Day: January 16, 2021

2 buy-rated small cap ASX shares for your watchlist

Woman in pink sweater lying on dock with binoculars to her eyes

At the small end of the market there are a good number of companies with the potential to grow strongly in the future.

Two that have been tipped as future stars are named below. Here’s what you need to know about them:

Damstra Holdings Ltd (ASX: DTC)

The first small cap to look at is this growing integrated workplace management solutions provider.

Damstra’s cloud-based workplace management platform is used by businesses to track, manage, and protect their workers and assets.

The company also offers solutions which are proving very popular during the pandemic. These include fever detection and mobility tracking.

Damstra recently strengthened its portfolio with the acquisition of Vault Intelligence. This adds solutions combining health, safety, compliance, and risk management.

The company has been a positive performer in FY 2021, reporting first quarter revenue of $5.2 million. This was up 34% on the prior corresponding period.

Analysts at Morgan Stanley are positive on its prospects. They have an overweight rating and $2.00 price target on its shares. This compares to the current Damstra share price of $1.49.

MyDeal.com.au Limited (ASX: MYD)

Another small cap to watch is MyDeal. As its name implies, MyDeal is an online retail marketplace provider. It has a focus on furniture, homewares, appliances, technology, baby products, and hardware.

Due to the accelerating shift to online shopping because of the pandemic, MyDeal has been a very strong performer recently.

For example, the online retailer reported a 317% increase in first quarter gross sales to $56.67 million. This was underpinned by a 268% increase in active customers to 669,897.

RBC Capital Markets is a fan of the company and sees more growth ahead for it. The broker has a buy rating and $1.60 price target on its shares. This compares to the latest MyDeal share price of $1.37.

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Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

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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 Damstra Holdings Ltd. The Motley Fool Australia has recommended Damstra Holdings Ltd. 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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3 ASX dividend shares with large yields and consistent payouts

man placing business card in pocket that says dividends signifying asx dividend shares

There are some ASX dividend shares out there that have high dividend yields but have paid consistent or even growing dividends, including through COVID-19.

Some investors may be looking for higher yields with the Reserve Bank of Australia (RBA) interest rate being so low.

Here are some examples:

JB Hi-Fi Limited (ASX: JBH)

JB Hi-Fi is a large retailer of phones, computers, appliances and other devices and accessories.

The company played its part in helping people get ready to learn and work at home during the difficult COVID-19 lockdown periods. It may also have benefited from the government stimulus.

In FY20, JB Hi-Fi achieved 11.6% growth of sales, earnings before interest and tax (EBIT) went up 30.5% and net profit rose by 33.2%. It was this growth that funded the 33.1% growth of the dividend to $1.89 per share.

The ASX dividend share has a trailing grossed-up dividend yield of 5.3% at the current JB Hi-Fi share price.

JB Hi Fi’s growth has continued into the first quarter of FY21, with JB Hi-Fi Australia sales growth of 27.3%, JB Hi-Fi New Zealand sales declined by 2.5% and the The Good Guys sales growth was 30.9%.

Nick Scali Limited (ASX: NCK)

Nick Scali is one of the largest retailers of furniture in Australia.

The company delivered flat profit growth in FY20 – whilst sales revenue fell 2.1% to $262.5 million, net profit after tax (NPAT) was $42.1 million, the same as the prior corresponding period. This was achieved by the EBIT margin increasing by 90 basis points to 23.2%.

Nick Scali increased its FY20 final dividend by 12.5% on the back of the strength of its sales orders for the first half of FY21. That brought the Nick Scali full year dividend to 47.5 cents per share.

The ASX dividend share has a trailing grossed-up dividend yield of 6.3%.

Nick Scali is expecting a lot more growth in the FY21 first half. It recently provided guidance that it’s expecting net profit after tax (NPAT) for the six months to 31 December 2020 to be $40.5 million, up approximately 100% on the underlying profit from the prior corresponding period. Total written sales orders grew by 45% in the first quarter and grew 58% in the second quarter.

The sales order book was at an all-time high at 31 December 2020 and this is expected to translate to material revenue and profit growth in the second half of FY21.

Nick Scali continues to add more stores to its network in Australia and New Zealand to increase its footprint and potential customer base.

Rural Funds Group (ASX: RFF)

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

The agricultural landlord leases its farms to a variety of high-quality tenants that are among the biggest of their industry in Australia. Examples are: Select Harvests Limited (ASX: SHV), Treasury Wine Estates Ltd (ASX: TWE), Olam, JBS and Australian Agricultural Company Ltd (ASX: AAC).

All of the contracts with these tenants are long-term and have rental growth built into them. That growth is either a fixed 2.5% annual increase, or it’s linked to CPI inflation, plus occasional market reviews.

The ASX dividend share also has a strategy of investing some of its rental profit each year into farm improvements to boost the value and rental potential of the properties. This has worked particularly well with cattle properties in recent years.

These two strategies are a large reason why Rural Funds has a goal of increase the distribution by 4% each year.

In FY21 Rural Funds plans to pay a higher distribution of 11.28 cents per unit, equating to a distribution yield of 4.5%.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

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Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and Treasury Wine Estates 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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2 ASX dividend shares with yields over 5% right now

Happy young man and woman throwing dividend cash into air in front of orange background

An ASX dividend share is worth more today than perhaps any time in living memory. With interest rates at record lows (near zero in fact), sources of yield outside the share market have more or less dried up.

Unlike in years gone by, investors who are nervous of the inherent volatility of the share market cannot turn to government bonds or term deposits to find a ‘safe’, inflation-beating yield.

Although the S&P/ASX 200 Index (ASX: XJO) and ASX shares are almost at their most expensive point today than at any time after the coronavirus-induced market crash of March 2020, there are still plenty of shares that offer decent, inflation-beating yields, some even exceeding 5%.

ASX dividend shares, of course, are not safe investments. A company has absolutely no obligation to maintain a dividend payout. And the market can dent your principle capital on any trading day, sometimes permanently. But if you want a 5% yield today, there are few alternatives.

So, here are 2 ASX dividend shares that offer a 5% yield or greater on current pricing.

2 ASX dividend shares offering a 5% yield today

Telstra Corporation Ltd (ASX: TLS)

Telstra is our first ASX dividend share offering a yield of more than 5% today.

In 2020, Telstra paid out 2 dividends, each consisting of an 8 cents per share payout, complete with full franking credits. That gives Telstra shares a trailing dividend yield of 5.13%. That grosses-up to 7.33% with franking.

The Telstra share price has come under fire in recent months due to the company’s struggles with the ongoing NBN rollout, together with its thin margins. Even so, its annual general meeting last year, Telstra’s management all-but-committed to maintaining a 16 cents per share annual payout in 2021. If that indeed proves to be the case, Telstra is once again set to offer a grossed-up 7.33% yield in 2021 on recent pricing.

Rio Tinto Limited (ASX: RIO)

Our second ASX dividend share with a 5% or greater yield today is this mining giant. Rio shares have been on a tear in recent months, buoyed by a rocketing iron ore price. In fact, Rio is up more than 30% since just the start of November.

The Rio share price also recently just hit a new record all-time high of $127 a share. Deposit these gains, Rio shares are still offering a hefty trailing dividend yield of 4.7% on current prices, which grosses-up to 6.71% with full franking credits. Rio’s dividend is arguably less safe than Telstra’s given how volatile commodity prices (especially iron ore) tend to be.

Even so, as long as the iron ore price stays at, or even near, its current level, investors can likely expect the dividends to keep flowing from their Rio shares.

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Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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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Buy these ASX dividend shares if the RBA cuts rates again

Graphic image of scissors cutting banknote in half

According to the latest cash rate futures, the market has priced in a 75% probability of the Reserve Bank of Australia cutting the cash rate down to zero next month.

Whether this happens or not, time will tell. But one thing that appears more certain is that the days of generous interest rates are some time away.

In light of this, the share market looks set to be the best place to earn a passive income for a while yet.

But which ASX dividend shares should you buy? Here are two to consider next week:

Bravura Solutions Ltd (ASX: BVS)

Bravura is a wealth management and transfer agency software solution provider with a number of popular solutions that are being used by large financial institutions.  These include its key Sonata wealth management platform, the Rufus transfer agency solution, the Garradin back office solution, and the Midwinter financial planning solution.

Unfortunately, the company has been facing significant headwinds over the last 12 months due to Brexit and COVID-19. However, management appears confident these are short term headwinds and that its growth will resume once the situation eases.

Goldman Sachs agrees with this view and believes the weakness in the Bravura share price is a buying opportunity. It has a buy rating and $4.50 price target on its shares and is forecasting a 10.6 cents per share dividend in FY 2021. Based on the latest Bravura share price, this represents a 3.6% dividend yield.

Wesfarmers Ltd (ASX: WES)

Another option to consider is Wesfarmers. In contrast to Bravura, this conglomerate has been a very positive performer over the last 12 months. This is thanks largely to its key Bunnings business which has been experiencing strong sales growth during the pandemic as consumers redirect their spending from holidays to home improvements.

Pleasingly, Bunnings has been tipped to continue its positive form over the coming years, especially given tax cuts and government stimulus. This should be supported by growth in other businesses such as Kmart, Target, and Catch.

Credit Suisse is positive on the company and has an outperform rating and $55.83 price target on its shares. The broker is also expecting a $1.90 per share fully franked dividend this year. Based on the latest Wesfarmers share price, this will mean a 3.8% dividend yield.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

More reading

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

The post Buy these ASX dividend shares if the RBA cuts rates again appeared first on The Motley Fool Australia.

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