In these uncertain economic conditions, it’s fascinating to see which companies have flourished and which have failed. The tourism sector has understandably suffered after governments across the world implemented strict travel bans. Shares of companies like Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) are still trading at a fraction of their pre-pandemic levels. 

But the COVID-19 crisis has also produced some unlikely market darlings. The share prices of companies like Australian online retailer Kogan.com Ltd (ASX: KGN) and meal kit delivery service Marley Spoon AG (ASX: MMM) have skyrocketed after demand for their offerings surged during lockdown.

Another niche sector of the economy that has held up strongly throughout the pandemic has been infant formula. Two companies operating in this sector that have seen spikes in demand are A2 Milk Company Ltd (ASX: A2M) and Bubs Australia Ltd (ASX: BUB). The solid performance of these companies throughout the coronavirus crisis have resulted in the A2 Milk and Bubs share prices showing remarkable resilience during this volatile period.

The A2 Milk Company share price

Surprisingly, the A2 Milk Company share price has taken the whole coronavirus crisis firmly in its stride. Despite exhibiting increased volatility throughout February and March, the share price has marched steadily upwards. It eventually peaked with a 52-week high of $19.23 on 20 April. And while it has edged lower in recent weeks, the A2 share price is currently trading at $17.83, as at the time of writing. This still puts it well within striking distance of that high.

In a market update released in late April, A2 Milk stated that revenue for the March quarter had exceeded expectations. This was driven by changes in consumer purchasing behaviour in response to the developing coronavirus crisis. Panic buying saw large numbers of consumers stocking their pantry with basic staples like long-life dairy products and infant formula.

While acknowledging that the future remained incredibly uncertain, New Zealand-based A2 Milk upgraded its guidance for FY20 EBITDA growth to be in the range of 31% to 32%. It expected full year revenue to be between NZD$1.7 billion and NZD$1.75 billion. This represents an increase of between 30% and 34% over the previous year.

The Bubs Australia share price

While the share price of ASX organic infant formula company Bubs hasn’t performed quite as well as that of A2 Milk, it has still managed to keep long-term shareholders happy throughout the health crisis. After falling to a low of just 40 cents in mid-March, the Bubs share price has rebounded strongly, climbing all the way back  up to $1.04 at the time of writing.

Revenues for the March quarter were the highest on record at $19.7 million. This is an increase of 36% over the previous quarter. Growth was driven by a surge in demand for its infant formula, which made up 58% of gross sales for the quarter. Sales volumes were up across all regions, particularly in China and Vietnam.

The company has been resilient throughout the pandemic in part due to its vertically integrated supply chain. In December 2017, Bubs acquired goat milk powder producer NuLac Foods, which operates a farm in Victoria’s Gippsland region. NuLac also operates a processing plant in the Melbourne suburb of Keysborough. This means Bubs has exclusive supply of the key ingredient in its goat milk infant formula. It also means the company is insured against supply-side disruptions caused by COVID-19 lockdowns and travel restrictions.

Should you invest?

The key issue for companies like Bubs, A2 Milk and even Marley Spoon, is whether this increase in short-term demand will persist over the longer term. Panic buying and lockdown restrictions have been unprecedented but are now starting to ease. This means there is the potential for sales to slump in subsequent quarters as things gradually return to ‘normal’.

A2 Milk has long been a market darling. But what I believe the crisis has really revealed is the strength of Bubs’ vertically integrated supply chain. Bubs has remained robust throughout the crisis and has ensured that its production can meet demand. Plus, the company also recently announced a new local supply agreement with Coles supermarkets. This means it could potentially emerge from this crisis in an even stronger position. I would definitely be putting the Bubs share price on my watch list heading into results season.

More reading

• Why Aventus, Kogan, Newcrest, & Northern Star are pushing higher
• 2 ASX shares I’d buy if the ASX crashes again
• ASX growth companies including Zip Co cash in on the rise of e-commerce
• Why the Kogan share price jumped 11% to a record high today
• Afterpay share price up 7%, ASX 200 edges higher

Motley Fool contributor Rhys Brock owns shares of BUBS AUST FPO and Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO, Kogan.com ltd, and Webjet Ltd. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. 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 How the A2 Milk and Bubs share prices have performed during the pandemic appeared first on Motley Fool Australia.

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At lunch on Thursday the S&P/ASX 200 Index (ASX: XJO) is out of form and sinking notably lower. The benchmark index is currently down 2% to 6,024.8 points.

Here’s what is happening on the market today:

JB Hi-Fi guidance.

The JB Hi-Fi Limited (ASX: JBH) share price is trading lower despite the release of a very positive update this morning. The retailer revealed that it has experienced very strong sales growth in Australia during the second half. In light of this, it has reinstated and upgraded its guidance for FY 2020. It expects net profit after tax in the range of $300 million to $305 million. This will be a 20% to 22% increase year on year.

Gold miners jump.

It has been a very positive day of trade for ASX 200 gold miners such as Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST). They are both up significantly today after the gold price jumped higher overnight. The price of the precious metal rose after the U.S. Federal Reserve revealed that it plans to keep interest rates at zero until 2022. The S&P/ASX All Ordinaries Gold index is up 4.5% at lunch.

Big four banks tumble.

The big four banks have come under pressure on Thursday and are acting as a drag on the ASX 200. All four banks have followed the lead of U.S. banks and are in the red at lunch. The worst performer in the group has been the Westpac Banking Corp (ASX: WBC) share price with a 4.5% decline.

Best and worst performing ASX 200 shares.

The best performer on the ASX 200 at lunch is the IPH Ltd (ASX: IPH) share price with a gain of over 6%. This morning analysts at Morgans upgraded the intellectual property company’s shares to an add rating with an $8.69 price target. The worst performer on the index has been the Computershare Limited (ASX: CPU) share price with a 6% decline. This is after Citi downgraded its shares to a sell rating this morning.

More reading

• ASX bank share prices tumble as they aren’t out of the COVID-19 woods yet
• Why Aventus, Kogan, Newcrest, & Northern Star are pushing higher
• 3 ASX 200 shares I’d buy for 2020 and beyond
• 3 great shares to buy now if you’re an ASX 200 investor in your 20s
• JB Hi-Fi share price higher after upgrading profit guidance for FY 2020

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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 ASX 200 drops 2%: Big four banks sink lower, JB Hi-Fi to deliver strong profit growth appeared first on Motley Fool Australia.

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There are some ASX dividend shares out there paying out huge amounts of cash.

You need to be careful with high dividend yields. Sometimes those shares can actually be yield traps. The dividend may be unsustainably high. It could include a one-off special dividend. The market may actually be expecting an earnings fall and therefore a dividend cut.

But if you can find great high yield ASX dividend shares, you can receive large amounts of cash dividends (and franking credits) every year for a bit less risk. Just don’t expect a lot of capital growth.

Here are some ideas to think about:

Share 1: Challenger Ltd (ASX: CGF)

Challenger is the annuity king of Australia with a dominant market share. The Challenger share price has dropped almost 50% from the share price at 21 February 2020. This has pushed the trailing dividend yield to a very high level. It currently has a grossed-up dividend yield of 9.25%. That’s a great yield for an ASX dividend share.

The company has reaffirmed its profit guidance for FY20, which leads me to believe the dividend can be maintained. Challenger didn’t cut its dividend during the GFC. I don’t think it will cut during this period either.

Over the longer-term Challenger can benefit from the ageing demographics in Australia. However, the ultra-low interest rates won’t help Challenger fund the annuities if the rate stays lower for longer than expected.

Share 2: WAM Research Limited (ASX: WAX)

WAM Research is a listed investment company (LIC). The job of a LIC is to invest in shares on your behalf. One of the main benefits is that it generates profit from capital gains and investment income received. It can then pay out a smoothed dividend to shareholders.

The ASX dividend share has an annualised grossed-up dividend yield of 9.6%. That seems really good in today’s low interest world.

It’s invested in shares like Infomedia Limited (ASX: IFM) and Citadel Group Ltd (ASX: CGL) which look compelling at the current prices. WAM Research is trying to find these undervalued smaller growth shares.

WAM Research has grown its dividend every year since the GFC. It likes to keep a solid amount of cash on hand for protection and opportunities. However, it’s likely trading at an expensive premium to the underlying net asset value.

Share 3: Naos Emerging Opportunities Company Ltd (ASX: NCC)

This is another LIC. It counts as an ASX dividend share because it has a grossed-up dividend yield of 11.8%.

Naos does things differently to most other LICs. It only looks at shares with market capitalisations under $250 million. That certainly classifies as the small cap end of the ASX.

I admire the fact that Naos only has around 10 names in the portfolio. That means it has a high conviction in what it invests in.

Small caps are much more volatile than larger shares. I believe that means we have the infrequent opportunity to buy the ASX dividend share when it’s beaten up. The coronavirus has caused the share price to drop heavily, pushing the yield higher. I think the Naos LIC is a good dividend opportunity, particularly because it hasn’t cut its dividend in its relatively young history.

Foolish takeaway

Each of these ASX dividend shares have great yields. At the current prices I think Challenger could produce the biggest total returns over the next few years. However, for pure income I’d go for the Naos LIC because it’s not trading at an expensive premium to its net assets like WAM Research is.

More reading

• Why do I own this ASX 200 share?
• 3 ASX 200 shares to protect your portfolio from recession
• How to replace your entire wage with dividends
• 3 ASX dividend shares with big yields above 9%
• How to make $1,000 a month in dividends

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 Infomedia. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool Australia has recommended Citadel Group Ltd. 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 Get paid huge amounts of cash to own these ASX dividend shares appeared first on Motley Fool Australia.

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