is a whole other discussion!).

The ratio can be useful from a broad market perspective too. Right now, the ASX 200 Index has an average P/E ratio of 22.73, according to BlackRock. Thus, we can also say that investors are placing a higher premium on both Coles and Woolworths when compared to the entire index.

When is the P/E ratio not so useful?

Looking at the P/E ratio alone, however, is not a sound investment strategy. Investors tend to price different sectors according to their earnings risk. For example, Fortescue Metals Group Limited (ASX: FMG) currently has a P/E ratio of just 11.2, despite the company being at record highs. This could possibly reflect the fact the market is unwilling to pay a premium for an iron ore miner that is subject to the whims of the commodity markets (read low long-term earnings certainty).

Also, the P/E ratio is almost useless for valuing companies that don’t yet have earnings or which reinvest revenues aggressively for more growth. As an example, Afterpay Ltd (ASX: APT) doesn’t even have a P/E ratio yet because it chooses to reinvest its revenues into the business, rather than banking them as earnings.

And many investors are choosing to buy Xero Limited (ASX: XRO) shares right now due to the company’s massive growth, despite a technical P/E ratio of a whopping 641. If Xero simply switched from reinvesting its revenues to banking earnings, its P/E ratio would come back closer to Earth.

Foolish takeaway

The P/E ratio is a great metric, and a highly useful one in certain situations. But it possibly doesn’t deserve the prominence it has among parts of the investing community. Its lack of universal application and potential for creating misleading impressions of a company mean it should be carefully regarded in conjunction with plenty of other data and research.

More reading

• 4 rock-solid ASX dividend shares to buy for 2021
• 2 blue chip ASX dividend shares to buy next week
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• How to invest in US shares in 2021

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are some ASX shares that could be poised to recover from the impacts of COVID-19 in 2021.

Many different sectors were particularly hurt in 2020. Travel, shopping centres, cinemas, casinos and so on were all hit.

However, there are some ASX shares that could recover some more of the lost ground in 2021:

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Sydney Airport is one of the largest infrastructure ASX shares.

Dion Hershan from Yarra Capital Management recently wrote that the ‘stay at home’ shares have outperformed the ‘out and about’ businesses by 21% since the market peak back in February. He thinks that with highly effective COVID-19 vaccines on the horizon and better treatment protocols, mobility will improve and confidence will rebound.

Yarra Capital has been looking for high quality businesses which have been de-rated to more appealing valuations through the sell-off. The fund manager said that it’s overweight to Sydney Airport as well other infrastructure shares like Transurban Group (ASX: TCL) and Atlas Arteria Group (ASX: ALX).

Sydney Airport recently told the market that there would be no distribution paid for the full year result because of the continued significant impact of COVID-19 on the business performance of the airport over the second half of the calendar year.

In terms of traffic, November 2020 showed the domestic passenger market is recovering for the ASX share, but international passenger numbers are still down heavily.

Total passengers were down 90.6% in November 2020 to 350,000. Domestic passengers were down 87.1% to 308,000 whilst international passenger numbers were down 96.9% to 42,000.

The modest recovery in domestic traffic in the month was driven by demand for NSW and Victoria interstate travel. Unrestricted travel between NSW and Victoria was permitted from 23 November 2020. The downturn in international passenger traffic is expected to persist until government travel restrictions are eased.

EML Payments Ltd (ASX: EML)

This ASX share has a number of different payment services for clients to use. EML Payments has general purpose reloadable offerings such as gaming payouts with white label gaming cards, salary packaging cards, commission payouts and rewards programs. EML Payments also offers physical gift cards, shopping centre gift cards and digital gift cards. Finally, it offers virtual account numbers.

The company boasts of a high retention rate with 99% of clients being retained through the three years to 2020. It also says there are high levels of barriers to entry, with necessary regulatory and compliance across the world being one of the main elements. It also has a high level of IT capability, with platforms for customer services.

Its gift and incentive volumes recovered significantly in the first quarter of FY21 after the initial impacts of COVID-19. Total FY21 first quarter revenue grew 20%, compared to the fourth quarter of FY20, to $40.6 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) generated in the FY21 first quarter was $10 million, which was 69% higher than the fourth quarter of FY20.

At the current EML Payments share price it’s valued at 30x FY23’s estimated earnings according to Commsec numbers.  

Audinate Group Ltd (ASX: AD8)

Audinate is an ASX share that owns the Dante platform, which distributes audio signals across computer networks. The company boasts about being the lead supplier of digital and audio video networking for the professional AV industry.

Some of Audinate’s main customer groups, being live sound and large events, are still being impacted because of COVID-19 impacts.

However, the recovery is on course within the sectors of corporate conferences and higher education. There has been a steady improvement in trading conditions since May.

In the first quarter of FY21, it generated revenue of US$5.2 million and EBITDA of AU$0.3 million.

More reading

• 4 leading ASX growth shares to buy for 2021
• These were the best performing ASX 200 shares last week
• Is the Sydney Airport (ASX:SYD) share price in the buy zone?
• Why Blackmores, Service Stream, Sydney Airport, & Webjet shares are dropping lower
• ASX 200 up 0.7%: Zip capital raising, A2 Milk trading halt, Sydney Airport dividend update

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO. The Motley Fool Australia has recommended AUDINATEGL FPO and EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

AGL Energy Limited (ASX: AGL)

According to a note out of UBS, its analysts have downgraded this energy retailer’s shares to a sell rating and cut the price target on them to $12.25. The broker believes that AGL is going to experience a sustained reduction in its earnings over the coming years. This is due to margin pressure from softening wholesale electricity prices and the push towards renewable energy. UBS notes that the majority of AGL’s electricity generation is powered by coal. The AGL share price ended the week at $13.22.

Commonwealth Bank of Australia (ASX: CBA)

A note out of Morgans reveals that its analysts have retained their reduce rating but lifted the price target on this banking giant’s shares to $64.00. According to the note, following the removal of dividend restrictions by APRA, the broker believes that Commonwealth Bank could increase its payout ratio to upwards of 75% over the coming years. While this would be a positive for dividend seekers, it isn’t enough for a change of rating. Morgans continues to believe its shares are overvalued and notes that other banks offer better value for money currently. The Commonwealth Bank share price was fetching $83.16 at Friday’s close.

Transurban Group (ASX: TCL)

Analysts at Citi have retained their sell rating and $12.83 price target on this toll road operator’s shares following an update last week. That update revealed that the company has sold a 50% stake in its Greater Washington assets to AustralianSuper and two other funds. While Citi sees positives in the move and expects it to reduce its leverage, it believes the reduction in earnings could put pressure on dividends until the funds are redeployed elsewhere. The Transurban share price ended the week at $14.15.

More reading

• How to invest in US shares in 2021
• AGL (ASX:AGL) shuts coal power unit after serious injury
• ASX 200 rises on Thursday
• ASX stock of the day: Why are Netwealth (ASX:NWL) shares up 7%?
• Here’s what is driving the Transurban (ASX:TCL) share price higher today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article is about four ASX dividend shares that pay consistent payments to investors, even during difficult times:

Rural Funds Group (ASX: RFF)

Rural Funds is a real estate investment trust (REIT) that owns farmland across different agricultural sectors including cattle, almonds, macadamias, vineyards and cropping (sugar and cotton).

The REIT was actually one of the top FY21 picks by broker Bell Potter which liked the high-quality tenants and steadily-growing asset values of the farms.

Those farms are spread across a variety of states and climactic conditions for useful diversification.

The ASX dividend share aims to grow its distribution by 4% per annum. This is funded by contracted rental increases and productivity improvement investments at its farms.

At the current Rural Funds share price, it offers a FY21 distribution yield of 4.3%.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts is one of the oldest listed businesses in the country. It has been listed in Australia since 1903. More than 40 employees have worked for the company for over 50 years. Five generations of the Pattinson family have served the company, as have three generations of the Dixson, Spence, Rowe and Letters families.

It’s an investment conglomerate that has exposure to many sectors including telecommunications, resources, building products, pharmacies, agriculture, financial services and swimming schools.

Some of its holdings include the following ASX shares: TPG Telecom Ltd (ASX: TPG), Clover Corporation Limited (ASX: CLV), Australian Pharmaceutical Industries Ltd (ASX: API), Bki Investment Co Ltd (ASX: BKI), Milton Corporation Limited (ASX: MLT) and Palla Pharma Ltd (ASX: PAL).

The business aims to take long-term positions in the businesses that it invests in, often with a contrarian approach.

In terms of being a reliable ASX dividend share, it has increased its dividend every year for 20 years in a row. That’s the longest growth record on the ASX.

Soul Patts pays for that dividend from the dividends and distributions received from its investments, after paying for its own operating expenses.

At the current Soul Patts share price it offers a grossed-up dividend yield of 2.8%.

Brickworks Limited (ASX: BKW)

Brickworks is one of the largest building products businesses in the country. It produces and sells a number of different products such as bricks, masonry, paving, precast and roofing. It’s also the market-leading brickmaker in the northeast of the US.

The business hasn’t cut its dividend for over 40 years, so it also has one of the longest dividend records. But it doesn’t have the consecutive dividend growth streak like Soul Patts.

However, it is actually invested in Soul Patts shares. Brickworks owns 39.4% of Soul Patts, which provides Brickworks with a growing stream of dividends and the capital value is steadily climbing over time as well.

It’s the Soul Patts dividends and the distributions from the joint venture (JV) property trust with Goodman Group (ASX: GMG) that entirely funds Brickworks’ dividend.

This JV structure is based on Brickworks selling surplus operational land into the trust at market value and Goodman funding the infrastructure works, to created serviced land ready for development. Balancing payments may be required to ensure a fair contribution towards the value of the fully serviced land. Once a lease pre-commitment is secured, the serviced land can then be used as security, with debt funding used to cover the cost of constructing the facilities.

This property trust is currently building huge warehouses for Amazon and Coles Group Ltd (ASX: COL) which, when completed, will see the trust’s gross assets rise above $3 billion and the net rental distributions to Brickworks are expected to rise by more than 25%.

At the current Brickworks share price it offers a grossed-up dividend yield of 4.3%.

APA Group (ASX: APA)

APA owns a large network of 15,000km of natural gas pipelines around Australia with a presence in every mainland state and the Northern Territory. It also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms). APA owns, or manages and operates, a portfolio of assets and delivers half the nation’s natural gas usage.

This ASX dividend share funds its distributions from the operating cashflow produced by its assets. APA regularly announces new plans to grow its asset base further. It plans to build a new pipeline in WA and that will link up with its existing pipeline.

APA recently announced it is going to increase its interim distribution by 4.3%, bringing the current distribution to $0.51 per unit, which equates to a distribution yield of 5% at the current APA share price. It has increased its distribution every year for about a decade and a half.

More reading

• 2 blue chip ASX dividend shares to buy next week
• 3 reasons why Brickworks (ASX:BKW) shares are a compelling idea
• 2 ASX dividend shares for 2021’s zero interest rate world
• ASX 200 rises 0.7% on Wednesday
• Here’s what these popular ASX dividend shares plan to pay investors in 2021

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