Author: therawinformant

Despite its recent wobbles, the tech sector has once again been one of the best places to invest your money in 2020.

Since its launch in February, the S&P/ASX All Technology Index (ASX: XTX) has gained approximately 20%. As a comparison, over the same period, the S&P/ASX 200 Index (ASX: XJO) has lost 15% of its value.

The good news is that due to the quality on offer in the sector, I believe a certain level of outperformance can continue for many years to come.

In light of this, I feel it could be worth considering a buy and hold investment in the sector today. But which ASX tech shares should you buy? Two I would recommend you consider buying are as follows:

Altium Limited (ASX: ALU)

The first ASX tech share to consider buying is Altium. It is the printed circuit board (PCB) design software provider behind the popular Altium Designer platform. This award-winning platform is used by almost 50,000 users to connect with every facet of the PCB design process.

Although FY 2020 was a difficult year because of the disruption caused by the pandemic, I believe it is well worth looking beyond this and focusing on the future. This is because Altium’s future looks increasingly positive due to its exposure to favourable industry tailwinds such as artificial intelligence, 5G internet, and the Internet of Things. These markets are supporting the rise of connected devices globally, which should underpin strong demand for electronic design software over the next decade.

Xero Limited (ASX: XRO)

Another outstanding ASX tech share to consider buying is Xero. It is a cloud-based accounting software company which has been growing its customer base at a rapid rate over the last few years. At the end of FY 2020, Xero’s total subscriber numbers were up 26% on the prior year to 2.285 million subscribers. Combined with an increase in average revenue per user, the company reported a 30% increase in operating revenue to NZ$718.2 million.

Pleasingly, due to the company’s sizeable market opportunity and the ongoing shift to the cloud, I believe it still has a very long runway for growth. In light of this, I think it could be a great buy and hold option for investors.

More reading

• 5 things to watch on the ASX 200 on Monday
• 2 of the best ASX 200 shares to buy in October
• 3 ASX shares I’d buy if the share market crashes again
• ASX 200 down 0.95%: Mesoblast crashes lower on FDA update, Afterpay surges higher
• Why WAAAX shares like Afterpay (ASX:APT) and Xero (ASX:XRO) are surging

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. 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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If you’re building a retirement portfolio, then you might want to take a look at the ASX shares named below.

I believe they are great options for investors looking for a combination of growth and income over the next decade. Here’s why I like them:

Collins Foods Ltd (ASX: CKF)

Collins Foods is a growing quick service restaurant operator with a massive 240 KFC stores in Australia and 40 KFC stores in Europe. It also operates 12 Taco Bells across Queensland and Victoria. I think it would be a great option for a retirement portfolio due to its strong business model and positive long term growth outlook.

Although it clearly has a very large KFC footprint in the ANZ market, management still sees plenty of room for growth in the future. The same can certainly be said for Europe, where the brand has yet to fully penetrate the market. In addition to this, the Taco Bell brand appears to be doing well and could be another driver of growth in the future. Combined, I believe Collins Foods is capable of delivering solid earnings and dividend growth for a long time to come.

Wesfarmers Ltd (ASX: WES)

Another ASX share that I think would be good for a retirement portfolio is Wesfarmers. I believe the conglomerate is one of the highest quality companies on the Australian share market and well-positioned to deliver solid earnings and dividend growth over the next decade.

This is thanks to its collection of leading retail brands such as Bunnings, Catch, and Kmart, as well as the numerous industrial businesses it has in its portfolio. In addition to this, the company has a very strong balance sheet and plenty of firepower to make earnings accretive acquisitions. It has been a bit quiet on the deal-making front of late, but I suspect it could have a number of targets in its sights at present.

More reading

• ASX 200 drops, Trump has COVID-19, Mesoblast (ASX:MSB) share price sinks
• Collins Foods (ASX:CKF) share price edges higher on Sizzler update
• Where should you invest your Wesfarmers (ASX:WES) dividends?
• 2 strong ASX shares I’d buy today for growth and income
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro owns shares of Collins Foods Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Collins Foods 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.

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The worst performer on the S&P/ASX 200 Index (ASX: XJO) on Monday by some distance has been the Viva Energy Group Ltd (ASX: VEA) share price.

In afternoon trade the fuel retailer’s shares are down a sizeable 11.5% to $1.39.

At one stage today they were down as much as 14.5% to $1.34.

Why is the Viva Energy share price crashing lower today?

The good news for shareholders is that today’s decline has nothing to do with a disappointing update or a broker downgrade.

Instead, this decline is completely attributable to Viva Energy’s shares trading ex-dividend and without the rights to an upcoming capital return on Monday.

In respect to its dividend, Viva Energy will be paying a 5.9 cents per share unfranked dividend to eligible shareholders on 13 October.

It is then rewarding shareholders handsomely with a massive 21.46 cents per share capital return on the same day.

Combined, Viva Energy is paying shareholders a total of 27.36 per share. Based on its last close price, this works out to be a sizeable 17.4% yield.

As you might have noticed, this yield is actually greater than the Viva Energy share price decline today. Which means its shares would be trading 6% higher if you took this out of the equation.

Why is Viva Energy returning capital to shareholders?

Viva Energy decided to return this surplus capital to shareholders after selling its entire 35.5% holding in service station property company Waypoint REIT (ASX: WPR).

The company received $734.3 million for its divestment, generating net proceeds of $680 million. Of this, a total of approximately $415.1 million will be returned to shareholders this month.  

Management explained its decision to return these funds despite the tough economic environment.

It explained: “The Company has had the opportunity to understand the scope of impacts, and the existing and potential impacts on the business. Whilst particular divisions of the Company have been impacted, the Company retains a strong balance sheet, and the proceeds from the divestment remain surplus to normal ongoing capital requirements of the business.”

“Accordingly, the Company has determined that distributing proceeds to shareholders remains in their best interest, and the most efficient mechanism is through a capital reduction and special dividend, in conjunction with the existing on-market buy-back,” it added.

More reading

• ASX 200 up 2.3%: Big four banks charge higher, Qantas soars, energy shares jump
• Why Advance NanoTek, Macquarie Telecom, Nick Scali, & Viva Energy shares are dropping lower
• 5 things to watch on the ASX 200 next week
• Meet the ASX sector that is cum-consensus upgrade for FY21
• Viva share price firm despite worrying trade update

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.

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The National Australia Bank Ltd. (ASX: NAB) share price is gaining strongly today. At the time of writing, the NAB share price is up 4.08% in early afternoon trading.

That will come as welcome news to shareholders, who witnessed the sharpest selloff in NAB shares ever following the outbreak of the global pandemic.

From 21 February through to 23 March, the NAB share price cratered by 49%. Although it’s since gained 30% from that low, the National Australia Bank share price is still down nearly 34% from the 21 February high water mark and down around 26% year to date.

Even following on those losses, NAB is still a dominant player in Australia’s banking sector. With a market capitalisation of $57.5 billion, it’s solidly within the S&P/ASX 200 Index (ASX: XJO).

For comparison, the ASX 200, also gaining today, is down 11.44% in 2020.

What does NAB do?

The National Australia Bank is a multinational financial services group that provides an integrated range of banking and financial services. Founded in 1982, NAB is one of the ‘big four’ Australian banks, not only in terms of market cap but also its earnings and customer base.

The majority of NAB’s financial service businesses operate in Australia and New Zealand. The bank’s other businesses are located in Asia, the United Kingdom and the United States.

What next for the NAB share price?

After a rough year, things are looking brighter for the NAB share price.

The first good news arrived on 25 September, when Treasurer Josh Frydenberg announced the government’s plans to abolish the responsible lending rules, which were put into place following the global financial crisis. This should enable NAB to issue more loans at a faster pace.

But more good news for the NAB share price likely lies ahead tomorrow. That’s when the government will officially unveil the full details of its new budget.

The JobKeeper and JobSeeker programs are likely to be extended, putting more money in household and business pockets. That should help reduce the number of non-performing loans and increase the number of people taking out new loans. Though NAB just announced it is hiring 500 new banking support staff to assist businesses during these difficult times.

All eyes will also be on the government’s HomeBuilder program and the first home loan deposit policy. Any extensions or increases here should also offer a solid tailwind for the NAB share price.

More reading

• ASX big bank profits haunted by zombie mortgages
• Banks rejoice: Mortgages back to pre-COVID levels
• The ASX big bank stock that’s most at risk of a dividend cut
• BrainChip (ASX:BRN) and Novonix (NVX) were among the most traded shares on the ASX last week
• ASX 200 Weekly Wrap: Bank shares push ASX 200 higher

Motley Fool contributor Bernd Struben 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 Why today’s NAB (ASX:NAB) share price gains could be just the beginning appeared first on Motley Fool Australia.

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If ever there was a time for ASX investors to ignore the noise, now is that time.

While day traders may delight in the opportunities for quick gains in these volatile conditions – and lament the equally quick losses – it can be a trying time for buy to hold investors.

By that I mean investors who buy shares in quality businesses with good management and growing revenues, and hold onto those shares for many years. Generally, until their original investment thesis changes substantially enough to alter the long-term outlook for share price gains and/or dividend streams. Only then (barring any urgent needs for funds) is there good reason to sell.

Buy to hold investing, with the right diversification among shares, is a historically proven way to grow your wealth over time. But it can be vexing when the share prices of your carefully chosen businesses fall on rumours of a ‘hard Brexit’, then rise on news of a promising COVID-19 vaccine, only to fall again when the United States’ president is stricken by that same virus.

But fear not. (Noise alert!)

The latest headlines across the financial media inform us that Australian and Asian share markets are swinging higher again today and US markets should follow.

Why?

Because Donald Trump may be released from hospital as soon as today (tonight Aussie time).

As I said, if you’re day trading you could lock in some quick gains if you guess the market direction on these kinds of short-term announcements correctly. Or book some quick losses if you guess wrong.

But if you’re holding onto quality shares that look set to perform well during the COVID-19 recovery period and beyond, then your best bet is to tune out the noise. Or at least take it all in with a big grain of salt.

Focus on what matters

Not to diminish Trump’s physical battle to recover from the coronavirus. I wish him, and everyone infected with COVID-19, a full and rapid recovery. But at the end of the year, or next year, this will have no bearing on the share prices of your ASX holdings. Even if this event serves to tip the November election for a Joe Biden victory.

You may have heard that Biden has pledged to raise the US business tax rate. The same rates Trump slashed to the delight of corporate America, helping send US share markets to new highs. But there’s no guarantee Biden will use up the political capital needed to try and follow through with this pledge. And even less certainty that his Democratic party will take control of the US Senate to enable raising the corporate tax rates in either case.

There’s enough uncertainty already that buy to hold investors should readily ignore this as noise. Topping it off, increasing corporate tax rates in the US would likely drag on US share markets, but the longer-term impact on ASX shares would be mixed… and minimal.

Yes, some Aussie companies would have to pay more taxes in the US, should this all come to pass. But at the same time, many ASX shares would get a boost as global investors re-rate their potential returns in an environment of higher US taxes.

Here comes the stimulus

What we do know for certain is that, following the COVID-19-led market panic in February and March, record levels of central bank and government stimulus measures were rolled out across the developed world.

And we know that share markets rallied at historic paces.

The S&P/ASX 200 Index (ASX: XJO) rocketed 35% higher from 23 March through to 9 June. And the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) posted an incredible 76% gain from the 23 March lows through to 2 September.

Today, both indexes are still trading below those highs as investors await details of the next stimulus measures.

In the US, Democrats are still pressing their US$2.1trillion (AU$2.9 trillion) package. While Republicans continue to balk at that, Trump spoke out from hospital to urge both sides to reach an agreement and pass a new spending package. As a long-term investor, it doesn’t much matter if that passes this week or next month. What matters is the US government will most assuredly open the fiscal taps wide once more.

Here in Australia, we’ll get the full details of the new budget tomorrow. From everything we’ve seen so far, it’s going to be huge, with personal and business tax cuts, home buying incentives, and a big splash on manufacturing and state infrastructure programs.

That’s a good reason to hold onto your infrastructure plays. And perhaps buy or add more of these two shares.

Two ASX shares to buy today

First up is Transurban Group (ASX: TCL). With a market cap of $38.6 billion, Transurban is not only one of the world’s largest toll road operators, it also designs and builds new road projects.

When lockdown measures began to sink in earlier this year, Transurban’s share price took a big hit, falling 39% from 19February through to 19 March. It’s gained 42% since that low, leaving the share price down 4% in 2020. But as Victorians emerge from their travel restrictions and begin paying tolls once more, and with new road construction highly likely to ramp up with the coming wave of stimulus, Transurban is well positioned to offer significant mid to long-term share price growth. 

Second up is small-cap share Acrow Formwork and Construction Srvc Ltd (ASX: ACF). With a market cap of $78 million, Acrow manages more than 50,000 tonnes of formwork and scaffolding equipment across Australia.

Acrow’s share price was smashed during the COVID-19 panic selling, falling 63% from 21 February through to 23 March. Since then the share price has soared 177% higher, putting it up 6% year-to-date.

But even after that phenomenal run, Acrow shares could have a lot further to run as the next big rounds of pandemic recovery stimulus spur new construction projects.

More reading

• ASX 200 up 2.3%: Big four banks charge higher, Qantas soars, energy shares jump
• Could industrial REITs be the best ASX shares to buy for dividends?
• ASX energy stocks like Woodside (ASX:WPL) not pricing in a Biden win
• 5 things to watch on the ASX 200 on Monday
• Why Trump catching COVID-19 could actually be a good thing for ASX shares

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban 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.

The post Ignore the noise and focus on these ASX shares instead appeared first on Motley Fool Australia.

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With so many shares to choose from on the ASX, it can be hard to decide which ones to buy.

The good news is that brokers across the country are doing a lot of the hard work for you.

Three top shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Breville Group Ltd (ASX: BRG)

According to a note out of UBS, its analysts have retained their buy rating and lifted their price target on this appliance manufacturer’s shares to $29.90. This follows the announcement of its acquisition of coffee grinding company Baratza for US$60 million. UBS notes that the company has made similarly successful bolt-on acquisitions in the past and expects this one to be approximately 3% accretive to earnings. I agree with UBS and feel Breville would be a good option for investors.

CSL Limited (ASX: CSL)

Another note out of UBS reveals that its analysts have retained their buy rating and $346.00 price target on this biotherapeutics company’s shares. The broker notes that recent industry data shows that immunoglobulins demand has been strong in 2020, while albumin demand has softened. Outside this, the broker believes CSL’s plasma collections could be down 20% between April and September because of the pandemic. However, it appears confident that collections will recover shortly and holds firm with its buy rating. I think UBS is spot on and investors should take advantage of recent weakness in the CSL share price.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Analysts at Goldman Sachs have reaffirmed their buy rating and lifted the price target on this airport operator’s shares to $7.02. According to the note, the broker believes that Sydney Airport is well-positioned to benefit from a stronger and quicker than expected recovery in the domestic travel market. And while it expects this to lead to a 14 cents per share distribution in FY 2021, a more normal 26 cents per share distribution is expected in FY 2022. The latter equates to a 4.4% yield. I agree with Goldman Sachs and feel Sydney Airport would be a top option for income investors.

More reading

• Sydney Airport (ASX:SYD) share price tipped to ascend 20% from here
• 2 of the best ASX 200 shares to buy in October
• 5 things to watch on the ASX 200 next week
• Where to invest $10,000 into ASX shares next week
• How to generate a passive income of $50,000 with ASX shares

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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 S&P/ASX 200 Index (ASX: XJO) has bounced back very strongly on Monday and is on course to record an impressive gain. At lunch, the benchmark index is up 2.3% to 5,924.7 points.

Here’s what has been happening on the market today:

Bank shares charge higher.

The big four banks have started the week in a very positive fashion. At lunch, all four banks are trading at least 3% higher and helping to drive the ASX 200 higher. The best performer in the group is the Westpac Banking Corp (ASX: WBC) share price. The shares of Australia’s oldest bank are up over 4% at the time of writing.

Qantas shares soar.

The Qantas Airways Limited (ASX: QAN) share price is soaring on Monday after being the subject of a bullish broker note out of Goldman Sachs. This morning the broker upgraded the airline operator’s shares to a buy rating and lifted the price target on them by a massive 49% to $5.28. Its analysts appear confident the domestic travel market will recover both quicker and stronger than expected.

Energy shares storm higher.

Also storming higher today are Australia’s leading energy shares. The likes of Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) are all trading notably higher after oil prices started their recovery in Asian trade. The S&P/ASX 200 Energy index is up a sizeable 4.5% at the time of writing.

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Monday has been the Oil Search Limited (ASX: OSH) share price with a 6.5% gain. This follows a recovery in oil prices in Asian trade following a sharp decline on Friday. The worst performer has been the Viva Energy Group Ltd (ASX: VEA) share price with a sizeable 11.5% decline. This morning the fuel retailer’s shares traded ex-dividend for its 5.9 cents per share dividend and its 21.46 cents per share capital return. The latter relates to its Waypoint REIT (ASX: WPR) divestment.

More reading

• Why Costa, Qantas, Santos, & Westpac shares are storming higher today
• Why Advance NanoTek, Macquarie Telecom, Nick Scali, & Viva Energy shares are dropping lower
• Could industrial REITs be the best ASX shares to buy for dividends?
• ASX energy stocks like Woodside (ASX:WPL) not pricing in a Biden win
• Leading broker upgrades Qantas (ASX:QAN) shares to buy rating

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.

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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to start the week on a very positive note. At the time of writing the benchmark index is up 2.25% to 5,921.1 points.

Four shares that are climbing more than most today are listed below. Here’s why they are storming higher:

The Costa Group Holdings Ltd (ASX: CGC) share price is up 3% to $3.46. This morning analysts at UBS retained their buy rating and $3.55 price target on this horticulture company’s shares. The broker is becoming increasingly confident in the company’s earnings outlook thanks to solid demand in the grocery channel. The broker also feels Costa’s shares are trading on undemanding multiples.

The Qantas Airways Limited (ASX: QAN) share price has charged 4.5% higher to $4.29. The catalyst for this has been a broker note out of Goldman Sachs. This morning the broker upgraded the airline operator’s shares to a buy rating with a massively improved price target of $5.28. It made the move due to its belief that the domestic travel market will recovery quicker and stronger than it previously expected.

The Santos Ltd (ASX: STO) share price has risen over 4% to $4.86. Investors have been buying Santos and other energy shares after oil prices recovered in Asian trade following a sharp decline on Friday evening. The S&P/ASX 200 Energy index is up a sizeable 4.7% at the time of writing.

The Westpac Banking Corp (ASX: WBC) share price has stormed over 4% higher to $17.29. Investors have been taking advantage of a pullback in bank shares on Friday to make an investment this morning. This appears to have been driven by news that President Trump is recovering well from COVID-19. It isn’t just Westpac pushing higher, all the big four banks are rising by at least 3% on Monday.

More reading

• ASX 200 up 2.3%: Big four banks charge higher, Qantas soars, energy shares jump
• ASX energy stocks like Woodside (ASX:WPL) not pricing in a Biden win
• Leading broker upgrades Qantas (ASX:QAN) shares to buy rating
• 5 things to watch on the ASX 200 on Monday
• Meet the ASX 200 stock with a dividend yield that’ll hit ~14% in FY22

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. 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 S&P/ASX 200 Index (ASX: XJO) has started the week on a very positive note and is storming notably higher. At the time of writing the benchmark index is up 2.3% to 5,926.1 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

The Advance NanoTek Ltd (ASX: ANO) share price is down almost 2.5% to a 52-week low of $3.08. Investors have been selling the advanced materials company’s shares this year amid a collapse in demand for its zinc products from sunscreen manufacturers. This led to the company recently downgrading its guidance for FY 2021.

The Macquarie Telecom Group Ltd (ASX: MAQ) share price has dropped 3% lower to $47.07. This appears to have been driven by a report in the AFR in relation to a statement of claim filed in the Supreme Court of NSW. Cocoon Data has accused the company’s Government division of failing to honour the terms of an agreement for it to resell its Safe Share security platform. Instead, it alleges, Macquarie Telecom created its own copycat version, which was passed off as an incremental upgrade.

The Nick Scali Limited (ASX: NCK) share price has fallen almost 3% to $8.22. This decline is attributable in full to the furniture retailer’s shares trading ex-dividend this morning for its final dividend. Eligible shareholders can now look forward to being paid Nick Scali’s 22.5 cents per share fully franked dividend in approximately three weeks on 27 October 2020.

The Viva Energy Group Ltd (ASX: VEA) share price has crashed over 12% lower to $1.37. As with Nick Scali, this decline is due to the fuel retailer’s shares trading ex-dividend this morning. Viva Energy is not only paying a 5.9 cents per share dividend, it is also returning 21.46 cents per share of capital to shareholders. If you exclude these from the equation, Viva Energy’s shares would be up over 5% on Monday. The capital return was the result of the company divesting its stapled securities in Waypoint REIT (ASX: WPR).

More reading

• 5 things to watch on the ASX 200 next week
• 3 ASX shares poised for huge growth in FY21
• The ASX stocks most leveraged to the Victorian economy re-start
• Advance NanoTek (ASX:ANO) share price crashes lower on COVID-19 sales update
• Can Macquarie Telecom (ASX: MAQ) become the next NextDC?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Advance NanoTek Limited. 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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Social distancing and lockdown measures have caused many real estate investment trust (REITs) to defer dividends and fall out of favour. Industrial REITs could be a hidden gem within the real estate sector with reliable clients such as eCommerce, manufacturing, logistics and construction that have been able to carry out business as usual. 

The reliability of its clients could make industrial REITs some of the best ASX 200 dividend shares to buy right now. Let’s take a closer look.

Why are REITs struggling?

REITs typically maintain properties within the office, retail, industrial and residential sectors. Office and retail-oriented REITs have struggled through COVID-19 due to shopping centre closures, rental disputes and the shift to working from home. This has seen the likes of Scentre Group (ASX: SCG) and Vicinity Centres (ASX: VCX) share prices fall more than 40% and defer interim dividends. 

In the case of Scentre Group, its April rental collection figures went as low as 28% of its regular monthly gross rental bills. There has since been a V-shaped recovery with August representing 86% of regular monthly gross rental bills. Despite the swift recovery, the impact throughout April and May has meant Scentre Group has opted to defer its interim dividend. I believe it could become difficult to gauge the reliability of dividends from office and retail REITs moving forward.

Enter industrial REITs

Industrial REITs such as Goodman Group (ASX: GMG), Centuria Industrial REIT (ASX: CIP) and APN Industria REIT (ASX: ADI) have not only outperformed the S&P/ASX 200 Index (ASX: XJO) but also maintained its all important dividend payment. The consistency of its cash flow and outperformance of the general market could make it an ASX 200 dividend share for yield focused investors. 

Centuria Industrial is one of Australia’s largest domestic pure play industrial REITs. The company has more than 50 high quality assets and a portfolio value of $1.6 billion as of 30 June 2020. 52% of portfolio income is derived from tenant customers directly linked to the production, packaging and distribution of consumer staples and pharmaceuticals. This includes high profile names such as Arnott’s, Visy, Australia Post and Toll. The company currently pays a dividend yield of 5.70%.  

Goodman Group on the other hand offers a much lower dividend yield but has provided more in terms of capital gains compared to the ASX 200 and its REIT peers. In FY20, the company delivered a 12.5% increase in operating profit driven by continued demand from several segments for both temporary and permanent space, and a general acceleration of requirements across the digital economy. Goodman could provide the best of both worlds with a small dividend yield of 1.70% and higher share price gains. 

Foolish takeaway

The high quality occupants for industrial REITs position them as both reliable ASX 200 dividend shares and potential for share price gains. For investors looking for lower risk companies with consistent cash flows, I would look at industrial REITs as an option. 

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Motley Fool contributor Lina Lim 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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