If you’re a value investor then cheap ASX shares will no doubt be of interest to you.

The good news is that there are two ASX shares that have just been declared as cheap by analysts.

They are as follows:

Rural Funds Group (ASX: RFF)

Analysts at Bell Potter believe that agricultural property company Rural Funds could be a dirt cheap ASX share following recent weakness. In fact, the broker highlights that the current discount to net asset value (NAV) implies that something disastrous is going to happen in agricultural property. However, the broker appears to doubt that this will be the case. It said:

RFF is down ~39% from its Jan’22 peak a material underperformance relative to the XPJ, which is down ~21% over the same time frame. The underperformance has come despite double digit YOY gains in agricultural land values in CY22. In effect the current 31% discount to market NAV is implying a downward correction in property values comparable to that seen in US agricultural land values in 1932-33 and 1985-87.

Bell Potter has a buy rating and $2.65 price target. It also expects dividend yields in the region of 6% for the foreseeable future.

Super Retail Group Ltd (ASX: SUL)

Another cheap ASX share to consider buying is Super Retail. It is the retail conglomerate behind brands such as Macpac, Rebel, and Super Cheap Auto.

Citi rates the retailer highly and put a buy rating and $14.50 price target on its shares earlier this month. This was in response to a solid quarterly update, which the broker believes demonstrates the company’s resilience. It commented:

Super Retail’s trading update again demonstrated resilience in sales across the board. The implied 4yr CAGR for the most recent 10-week period showed only very slight moderation from the strong February trading update across all brands. On the negative side, GP margins look to be down ~80bps in 2H23 to date on the pcp, better than the market’s expectation of -100bps though worse than we expected. High promotional intensity in BCF’s categories has continued from 1H23. We reduce our FY23e EBIT by ~1% but remain 8% above consensus for 2H. Super Retail remains our top pick in consumer discretionary.

All in all, with its shares changing hands for under 11x forward earnings and offering a dividend yield greater than 5%, Citi appears to see Super Retail as an ASX share to buy.

The post These cheap ASX shares are bargain buys: brokers appeared first on The Motley Fool Australia.

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More reading

• 5 ASX shares I’d buy for a US recession
• Turning ASX shares into a $40,000 annual passive income generator
• UBS tips 4 ASX 200 retail shares to benefit from the federal budget
• Top brokers name 3 ASX shares to buy today
• Top defensive ASX shares to buy in May 2023

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 positions in and has recommended Super Retail Group. The Motley Fool Australia has positions in and has recommended Rural Funds Group and Super Retail 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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Are you searching for ASX dividend shares to buy? If you are, then the two named below could be worth checking out.

Both have been named as buys by analysts and tipped to provide attractive yields. Here’s what you need to know about them:

Charter Hall Long WALE REIT (ASX: CLW)

The Charter Hall Long Wale REIT could be an ASX dividend share to buy when the market reopens.

When you own property, your biggest concern is having tenants in there paying rent. The good news is that this is not a problem for this REIT. Far from it! At the last count, the company had almost 100% occupancy with a weighted average lease expiry (WALE) of 12 years.

This provides great visibility on its future earnings and arguably makes it a low risk option in the property space. Particularly given how the majority of its tenants are either from The corporate and government sectors.

It is largely for this reason that Citi currently has a buy rating and $5.00 price target on its shares. The broker highlights its “low risk income stream with c. 12 year WALE and 99.9% occupancy.”

Citi also expects some big dividend yields. It is forecasting dividends per share of 28 cents in FY 2023 and then 29 cents in FY 2024. Based on the current Charter Hall Long Wale REIT share price of $4.38, this will mean yields of 6.6% and 6.85%, respectively.

Dicker Data Ltd (ASX: DDR)

Dicker Data could be another ASX dividend share to buy next week. It is one of the largest technology hardware, software, and cloud distributors in Australia and New Zealand.

Last week, Dicker Data released its first-quarter update and revealed solid revenue and earnings growth over the prior corresponding period.

Analysts at Morgan Stanley were pleased with its performance, noting that it was in-line with expectations. And while it is warning investors not to extrapolate this quarterly performance for the whole year, the broker remains positive on the company’s medium term outlook.

As a result, it has retained its overweight rating and $10.00 price target on Dicker Data’s shares.

In addition, its analysts continue to forecast fully franked dividends per share of 43.8 cents in FY 2023 and 48.8 cents in FY 2024. Based on the latest Dicker Data share price of $8.96, this will mean yields of 4.9% and 5.4%, respectively.

The post Here are 2 growing ASX dividend shares for income investors to buy: analysts appeared first on The Motley Fool Australia.

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More reading

• Why Dicker Data, Ioneer, Monadelphous, and Weebit Nano shares are rising
• Here’s why this ASX tech share is storming 6% higher on Wednesday
• These ASX income shares have very big forecast dividend yields
• 3 ASX 300 shares being bought up by insiders
• Citi rates these ASX dividend shares as buys

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 positions in and has recommended Dicker Data. The Motley Fool Australia has positions in and has recommended Dicker Data. 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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Hand-wringing about the next recession seems to be a common activity for those who invest in ASX shares. Most investors fear a recession, and the slump (or even crash) in share prices it can bring with it.

But in 2023, the risk of a recession does seem to be rising. For one, interest rates around the world, but particularly in the United States, have been steadily and steeply climbing over the past 12 months.

If you know anything about the history of recessions, you’ll know that most are preceded by rising interest rates. Inflation continues to be a problem, and many investors are doubtful that the US Federal Reserve can pull off the fabled ‘soft landing’ of getting inflation down without sparking an economic downturn.

It’s worth pointing out that at this stage, anything can still happen. We may see a recession later this year or in 2024, or 2025. It could be mild or severe. Or maybe we do pull off a soft landing and avoid one altogether. All scenarios are possible.

But let’s assume one is coming for the American economy, which would inevitably drag the rest of the world down with it. Which ASX shares would be best placed to weather this storm?

5 ASX shares I would buy for an American recession

If I wished to protect my capital as much as possible in anticipation of a US recession, I would look to ASX’s most defensive stocks. 

That would start with Coles Group Ltd (ASX: COL). Coles, as the country’s second-largest supermarket chain, is an inherently defensive company. No matter if there is a recession or not, we all have to eat and keep our households running.

With that in mind, Coles’ earnings base is highly defensive, which means it is a great company to hold in all kinds of economic weather. Coles’ hefty dividend would also come in handy, which the company kept raising during the pandemic.

In a similar vein, I would also look to Telstra Group Ltd (ASX: TLS). We all need to eat, but internet access is also something that most of us wouldn’t want to give up either, no matter how tight the budget gets.

Telstra’s position as the nation’s most dominant telco makes this a very strong business, which makes it another great pick for a recessionary environment. Telstra has also shown that its hefty dividend is recession-proof in recent years too.

Transurban Group (ASX: TCL) is my third pick. This toll-road operator used to be known as one of the safest dividend payers on the ASX. COVID played havoc with that reputation for a few years. But I highly doubt the next economic downturn will have us all locked indoors for months on end.

As such, Transurban’s toll roads should prove to be another inelastic and defensive source of earnings for the foreseeable future, no matter what is happening in the broader economy.

A focus on food, drinks and household items

Another investment I would turn to in order to protect an ASX share portfolio from a US recession is Rural Funds Group (ASX: RFF). Rural Funds is a real estate investment trust (REIT) that specialises in farms and food production assets. These include macadamia, cattle, and almond farms, as well as vineyards.

Again, the need to eat is not dependent on what the economy is doing, so I would feel very comfortable owning this investment in good times and bad. Right now, this REIT offers a dividend distribution yield of over 6%. Considering Rural Funds’ ability to raise its dividend every year between 2019 and 2022, I consider it to be another recession-proof investment.

Finally, let’s discuss the iShares Global Consumer Staples ETF (ASX: IXI). This exchange-traded fund (ETF) specialises in investing in consumer staples stocks.

Consumer staples shares are companies that produce or sell food, drinks and other household items (there’s a bit of a theme here). But this ETF holds companies that are listed all around the world. Some of its top holdings include Coca-Cola Co, PepsiCo, Colgate-Palmolive and Philip Morris International.

I think that this ETF can add some much-needed diversification to a portfolio, given its global orientation. And given its defensive nature, it’s my final pick for a recession-resistant portfolio.

The post 5 ASX shares I’d buy for a US recession appeared first on The Motley Fool Australia.

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More reading

• Top brokers name 3 ASX shares to buy next week
• How to invest $10,000 in ASX dividend shares in May
• I’m following Warren Buffett and preparing for a stock market crash
• Turning ASX shares into a $40,000 annual passive income generator
• These ASX 200 dividend stocks are highly rated for a reason

Motley Fool contributor Sebastian Bowen has positions in Coca-Cola, PepsiCo, Philip Morris International, Telstra Group, and iShares International Equity ETFs – iShares Global Consumer Staples ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Philip Morris International and has recommended the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool Australia has positions in and has recommended Coles Group, Rural Funds Group, Telstra Group, and iShares International Equity ETFs – iShares Global Consumer Staples 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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It’s been a year and three months since Block Inc CDI (ASX: SQ2) shares debuted on the Aussie share market. Yet, the fruits of engulfing the former high-flying buy now, pay later golden child, Afterpay, have not manifested in the form of a higher share price.

Oddly, the unrewarding share price performance corresponds with an all-time high in 12-month trailing revenues as of 31 March 2023. With the Block share price nearing its 52-week low again, there’s a good chance Block is beginning to catch the attention of some investors.

As they say, a picture is worth a thousand words. That’s why I believe there are five images worth viewing before making a call on Block shares.

What is the investment case for Block shares?

Every investment should be backed by clear justification. Without a doubt, Block is competing in a crowded arena. Not only that, it’s engaging in a battle of David and Goliath proportions, taking on the largest financial institutions in the world.

So, what’s the reasoning behind Block potentially succeeding in the long run?

Going global

Although Block (formerly Square) generated US$18.56 billion in revenue for the 12 months ending 31 March 2023, its revenue by geography remains highly concentrated in the United States.

According to data sourced from its 2022 annual report, approximately 93% of all revenue was derived from the US. However, the use of digital payments and the expansion of e-commerce is not a US-only phenomenon.

In my opinion, the lack of market penetration into countries outside of the US presents an opportunity to fuel future growth. Few traditional banks provide banking services across multiple countries, offering a unique chance to build a formidable cross-border brand in financial services.

Fortunately, Block is already laying the groundwork beyond its local borders. The fintech giant grew gross profits outside of the US from its Square operations by 43% year on year to US$122 million.

Already, the company offers its payment provider services in the United Kingdom, Ireland, Canada, Australia, and Japan.

However, it’s the company’s consumer-facing product that I believe could be the biggest boon for Block shares.

A 21st-century financial operating system

Much like how Apple Inc (NASDAQ: AAPL) and Microsoft Corp (NASDAQ: MSFT) unlocked the full potential of personal computing to the masses through the introduction of user-friendly graphical user interfaces (GUIs), Block could do the same in the financial and banking services industry.

Democratising digital solutions for small and medium-sized businesses through Square could reduce the barriers of entry for many aspiring business operators. By providing a system to simplify administrative tasks (bookings, inventory management, and payments), business operators can focus on core operations.

Meanwhile, Block’s Cash App ecosystem is a modern answer to money handling. The decline of cash as a payment method continues, as illustrated in the Reserve Bank of Australia’s chart above.

For many, cash has become a burden with too many friction points compared to digital alternatives. It also can’t be used for online transactions, which are becoming all the more frequent.

While only available in the US and the UK right now, Cash App continues to experience rapid growth. In Q1 FY23, Cash App inflows increased 27% year on year to US$61 billion — pictured below.

The impressive growth of Cash App at scale is likely to appeal to anyone considering Block shares. This area of the business could sustain double-digit expansion for many years, given the tailwinds for further digital payments adoption.

What about the valuation?

It’s one thing to have a good growth story… it’s another to be trading at a valuation worth buying at. No matter how good the future is, if all of it is priced in (and then some), the potential for upside is likely limited.

Due to Block’s checkered history with profitability, the price-to-sales (P/S) ratio is a more suitable tool for some fundamental analysis.

On this basis, Block shares are trading at their lowest multiple since early 2017. The company is valued similarly to Tyro Payments Ltd (ASX: TYR) at a P/S multiple of around two times, as shown below.

For reference, Block’s revenue has increased by nearly 11 times since late 2016. Nevertheless, the market appears unwilling to pay a greater premium while profitability proves to remain elusive.

Why I’m still a little cautious about buying more Block shares

The market opportunity to become a household name in banking and financial services across the globe is an enticing prospect. However, Block shares are not without their thorns.

Any good investor should be aware of the uglier aspects of a business before committing to investing.

For me, a glaringly obvious piece of baggage that comes along with Block right now is the enormous amount of stock-based compensation (SBC). A total of US$279.59 million (AU$417.69 million) worth of stock-based compensation was incurred in the latest quarter alone.

The company uses this to aid in retaining its talented employees. However, the fact that SBC is rapidly growing over time is concerning, as shown above. Especially when this amount is added back into operational cash flow.

There are differing opinions over the treatment of SBC. Personally, I think it is important to look at cash flow excluding SBC. When doing so, Block’s cash flow from operations in the latest quarter would be a meagre US$14.81 million from US$4.99 billion in revenue.

Overall, that is the biggest ‘must-know’ detail for anyone considering buying Block shares, in my opinion.

The post 5 must-see images for anyone considering Block shares appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why ANZ, Block, Pilbara Minerals, and SSR Mining shares are storming higher
• Block share price charges higher on strong Q1 result and guidance
• Down 37% in a year, fundie says Block shares offer ‘very attractive rate of return’
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Mitchell Lawler has positions in Apple and Block. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Block, Microsoft, and Tyro Payments. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool Australia has recommended Apple and Tyro Payments. 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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