I think that defensive ASX shares could be the best way to protect your portfolio.

Businesses with robust business models should hopefully not see much of a hit to their earnings during this COVID-19 period. If the earnings don’t fall much then theoretically the share prices shouldn’t drop too much compared to a riskier cyclical share.

I believe the best defensive ASX shares are the ones that won’t see much of a change in demand for their product or service.

Here are two of the most defensive ASX shares:

Share 1: APA Group (ASX: APA)

APA Group is one of the biggest infrastructure businesses on the ASX.

It owns a vast network of 15,000km of natural gas pipelines around Australia with a presence in every mainland state and the Northern Territory. It also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms). APA owns, or manages and operates, a portfolio of assets worth more than $21 billion and delivers half the nation’s natural gas usage.

APA delivers an essential service for Australia. The nation needs its natural gas.

I think APA is a defensive ASX share because the demand for gas remains robust. The energy infrastructure giant recently said that there hasn’t been a material change because of COVID-19. It also has $1.2 billion of available liquidity to get through this period if needed.

The business has grown its distribution every year for a decade and a half. It offers a FY20 distribution yield of 4.4%. The distribution can keep growing because APA funds it from its annual cashflow. That cashflow is growing because APA continues to complete new energy projects.

Share 2: Rural Funds Group (ASX: RFF)

I think Rural Funds is another great defensive ASX share. It’s a farmland real estate investment trust (REIT).

COVID-19 caused many other REITs to be sold off. Shopping centres like Scentre Group (ASX: SCG) were hurt as shoppers stayed away and shops were shut. Office property REITs like DEXUS Property Group (ASX: DXS) were sold down as workers stayed home.

But Rural Funds hasn’t faced the same problems. Its agricultural tenants continue to grow produce at the farms. Some of its tenants include Olam, Select Harvests Limited (ASX: SHV) and Treasury Wine Estates Ltd (ASX: TWE).

I think Rural Funds is a really good defensive ASX share for several reasons. It has high-quality tenants like the ones I just mentioned. Rural Funds’ farms are diversified geographically and by farm type – it owns cattle, cotton, vineyard, almond and macadamia properties.

One of the best reasons to like Rural Funds is that it has a weighted average lease expiry (WALE) of more than 10 years. That means the rental income is locked in for more than a decade.

That rental income is rising as each rental contract has built-in rental indexation. The rental indexation is either a fixed 2.5% increase or linked to CPI inflation, with market reviews. This helps the management of the defensive ASX share forecast that the distribution can grow by 4% per annum. I think that’s a good growth rate, it’s comfortably higher than inflation.

Another factor helping distribution growth is productivity investing. Rural Funds retains around 20% of its annual cash rental profit. The official term its cash rental profit is ‘adjusted funds from operations’ (AFFO). Rural Funds re-invests 20% of AFFO into productivity improvements at its farms for its tenants benefit. This increases the value of the farms and grows rental income.

Occasionally the defensive ASX share will acquire a new farm that will add to earnings. It has been focusing on buying cattle properties in the last couple of years.

It currently offers a FY21 distribution yield of 5.7%.

Foolish takeaway

I think both businesses are defensive ASX shares. At the current prices I’m more drawn to Rural Funds because of its consistent growth and higher distribution yield. However, I’d be happy to have both businesses in my portfolio for reliable income.

More reading

• The pros and cons of investing in high yield dividend shares
• 12 top ASX dividend shares to buy in June 2020
• 3 high yield ASX dividend shares for income
• Not keen on Westpac? Then buy these top ASX dividend shares instead
• 2 strong ASX dividend shares to bolster your income

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 Australia owns shares of APA Group. The Motley Fool Australia has recommended Scentre Group. 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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I believe there are a few ASX dividend kings that can fit nicely into almost any share portfolio. Especially in the current market, dividend shares can be like gold in providing a steady income stream.

Here are a few of my favourite dividend picks that are worth holding for the long term.

3 ASX dividend kings to buy and hold forever

It’s hard to look past Harvey Norman Holdings Limited (ASX: HVN). The Harvey Norman share price has fallen 13% lower in 2020 but that’s not what caught my eye.

The Aussie retailer recently announced a special dividend for shareholders. The 6 cents per share distribution comes following strong sales during the coronavirus pandemic. The retailer had previously scrapped its planned 12 cents per share distribution in April.

Harvey Norman isn’t the only ASX dividend king on my watchlist. I also like the look of Commonwealth Bank of Australia (ASX: CBA) right now.

CommBank announced an interim dividend of $2.00 per share in February in the pre-COVID-19 market. The largest of the Aussie banks reports its earnings before the other majors and paid investors prior to APRA calling on banks to defer or reduce dividends in April.

However, I think CommBank will bounce back strongly. The ASX bank share is down 15.7% in 2020 but has some strong momentum behind it. If you’re willing to buy and hold forever, I think Commonwealth Bank remains a strong ASX dividend share.

I also like some of the ASX real estate investment trusts (REITs) for the long term. In terms of ASX dividend kings, it’s hard to look past Scentre Group (ASX: SCG) right now.

Scentre shares are currently yielding 8.39% but I don’t know if this will remain the case in the short term. Aussie retail is doing it tough even with considerable government stimulus measures in place.

However, if you’re buying and holding forever, what happens today or tomorrow isn’t too important.

With a strong balance sheet and significant real estate holdings, I think Scentre can remain a strong ASX dividend share for decades to come.

Foolish takeaway

These are just a few ASX dividend kings that I like the look of right now but there are plenty of good options on the market.

More reading

• How I would build a balanced portfolio worth $100,000 with 10 ASX shares
• 12 top ASX dividend shares to buy in June 2020
• Why the Lovisa share price is at risk of falling further over the coming weeks
• ASX 200 falls 1.9%, big 4 ASX banks retreat
• The latest ASX shares to be hit by broker downgrades to “sell” today

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. 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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Building a truly well-balanced and diversified $100,000 ASX portfolio is a daunting task – and one that can take years. But the rewards are lucrative enough that I think all ASX investors should aspire to hit the 6-figure mark – whether that takes 5 years or 20.

But choosing the right shares across the right sectors is equally important. Here at the Fool, we are always preaching the benefits of diversification, of not having all of your eggs in one basket.

So in saying that, here are 10 ASX shares that I think would make the perfect (in my eyes, anyway) balanced portfolio with $10,000 invested in each.

Vanguard Australian Shares Index ETF (ASX: VAS) 

As a starter, I think this exchange-traded fund (ETF) forms a solid bedrock of an ASX portfolio. By having the largest 300 companies as holdings, VAS gives us instant diversification and a well-rounded foundation for our other companies to sit upon.

CSL Limited (ASX: CSL) 

The big dog of the ASX, I think it would be amiss to exclude CSL from any ASX-based portfolio. CSL is one of the best blue chips money can buy in my view. It’s a diversified healthcare giant that’s active on the global stage. It’s also the most growth-orientated ASX blue chip in my view and has been quietly building its dividend over the last few years. Therefore, I think an investment in CSL is a great place to have your money over the coming decade.

Woolworths Group Ltd (ASX: WOW)

A stalwart of ASX consumer staples and a highly defensive, mature business, Woolworths earns a place in our balanced portfolio today. It’s dominance of the Aussie groceries market and its familiar and powerful brand give this company an edge in my view and one that can protect your portfolio in any kind of downturn.

Telstra Corporation Ltd (ASX: TLS) 

Telstra is the dominant telco in Australia and commands a healthy market share across both fixed-line internet and mobile. Its mobile network is inarguably the best in the country and leaves its rivals like Optus and Vodafone/TPG Telecom Ltd (ASX: TPM) in the dust in my view. It’s also a healthy dividend payer, and I’m excited about its foray into 5G technology.

Macquarie Group Ltd (ASX: MQG) 

I’m not too excited about the ASX banks like Commonwealth Bank of Australia (ASX: CBA) right now, and so I think Macquarie is a great alternative. It does do traditional banking services like mortgages, but most of its business these days is in asset management and investment banking. Macquarie also pays a healthy dividend, but I think of this company as more a growth stock compared with the major ASX banks.

Wesfarmers Ltd (ASX: WES)

I don’t think we can have a balanced portfolio without including this conglomerate. Wesfarmers is already a highly diversified company. It owns the Bunnings, Target, Kmart and Officeworks chains, as well as a plethora of other businesses across different sectors of the economy. Most recently, it’s expanded into the lithium space with its acquisition of Kidman Resources. As such, I think Wesfarmers is one of the best blue chips on the ASX and a must for our portfolio.

BHP Group Ltd (ASX: BHP)

This year has already well and truly proved the value of holding ASX resources shares in my view. Big miners like BHP have held up remarkably well in the face of the coronavirus crash we saw earlier in the year. Commodity prices can be volatile, but they can also act independently of the rest of the economy, which can be a very handy cushion for a portfolio to have. BHP is one of the largest miners in the world, but also one of the most diversified. It has operations across the coal, oil, copper and iron ore spaces.

As such, I think the ‘Big Australian’ is a great stock to have in our $100,000 portfolio.

Altium Limited (ASX: ALU)

Altium is more of a high-growth, high-volatility share, but that’s why I think its a great inclusion in our portfolio. This company provides software that assists with the design of printed circuit boards – which are an essential component of most electronic devices. It’s been growing rapidly and has a very scalable software as a service business (SaaS) model to boot.

Afterpay Ltd (ASX: APT)

I would feel amiss if I didn’t include this superstar of an ASX company in our $100,000 portfolio. Yes, Afterpay is one of the most volatile shares on the ASX. We’re talking about a company that has had a ~470% swing in value over the last 3 months, after all. But I think Afterpay’s potential is too great to ignore and anyone who has ever bet against this company has always lost. As such, it joins our portfolio with aplomb.

Magellan Global Trust (ASX: MGG)

Our last share to finish off our portfolio is actually a listed investment trust (LIT). MGG invests in a basket of global shares, which include quality names like Microsoft, Alphabet and Tencent. I think all ASX portfolios should have at least some international exposure thrown in, and here MGG is a great candidate for the job in my view. It has a stellar track record of delivering for its investors and also has a top-notch fund manager in Magellan Financial Group Ltd (ASX: MFG)’s Hamish Douglass.

As such, I think this trust is a great stock to round out our $100,000 portfolio.

More reading

• 3 ASX dividend kings to buy and hold forever
• Got $20,000? These are the ASX shares I’d buy during COVID-19
• Here’s how you invest in super to get a free $500
• 12 top ASX dividend shares to buy in June 2020
• 3 ASX shares I’d buy if the market hits 23 March levels again

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares) and Telstra Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Altium, and CSL Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra Limited. The Motley Fool Australia owns shares of Wesfarmers Limited and Woolworths Limited. The Motley Fool Australia has recommended Alphabet (A shares). 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 I would build a balanced portfolio worth $100,000 with 10 ASX shares appeared first on Motley Fool Australia.

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