Investors looking for buy ideas that’s off the beaten path might be keen to put these ASX stocks on their watchlist.

These often overlooked stocks are the latest “buy” recommendations outside of the S&P/ASX 200 Index (Index:^AXJO) by leading brokers.

Little risk of dividend cut

The first is the APN Convenience Retail REIT (ASX: ARQ) share price, which jumped 4.5% to $3.50 on Thursday.

Morgans reiterated its “add” recommendation on the stock after the property trust completed its $50 million placement.

APN is looking to raise another $5 million to strengthen its balance sheet and fund the recently announced acquisition of Coles Express outlets.

Management is promising that its FY21 dividend will be no less than the current financial year. That will be music to investors’ ears given that the property sector is at risk of cutting dividends, as highlighted in my article yesterday.

Upcoming catalyst

“The main tenant remains Puma Energy Australia (c58% of income), however in December 2019 Chevron entered into a conditional agreement to acquire its Australian fuel business,” said Morgans.

“In our view, completion of this deal would be a near term positive catalyst as it would further strengthen the credit quality of a key tenant.”

The broker is forecasting a FY20 dividend of 21.8 cents a share, which increases slightly to 21.9 cents next year.

This puts the stock on a yield of 6.3% and Morgan’s price target on the stock is $3.75 a share.

Digging itself out of a hole

Another ASX small cap to put on your buy list is the Imdex Limited (ASX: IMD) share price, according to UBS.

The drilling services company is impacted by the COVID-19 shutdowns, particularly in South America. You only need to look at Brazil to see what I mean.

UBS estimates that Imdex’s June quarter revenue will crash by around 41% over the same period last year due to the lockdowns.

What’s more, the broker doesn’t see a V-shape recovery for Imdex with the way South America is going, but is convinced the stock looks cheap for those willing to look through the coronavirus crisis.

Looking cheap over medium-term

“While near-term earnings provide little support for IMD’s valuation, we view IMD’s FY22E EBIT multiple of 7.5x EV/EBIT as attractive and representative of more normalised EBIT,” said UBS.

“We see risks skewed to the upside from a faster recovery, underpinned by a favourable commodity price backdrop, and faster adoption of IMD’s new products.”

UBS reiterated its “buy” recommendation on Imdex with a price target of $1.30 a share.

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Motley Fool contributor Brendon Lau 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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The Turners Automotive Group Ltd (ASX: TRA) share price was a standout performer on the ASX today. Turners shares finished 28.24% higher at $2.18 after the group released its full-year FY20 results for the year ending 31 March 2020.

Turners Automotive Group is an integrated financial services group that, as its name suggests, primarily operates in the automotive sector. The group has three main business segments: automotive retail, finance and insurance, and debt management systems. 

Alongside the cornerstone Turners business, the group has a number of brands under its banner, including Oxford Finance, Autosure, and EC Credit Control.

Headline results

Starting from the top line, FY20 group revenue declined by 1% to NZ$333 million. Turners noted that trading towards the back end of the financial year was impacted by the early effects of COVID-19.

Nonetheless, the group delivered an 11% increase in underlying net profit before tax (NPBT), which rose from NZ$26 million in FY19 to NZ$28.8 million in FY20.

The group attributed this growth to gains made in the insurance, finance and credit divisions, which were partially offset by a drop in auto retail due to COVID-19.

Reported NPBT came in at NZ$29.1 million, in line with the group’s guidance range of NZ$28 million to NZ$30 million and flat on FY19 NPBT of NZ$29 million.

Automotive retail

Turners observed a softening of the used car market throughout FY20 due to reduced consumer confidence. Unsurprisingly, this decline was exacerbated during late February and March in the wake of the coronavirus pandemic.

The group highlighted a cyclical reduction in consignment vehicles in FY20. However, this was partially offset by an increase in the sales of owned inventory, with average gross profits per unit up 12% to $529.

Overall, the group’s automotive retail segment delivered revenue of NZ$224.9 million and underlying profit of NZ$13.3 million.

Other segment performance

The group’s finance business, Oxford Finance, delivered marginal revenue growth of 4% to come in at NZ$45.7 million. Operating profit also jumped 10% to NZ$12.2 million. Turners attributed this improvement to writing higher quality new business and the resulting improved arrears performance.

Meanwhile, the group’s insurance arm, Autosure, recorded a 9% drop in revenue as a result of market conditions and focusing on lower risk portfolios and vehicles. Operating profit saw a steeper decline, falling 25% to NZ$6.2 million.

Finally, credit management business EC Credit Control booked in a 1% drop in revenue, while operating profit increased by 3%.

What next?

Looking forward, Turners noted its auto retail business is fully operational, with sales stronger than expected.

The finance segment is seeing arrears performing well, while new insurance policy claims are recovering, with claims tracking below expectations.

On the whole, the group stated that trading in April and May has been “significantly better than what we expected”. This comes as New Zealand moved through its COVID-19 alert levels and the benefits of cost reductions, rent reductions and wage subsidies materialised.

At the end of FY20, the group had net debt of NZ$317.6 million, comprising NZ$32.8 million cash and NZ$350.4 million debt. Turners has an additional NZ$78 million of undrawn funding.

After today’s strong gains, the Turners Automotive share price is down 3.11% year-to-date.

More reading

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• What are the best ASX shares for dividends?

Motley Fool contributor Cathryn Goh 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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According to the latest cash rate futures, the market is currently pricing in a 57% probability of a rate cut to zero next month.

While I’m not convinced that another rate cut is coming, I feel quite sure that rates will be staying at these ultra low levels for the foreseeable future.

This is good news for borrowers, but the very opposite for savers and income investors who will have to live with meagre interest rates for some time to come.

Fortunately, the Australian share market is home to a large number of dividend shares with generous yields. Two which I would buy today are listed below:

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

If you don’t have exposure to the banking sector already, then I think ANZ would be worth considering. With its shares down by a third from their 52-week high, I estimate that they are changing hands for 13x estimated FY 2021 earnings and 0.9% FY 2021 book value. This is lower than average and a level that I think is attractive for patient investors.

Another positive is that although it is highly likely to cut its dividend materially next year, its share price decline means it should still offer an above-average yield. As things stand, I expect ANZ to pay a partially franked dividend of $1.05 per share next year. This equates to a 5.5% yield today.

BWP Trust (ASX: BWP)

Another dividend share to consider buying is BWP Trust. It is a real estate investment trust which owns 75 properties across Australia. The majority of its properties are warehouses that are leased to the Wesfarmers Ltd (ASX: WES) owned Bunnings business. At the last count the company’s occupancy rate stood at 97.5% and it was generating over $150 million in rent each year.

While having the majority of your properties leased to a single customer is usually a risk, I don’t believe it is anything to be too concerned about. This is because Wesfarmers is a major BWP shareholder with a stake of almost 24% and unlikely to do anything that would negative impact its investment. All in all, I’m confident BWP can continue growing its income and distribution at a modest rate for the foreseeable future. At present I estimate that its shares offer investors a forward 4.9% yield.

More reading

• Next phase of bull market could see ANZ Bank outperform Afterpay
• The next ASX sector at risk of cutting dividends
• ASX 200 down 0.1%: Carsales update impresses, a2 Milk surges higher
• Is the ANZ share price a buy today?
• Can ASX big banks generate an attractive sustainable dividend yield from FY21?

Motley Fool contributor James Mickleboro 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 Beat the cash rate cuts with these top ASX dividend shares appeared first on Motley Fool Australia.

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