Day: 8 May 2023

Baby Bunting Group Ltd (ASX: BBN) is an All Ordinaries (ASX: XAO) stock, or ASX All Ords stock, that has a significant valuation decline. But, it’s projected to make a big earnings recovery over the next few years, which could also mean a strong dividend yield by FY25.

Baby Bunting is a retailer that sells a variety of products for young children including prams, car seats, furniture, toys, clothes and so on.

It has been facing heightened competition, which hurt the gross profit margin and overall profitability. Over the past year, the Baby Bunting share price has dropped by around 50%.

But, this could be an opportunistic time to consider the business when investors are feeling pessimistic.

Baby Bunting dividend yield expectations

Commsec projections currently suggest that the ASX All Ords stock could pay an annual dividend per share of 11.2 cents, which would be a grossed-up dividend yield of 7.4%.

In FY24, the Baby Bunting annual payout could increase to 13.4 cents, which would equate to a grossed-up dividend yield of 8.9%.

By FY25, the All Ords ASX stock might pay an annual dividend per share of 16.1 cents. This would be a grossed-up dividend yield of 10.6%.

Earnings per share (EPS) are also expected to rise, which will be key for funding those larger dividends.

Commsec numbers suggest that the business might generate EPS of 16.3 cents this year, putting it at 13 times FY23’s estimated earnings. But, by FY25, EPS could jump to 24.2 cents. This would mean the current Baby Bunting share price is valued at just 9 times FY25’s estimated earnings.

What could drive the All Ords ASX stock’s earnings higher?

The business has outlined its strategy and future initiatives, including growing its market share from its core business, investing in digital, growing in new markets and profit margin improvement.

The All Ords ASX stock continues to roll out new stores. When it announced its FY23 half-year result, it said it had 69 stores in Australia and two in New Zealand. The company thinks it can reach 110 stores in Australia and 10 in New Zealand.

Baby Bunting is working on its marketplace offering, which presents a “significant revenue opportunity”. It’s working with a number of suppliers and plans to have 1,000 additional products as part of the new curated marketplace.

The business was already seeing the gross profit margin in January 2023 being in line with its recovery plans and “up” on the prior year.

If it’s successful at turning things around, it would presumably help the Baby Bunting share price and the dividend. So, it could achieve good capital growth and good dividends from here.

The post This ASX All Ords stock could pay an 11% dividend yield by FY25 appeared first on The Motley Fool Australia.

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More reading

• After big falls, these ASX 300 shares look dirt-cheap!
• Down 60% in 12 months, I’d buy these 2 ASX All Ords shares for the turnaround

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Baby Bunting Group. The Motley Fool Australia has recommended Baby Bunting Group. 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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Investors on the lookout for historically reliable passive income may wish to revisit Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares.

On the capital gains front, ANZ shares are up 3.4% since the opening bell on 3 January. However, the S&P/ASX 200 Index (ASX: XJO) bank stock remains down 7.8% over the past full year.

Of course, that’s not including the two fully franked dividends ANZ delivered over those 12 months.

Which brings us to how much passive income you could earn if you invested $10,000 in ANZ shares today.

How much passive income could ANZ shares provide?

Before diving into the answer, it’s important to note that some of the dividend yields we discuss here are trailing yields. Meaning they’re based on the dividend payments already made over the prior 12 months.

Now, with the exception of the pandemic-addled year of 2020, the passive income delivered by ANZ shares has been quite consistent. But future dividend payments could be higher or lower than what was paid over the year just past.

With that said, ANZ paid a final dividend of 74 cents per share on 15 December.

When the big four bank delivered its half-year results on Friday, the board declared an interim dividend of 81 cents per share. That’s up 9.5% from last year’s interim dividend, driven by all-time high cash earnings. Cash earnings for the six months were up 12% to $3.82 billion.

ANZ shares trade ex-dividend next Monday. Meaning investors who want to score the 81 cents per share in passive income need to own the bank stock by market close this Friday, 12 May to be eligible. That fully franked dividend will hit shareholders’ bank accounts on 3 July.

All told then, ANZ has paid (or declared) a total of $1.55 per share in dividends over a year.

At Friday’s market close share price of $23.80, that works out to a yield of 6.5%, with potential tax benefits.

Meaning that for a $10,000 investment, ANZ shares can offer $651 a year in convenient passive income.

The post If you invest $10,000 in ANZ shares here’s how much passive income you’ll earn appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Is it time to buy ANZ shares after its strong results?
• Why ANZ, Block, Pilbara Minerals, and SSR Mining shares are storming higher
• Banking crisis continues: What’s up (and down) with ASX 200 bank shares today?
• Everything you need to know about the 81 cents ANZ dividend

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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If you’re looking to add some mining sector exposure to your portfolio, then it could be worth checking out the two ASX 200 mining shares listed below.

Here’s why these could be top options in the sector right now:

Chalice Mining Ltd (ASX: CHN)

The first ASX 200 mining share that could be a buy is Chalice Mining.

It is the mineral exploration company behind the 100%-owned, globally significant Julimar project in Western Australia. This project is on course to become one of the largest PGE-NiCu deposits in the world based on recent drilling. This is a huge positive given how important these metals will be for the decarbonisation of the planet.

Bell Potter is a big fan of the company. It recently said:

CHN’s 100%-owned Julimar project is a globally significant PGE-NiCu deposit. Located 70km north of Perth in WA, it represents a unique opportunity to establish new strategic PGE and base metals supply in a top mining jurisdiction.

The broker has a speculative buy rating and $11.73 price target on its shares.

Rio Tinto Ltd (ASX: RIO)

Another ASX 200 mining share that has been named as a buy is Rio Tinto.

It is of course one of the world’s largest miners with a diverse portfolio of operations and projects across a number of commodities and geographies.

The team at Goldman Sachs is very positive on the mining giant at the moment. This is due partly to its attractive valuation, strong free cash flow generation, and production growth outlook. It explains:

We are Buy rated (on CL) on RIO due to: (1) compelling relative valuation vs. peers, (2) Strong FCF and dividend yield with our bullish view on iron ore, aluminium and copper prices, (3) Strong production growth in 2023 & 2024, (4) Pilbara turnaround (~50% of group NAV), (5) Compelling high margin low emission aluminium exposure.

Goldman has a buy rating and $136.20 price target on its shares.

The post Brokers say these ASX 200 mining shares are top buys appeared first on The Motley Fool Australia.

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More reading

• Why the iron ore price is ‘not out of the danger zone’
• Top ASX passive income shares to buy in May 2023
• The Rio Tinto share price dumped 7% in April. Here’s why
• 2 ASX 200 mining shares to buy for big dividends: analysts
• Rio Tinto shares: Buy, hold or fold in May?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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If you’re searching for ASX dividend stocks to buy for passive income, then the two listed below could be worth looking at.

Both have been tipped as buys with meaningful upside potential and big forecast yields.

Here’s what you need to know about them:

Rural Funds Group (ASX: RFF)

The first ASX dividend stock that has been named as a buy is Rural Funds.

It is a real estate investment trust (REIT) with a focus on agricultural properties. Its portfolio comprises assets including orchards, vineyards, water entitlements, cropping, and cattle farms.

Analysts at Bell Potter are positive on Rural Funds. In fact, they believe its shares could be cheap based on where they trade relative to its net asset value. The broker has previously commented that this discount to adjusted NAV reflects what would historically be considered “an attractive entry point for investors.” It has a buy rating and $2.65 price target on Rural Funds shares.

As for dividends, the broker is expecting an 11.7 cents per share dividend in FY 2023 and then a 12.2 cents per share dividend in FY 2024. Based on the current Rural Funds share price of $1.97, this represents yields of 5.9% and 6.2%, respectively.

South32 Ltd (ASX: S32)

Another ASX dividend stock that could give your passive income a lift is diversified miner South32.

Goldman Sachs recently became positive on the company for a number of reasons. It explained:

We rate S32 a Buy based on: (1) Attractive valuation, (2) Improving FCF outlook on higher production & commodity prices (base metals and met coal), (3) Supportive share buyback and dividend yield, (4) Upside potential from base metal growth projects.

The broker is expecting the above to result in fully franked dividends of 12 US cents per share in FY 2023 and then 28 US cents per share in FY 2024. Based on the current South32 share price of $4.13 and the latest exchange rates, this will mean yields of 4.3% and 9.9%, respectively.

Goldman Sachs also sees decent upside for its shares with its buy rating and $4.80 price target.

The post Here’s why brokers say these ASX dividend stocks with big yields are buys appeared first on The Motley Fool Australia.

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More reading

• Want $200 in weekly passive income? Buy 85,200 shares of this ASX 300 stock
• Top ASX passive income shares to buy in May 2023
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Analysts say income investors should buy ANZ and these ASX dividend shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Rural Funds Group. 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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The IGO Ltd (ASX: IGO) share price has nearly tripled over the last five years.

The stock was trading at just $4.92 in May 2018. That means a $3,000 investment at that point in time would have seen a buyer walking away with 609 IGO shares.

Today, that holding would be worth an eye-popping $8,757.

The IGO share price last traded at $14.38, marking a 192% gain for the period.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has lifted just 18% since May 2018.

While the ASX 200 critical metals producer outperformed the index 10 times over, it also continued to post regular dividends.

Let’s take a look at all the passive income our figurative investment in IGO shares has provided over its life.

All dividends paid to those invested in IGO shares since 2018

Here are all the dividends the ASX 200 company has provided over the last five years:

IGO dividends’ pay date	Type	Dividend amount
March 2023	Interim	14 cents
September 2022	Final	5 cents
March 2022	Interim	5 cents
September 2021	Final	10 cents
September 2020	Final	5 cents
February 2020	Interim	6 cents
September 2019	Final	8 cents
March 2019	Interim	2 cents
September 2018	Final	2 cents
Total:		57 cents

As the chart shows, each IGO share has yielded 57 cents of passive income since May 2018. That means our $3,000 investment has brought in $347.13 over its life.

Factoring in both the company’s share price gains and dividends, an investment in the stock five years ago has likely provided a total return on investment (ROI) of nearly 204%.

And that’s before considering the potential compounding an investor might have realised if they were to have reinvested their dividends, using them to buy more IGO shares.

Not to mention, the franking credits offered alongside many of the company’s dividends might have provided further benefits for some shareholders at tax time.

Right now, IGO shares are trading with a 1.3% dividend yield.

The post Snapped up $3,000 of IGO shares 5 years ago? Here’s how much passive income your investment has brought in appeared first on The Motley Fool Australia.

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More reading

• Buy this ASX 200 lithium share in May: Goldman Sachs
• ASX lithium shares: Short-term pain for long-term gain?
• IGO share price lifts on news of record quarterly profit
• 11 ASX shares to buy with 4 on-trend qualities right now
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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There are plenty of ASX shares that have gone through significant pain in recent times. But it’s worth noting when something has fallen heavily, it could present an excellent buying opportunity.

I like the look of investments that are delivering underlying growth of their businesses while their share prices are a lot cheaper.

In my opinion, investing $5,000 into the following ASX shares could lead to that amount growing to $15,000. That would represent growth of 200%.

Australian Ethical Investment Ltd (ASX: AEF)

This ASX share has dropped by 78% since November 2021 when it was trading at around $14.70. It’s currently $3.21 per share. The share price would only need to recover to around $9.60 to deliver that sort of capital growth.

The business is focused on providing people with investment options in businesses that are trying to provide a more sustainable, low-carbon future.

Despite the difficult operating conditions with volatile markets, the business is seeing growth in its funds under management (FUM). It also recently took on $1.93 billion of FUM from Christian Super members, boosting its scale.

It’s expanding in a number of different ways, such as increasing its presence in the financial adviser channel and working on its product development pipeline.

This ASX share can benefit from regular superannuation contributions into the funds. The company is targeting revenue of more than $100 million and the business is expecting operating leverage to emerge.

Fund managers can be very scalable in that the same-size investment team can manage $7 billion almost as easily as $6 billion. This means profit margins can rise as the ASX share grows.

Betashares Asia Technology Tigers ETF (ASX: ASIA)

This is an exchange-traded fund (ETF) that gives investors exospore to the largest 50 Asian technology companies outside of Japan. Since June 2021, the ETF unit price has fallen by more than 40%.

It has been a difficult period for Asian businesses, with uncertainties in China, higher interest rates, and global inflation impacts.

But this lower price for the overall group of businesses could mean it’s a good time to invest in names like Samsung, Tencent, Taiwan Semiconductor Manufacturing, Alibaba, PDD, and Infosys.

Over the past ten years, the index that this ETF tracks has returned an average of 15% per annum. But, of course, past performance is not a reliable indicator of future performance

I think, generally, technology shares are very promising. Certainly, the large technology businesses in Asia could perform well in the long term as the Asian economy continues to digitalise.

The post Why I believe these 2 appealing ASX shares could turn $5,000 into $15,000 appeared first on The Motley Fool Australia.

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More reading

• 3 fantastic ETFs for ASX investors to buy in May
• 3 quality ASX ETFs for investors to buy for the long term
• Why I think it’s a great time to start buying ASX growth shares
• Here are a couple of high-quality ETFs to add some oomph to your portfolio
• Down 60% in 12 months, I’d buy these 2 ASX All Ords shares for the turnaround

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Australian Ethical Investment, Taiwan Semiconductor Manufacturing, and Tencent. The Motley Fool Australia has recommended Australian Ethical Investment and Betashares Capital – Asia Technology Tigers ETF. 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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If you are wanting to invest in some blue chip ASX 200 shares, then Morgans has your back.

It has just released its best ideas for May and has named several blue chip stars on its list.

Two that could be top options this month are listed below. Here’s why its analysts rate them highly:

Qantas Airways Limited (ASX: QAN)

The flying kangaroo could be a blue chip ASX 200 share to buy according to Morgans. As well as making its best ideas list, the broker has named the company as its top pick in the travel sector right now.

Morgans rates Qantas highly due to its cheap valuation, pent-up demand, positive outlook, and strong balance sheet. It explained:

QAN is now our preferred pick of our travel stocks under coverage given it has the most near-term earnings momentum. Looking across travel companies globally, airlines are now in the sweet spot given demand is massively exceeding supply. QAN is trading at a material discount compared to pre-COVID multiples, despite having structurally higher earnings, a much stronger balance sheet, a better domestic market position, a higher returning International business and more diversification (stronger Loyalty/Freight earnings). The strong pent-up demand to travel post-COVID should result in a healthy demand environment for some time, underpinning further EBITDA growth over FY24/25. QAN’s balance sheet strength positions it extremely well for its upcoming EBIT- accretive fleet reinvestment and further capital management initiatives (recently announced a A$500m on-market share buyback at its 1H23 result). There is also likely upside to our forecasts and consensus if QAN achieves its FY24 strategic targets.

The broker has an add rating and $8.35 price target on Qantas’ shares.

Telstra Group Ltd (ASX: TLS)

This telco giant also gets the thumbs up by Morgans. Its analysts believe Telstra is an ASX 200 blue chip share to buy thanks to the success of its turnaround, its strong earnings momentum, and its valuation. In respect to the latter, the broker believes that value could soon be unlocked through asset divestments. It commented:

After a major turnaround, TLS has emerged in good shape with strong earnings momentum and a strong balance sheet. In late CY22 shareholders vote[d] on Telstra’s legal restructure, which opens the door for value to be released. TLS currently trades on ~7x EV/EBITDA. However some of TLS’s high quality long life assets like InfraCo are worth substantially more, in our view. We don’t think this is in the price so see it as value generating for TLS shareholders. This, free option, combined with likely reputational damage to its closest peer, following a major cybersecurity incident, means TLS looks well placed for the year ahead.

Morgans has an add rating and $4.70 price target on Telstra’s shares. It is also expecting a fully franked dividend yield of approximately 4% in FY 2023 and FY 2024.

The post Morgans names the best ASX 200 blue chip shares to buy in May appeared first on The Motley Fool Australia.

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More reading

• Should I buy this week’s slump on Telstra shares?
• Is the Qantas share price at risk over the airline’s $12 billion renewal plans?
• Why did the Qantas share price struggle in April?
• My 5-step plan to achieving $500 in monthly passive income
• Here’s what this broker is saying about the Qantas share price

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. 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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ASX dividend shares can be an excellent way for investors to generate passive income from their portfolios. Here, I’m going to talk about two of the ASX’s dividend income beasts that have the longest dividend growth records on the ASX.

Most businesses can grow their dividend when the economy is booming. But I’m particularly impressed by the ASX dividend shares that keep growing dividends during difficult times.

There are very few businesses that have grown their payouts every year since before the global financial crisis. But both of the businesses below have done just that.

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

Soul Pattinson has increased its annual ordinary dividend every year since 2000, which is the best record on the ASX.

The ASX dividend income beast has managed this thanks to its investment conglomerate nature. It owns a portfolio of assets across ASX blue chip shares, ASX small cap shares, private equity, property, structured debt, and strategic positions in other ASX shares.

Soul Pattinson has large positions in businesses like Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), TPG Telecom Ltd (ASX: TPG), Tuas Ltd (ASX: TUA), Pengana Capital Group Ltd (ASX: PCG), Apex Healthcare, Aeris Resources Ltd (ASX: AIS), Macquarie Group Ltd (ASX: MQG), BHP Group Ltd (ASX: BHP), CSL Limited (ASX: CSL), Wesfarmers Ltd (ASX: WES), and Commonwealth Bank of Australia (ASX: CBA).

The company has looked to build a portfolio of “robust, defensible business models and uncorrelated assets”. The growing cash flow from its investments have helped fund Soul Pattinson’s growing dividends. There’s enough cash flow left over after paying for its expenditure to re-invest in more opportunities.

The total returns of this ASX dividend income star have outperformed the All Ordinaries Accumulation Index (ASX: XAOA), thanks to the steady compounding of its portfolio in good businesses.

APA Group (ASX: APA)

APA is an energy infrastructure business that owns a huge gas pipeline network. In fact, it transports half of Australia’s natural gas usage. It also has a growing portfolio of renewable energy and electricity transmission assets.

Each time it completes a project, such as a new pipeline, the business benefits from an increased level of cash flow generation which can then fund a higher distribution.

It has increased its distribution each year since 2004 and is expecting to deliver a distribution of 55 cents per security in FY23. This would represent an increase of 3.8% compared to FY22.

The company says it’s “building momentum” across its business and “investing in the capability, systems and processes necessary to be the partner of choice in delivering infrastructure solutions for the energy transition”.

As an energy infrastructure business, it’s planning to invest in renewables, gas and hydrogen infrastructure, and electricity transmission. The ASX dividend income share currently has an investment pipeline of more than $1.4 billion, including the East Coast grid expansion and western outer ring main. These will provide increased capacity ahead of winter 2023. It is also investing in the Northern Goldfield interconnect project in Western Australia.

The post 2 ASX dividend income beasts with impressive payout records appeared first on The Motley Fool Australia.

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More reading

• My 5-step plan to achieving $500 in monthly passive income
• Worried about the market? 2 ASX dividend stocks that could help you sleep at night
• 6 excellent ASX 200 dividend shares that aren’t banks or miners
• 2 popular ASX 200 shares trading near 52-week highs. Is it too late to buy?
• Investing 15% of my salary could yield $500 in a monthly second income

Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, CSL, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Apa Group, Brickworks, Macquarie Group, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has recommended Tpg Telecom. 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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The Betashares Nasdaq 100 ETF (ASX: NDQ) is an exchange-traded fund (ETF) with net assets of close to $3 billion. Could it be a good option for dividend investors?

The idea behind the NDQ ETF is that it invests in 100 of the largest non-financial companies listed on the US-based NASDAQ market. It includes “many companies that are at the forefront of the new economy”, according to BetaShares.

Essentially, it gives investors exposure to some of the world’s largest and most technologically-advanced companies invested in the United States, such as Microsoft, Apple, Amazon.com, Alphabet (Google), Nvidia, Meta Platforms and Tesla. Those holdings amount to more than 50% of the ETF’s portfolio.

Is the NDQ ETF an option for dividend investors?

An ETF operates through a trust structure, so it essentially passes on any dividend income received from its underlying portfolio holdings to investors.

But, an ETF also distributes crystallised capital gains from any sales of its holdings, which can be a boost to the distribution yield.

Companies such as Amazon, Meta Platforms, Alphabet and Tesla don’t pay dividends to investors. This suggests that the dividend yield of the Betashares Nasdaq 100 ETF is likely to be fairly low.

On top of that, some of the biggest companies that do pay a dividend have a low dividend yield – Microsoft has a 0.9% dividend yield, according to Google Finance, while Apple has a dividend yield of 0.6%.

According to BetaShares, the 12-month distribution yield at the end of April 2023 was 2.8%.

Is there a way to generate more income?

Investors could decide to sell a small amount of their NDQ ETF units and tap into the capital growth.

Before I get into an example, let me remind everyone that past performance is not a reliable indicator of future performance.

The Betashares Nasdaq 100 ETF has delivered an average return per annum of 13.6% over the three years to April 2023. Let’s assume that an investor is re-investing their distributions into more NDQ ETF units.

If an investor started with a $100,000 portfolio and it grew by 13% over 12 months, they would end with a portfolio worth $113,000. The investor could then sell $5,000 and use that cash for their own life. They’d have $108,000 left in the portfolio to hopefully grow in the following year.

If we think of the $5,000 sale as a dividend of the original $100,000, that’s a 5% dividend yield.

Foolish takeaway

I don’t think we can say that the Betashares Nasdaq 100 ETF is a dividend option with it having a distribution yield of less than 3%.

However, I’ve shown a way for investors to unlock a stream of investment income from the NDQ ETF by selling a small parcel each year. The caveat is that they must have a sizeable sum to work with (such as $100,000). It wouldn’t make sense to have $2,000 invested in the ETF and then sell $50 worth of units.

The post I’m a dividend investor. Should I buy the Betashares Nasdaq 100 ETF (NDQ)? appeared first on The Motley Fool Australia.

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More reading

• 3 top quality ETFs for ASX investors to buy and hold for 10 years
• 3 top ASX ETFs hitting new 52-week highs on Friday
• Sunk $5,000 into the Betashares Nasdaq 100 ETF (NDQ) in 2020? Here’s how much passive income your investment has provided
• 3 highly rated ETFs for ASX investors to buy in May
• I think this underrated reason is key to why ETFs can be great investments

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon.com, Apple, BetaShares Nasdaq 100 ETF, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Alphabet, Amazon.com, Apple, Meta Platforms, and Nvidia. 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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The exchange-traded fund (ETF) iShares S&P 500 ETF (ASX: IVV) is one of the more popular ETFs that give investors broad access to the share market. But can buying it at a price under $45 make you rich?

Its net assets were around $5.4 billion at the end of April 2023. So investors already have a lot of money invested.

But can it deliver a lot more growth for investors and is it a good way to invest? I’m going to outline three reasons why I think it’s a good option.

Extremely cheap management fee

This ETF has one of the cheapest expense fees around, with an annual fee of just 0.04%.

The great benefit of having a cheap management fee is that it means that most of the gross/total returns turn into net returns. In other words, investors keep more of the returns in their pockets.

Plus, it doesn’t charge any performance fees, while many active fund managers are charging 1%, 1.25%, or even more per annum.

So, over time, the iShares S&P 500 ETF can deliver impressive net returns because hardly anything is lost to fees.

Strong investment holdings

As the name suggests, the ETF is invested in 500 businesses. These businesses are some of the largest and most profitable companies listed in the US.

The names within the portfolio are regularly changing, but the overall group has performed well for decades.

Investors have probably heard of a number of the big businesses in the iShares S&P 500 ETF portfolio. Some of the biggest positions include Apple, Microsoft, Alphabet, Amazon.com, Nvidia, Berkshire Hathaway, and Meta Platforms.

These businesses are among the world’s leaders in their respective industries. Any new entrants in their respective fields would find it incredibly difficult to displace them. So, I’d say that plenty of the businesses within the ASX ETF have very strong economic moats, which can then enable investors to make good returns.

Good long-term returns

Past performance is not a reliable indicator of future returns. However, the iShares S&P 500 ETF has done very well over the long term.

As of April 2023, the ETF has offered an average return per annum of 14.1% over the prior five years. If it keeps making a return of that level then I think investors can become very rich given how well it’s doing, the diversification it offers, and the fact that most of the returns come from capital gains.

On paper, capital growth can deliver stronger compound growth compared to dividends because investors aren’t losing a chunk of the return to tax each year. If most of the return comes through dividends then investors may need to pay a fair amount of tax — that’s assuming they’re in one of the higher tax brackets.

I think iShares S&P 500 ETF’s portfolio is high quality and it can continue to deliver long-term returns.

Foolish takeaway

I believe that investors can become rich by utilising the iShares S&P 500 ETF and regularly investing in it. I love the diversification and the strong businesses it’s invested in.

The post Could buying iShares S&P 500 ETF (IVV) shares at under $45 make me rich? appeared first on The Motley Fool Australia.

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More reading

• 3 top ASX ETFs hitting new 52-week highs on Friday
• I think this underrated reason is key to why ETFs can be great investments
• I’m a dividend investor. Should I buy the iShares S&P 500 ETF (IVV)?
• Should I invest in the ASX 200 or the S&P 500?
• 2 fantastic ETFs for ASX investors to buy next week

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon.com, Apple, Berkshire Hathaway, Meta Platforms, and Nvidia. The Motley Fool Australia has recommended Alphabet, Amazon.com, Apple, Berkshire Hathaway, Meta Platforms, Nvidia, and iShares S&p 500 ETF. 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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