Author: therawinformant

Online shopping has grown dramatically in Australia over recent years. The onset of the coronavirus pandemic accelerated this trend, with one out of every ten items purchased this year thought to have been bought online. The Australian eCommerce market was valued at $28.6 billion in 2019 and is expected to grow to $35.2 billion by 2021. eCommerce penetration is expected to reach 85.2% next year, meaning 22 million people will be buying online. There are plenty of retailers on the ASX, most of which offer goods both through shopfronts and online channels. But these two ASX online-only retailers have shown you don’t need stores to make sales. 

Temple & Webster Group Ltd (ASX: TPW) 

Temple & Webster is Australia’s largest online-only furniture and homewares retailer. The company offers over 180,000 products on its website from hundreds of suppliers. Temple & Webster runs a drop-shipping model where suppliers ship directly to the end customer. This means Temple & Webster does not need to hold inventory and can provide a larger product range. 

Temple & Webster saw sales accelerate with the onset of coronavirus. People have been spending more time at home so have been looking to upgrade their surroundings. FY20 revenue was up 74% to $176.3 million, with sales accelerating in 4Q FY20 when revenue was up 130% on the prior corresponding period. Active customers increased 77% across the year with EBITDA increasing 483% to $8.5 million. CEO Mark Coulter said “The advantages of being the online market leader are apparent as we continue to grow our market share”. 

Kogan.com Ltd (ASX: KGN)

Kogan is an online retailer offering products across a wide range of categories as well as a suite of private label brands. Kogan has also seen a spike in sales since the onset of lockdowns, with gross sales up 103% in April and May. This drove a 130% increase in gross profit. Sales almost doubled in June, rising 95% to more than $94 million. 

Kogan added 126,000 active customers in May, growing active customer numbers to 2,074,000 at the end of the month. In June, Kogan raised $100 million of capital to increase financial flexibility. This provides the company with the means to act quickly on accretive opportunities, continue expanding its customer base, and enhance its operating model. Founder Ruslan Kogan told the Australian Financial Review, “our business is booming as more customers than ever chose Kogan.com.”

Foolish takeaway

These two ASX online retail shares are proof that you don’t need stores to deliver impressive sales levels. Both have seen sales accelerate since the onset of the pandemic, benefiting from the shift to digital commerce. And if the forecasts are accurate, this shift looks set to continue into the future even after the pandemic has subsided.

More reading

• 3 top small cap ASX shares to buy now
• Goodman share price hits record high. Is it too late to invest?
• Why you should buy into this booming ASX retail sector today
• Top brokers have named 3 ASX shares to buy today
• 3 of the best ASX tech shares to buy and hold until 2030

Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster 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.

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Well, 2020 has been a rough year for holders of ASX dividend shares.

With S&P/ASX 200 Index (ASX: XJO) companies like Westpac Banking Corp (ASX: WBC),  Sydney Airport Holdings Pty Ltd (ASX: SYD) and Ramsay Health Care Limited (ASX: RHC) slashing or ‘deferring’ dividends left, right and centre, the forests of yield in 2020 are a sparse hunting ground indeed.

And with the Reserve Bank of Australia telling us that interest rates might not start climbing from their current record low of 0.25% for some years, it’s arguably never been more important to find solid ASX dividend shares.

So that’s why we’ll be looking at 2 such shares today, which I think income investors can confidently buy for solid dividends in 2020 and beyond.

AGL Energy Limited (ASX: AGL)

AGL is the largest electricity and gas retailer in the country. It also owns a portfolio of generation assets (power plants), so there is significant vertical integration with this company.

I like AGL because it is an extremely defensive business. We all need electricity (and gas, in many cases) all of the time, whether it’s for cooking, heating, cooling or just powering our homes and businesses. This makes a company like AGL, which supplies these modern-world necessities, a great business to own — rain, hail or shine.

The defensiveness extends to AGL’s dividends, in my view. On current prices, AGL offers a trailing dividend yield of 6.51%, which comes partially franked as well.

AGL may not be a get-rich-quick kind of share (best avoided anyway), but I think it’s a solid pick for dividend income in 2020 and beyond.

Transurban Group (ASX: TCL)

Another ASX dividend share to consider today is this toll-road giant. Transurban did get whacked by the coronavirus-induced lockdowns we saw earlier in the year (and which are still ongoing in Victoria).

More people working from home meant fewer cars on the road — and that wasn’t good news for Transurban. But with cars back on the roads (outside Victoria anyway), I think things are on the mend for Transurban shares.

With a virtual monopoly on tolled roads across Sydney and Melbourne, and a large presence in Brisbane as well as North America, I’m very bullish on Transurban’s long-term future. Even if lockdowns do come back across the country, I think this company will still be able to pay decent dividends for the remainder of the year and beyond.

Transurban’s recent final dividend came in at 16 cents per share — a step down from 31 cents per share the company paid for its interim dividend last year. Despite this setback, I think the company will pay another dividend this year and should be (in my opinion) back on track with its old payouts in 2021.

More reading

• Rio Tinto’s capital return crashes by half on $2.5 billion dividend payout
• ASX 200 drops 0.2%, APRA boosts big 4 ASX banks
• Short-sellers are targeting these ASX stocks ahead of the reporting season
• Warning! ASX investors might be turning away from the share market
• ASX big banks stocks outperform even as APRA caps dividends

Motley Fool contributor Sebastian Bowen owns shares of Ramsay Health Care Limited. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Ramsay Health Care 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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Small cap ASX shares could be the best way to generate large returns for your portfolio over the long-term.

It’s much easier to double profit from $10 million to $20 million than it is to double profit from $1 billion to $2 billion. The law of large numbers makes it harder to keep growing at a good pace the larger a business becomes. 

I don’t think a business like Commonwealth Bank of Australia (ASX: CBA) can generate much organic compound profit growth because it’s already so large.

However, I think these three small cap ASX shares could be worth buying for long-term returns:

City Chic Collective Ltd (ASX: CCX)

City Chic is a retailer of plus-size women’s apparel and accessories. Initially, that industry doesn’t sound like a huge growth opportunity – but the company is growing at a fast pace. In FY20 City Chic achieved sales growth of 31%.

COVID-19 obviously caused major disruption with City Chic having to close stores. However, the company saw robust demand online. The company already sold a solid amount of products online before COVID-19, but at the end of May 2020 it had seen 57% of online sales growth during the store closure period. I think that’s impressive. 

The business is aiming to be a global player in the plus-size fashion market. I think management have a smart strategy of acquiring competitors that are in financial difficulty and turning them into online-only offerings. Online brings better (and cheaper) efficiencies. Catherines in the US is the latest target.

I like that the small cap ASX share is looking to grow strongly internationally. Australia is a great place to do business, but it has a relatively small population.

At the current City Chic share price it’s trading at 22x FY22’s estimated earnings. I think that’s a good price for the small cap ASX share.

Duxton Water Ltd (ASX: D2O)

I think Duxton Water is one of the most interesting small cap ASX shares. It’s a company that purely owns water entitlements and leases them out.

Obviously farmers need water to grow their crops, so Duxton Water offers an essential service. It’s indirectly benefiting from Australia being a major supplier of food domestically and internationally.

There is a long-term shift of water demand by farmers to permanent crops that use more water, such as almonds.

The recent dry conditions have pushed up water values over the past few years which has helped the small cap ASX share, though the Duxton Water net asset value (NAV) has declined over the past few months. There has been a bit more rain this year compared to the last few years.

However, I think it has long-term potential because fresh water supply is a very important resource. Demand for Australian produce is expected to grow over the long-term.

The water company has provided guidance of dividend growth over the next couple of years, which is good for income investors.

At the current Duxton Water share price of $1.40, it’s trading at a low double digit discount to the pre-tax NAV. I think that’s decent value for the small cap ASX share.

Just be aware that the ACCC is currently reviewing the water market. If there is a negative outcome to water values due to the ACCC, I think it could prove to be a long-term buying opportunity of Duxton Water shares.

WAM Microcap Limited (ASX: WMI)

Maybe you love the idea of investing in small cap ASX shares, perhaps you’re just not sure of which ones to invest in. I do believe that you need to be picky. Some small cap ASX shares can be very high quality, whereas others could be very risky.

The investment team at Wilson Asset Management (WAM) have proven to be great investors for this listed investment company (LIC). Over FY20 the portfolio returned 11.8% before fees, expenses and taxes – outperforming the S&P/ASX Small Ordinaries Accumulation Index by 17.5%.

I like that with this LIC you get a diversified portfolio of some of the most exciting growth opportunities on the ASX, as judged by the WAM team. At the end of June 2020 some of its largest positions were Objective Corporation Limited (ASX: OCL), Temple & Webster Group Ltd (ASX: TPW) and Johns Lyng Group Ltd (ASX: JLG).

At the current WAM Microcap share price it offers a grossed-up dividend yield of 6.3%.

More reading

• Top brokers have named 3 ASX shares to buy today
• 3 unstoppable ASX shares to buy right now
• ASX 200 down 0.4%, Credit Corp and Temple & Webster impress
• Why Credit Corp, Nufarm, Regis, & Temple & Webster shares are jumping higher
• Can the Marley Spoon share price climb even higher?

Tristan Harrison owns shares of DUXTON FPO and WAM MICRO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Objective Limited and Temple & Webster Group Ltd. The Motley Fool Australia has recommended DUXTON FPO and Temple & Webster 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.

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I want to draw your attention to Visa Inc (NYSE: V). I won’t waste your valuable time explaining what Visa does. As the world’s largest payments network, there’s a good chance you have one of the company’s cards in your own wallet.

The global credit card company, with a market cap of US$418.9 billion (A$586.7 billion), hasn’t had the best of years. But that may make now the perfect time to pick up some Visa shares.

As you know, consumers around the globe have been tightening their belts of late. Some of that comes from falling incomes due to lost work as companies have been forced to shut down due to COVID-19 mitigation efforts. Most of the remaining spending slump can also be pinned on the coronavirus. If you can’t leave your hometown, or even your home, you’re much less likely to splurge on discretionary items.

Recent performance

After several months of falling spending, Visa reported a roughly 10% rise in recent weeks.

An increase in online spending made up for much of those gains. That’s good news for the stock, as it gets a much larger share of online transactions than it does from in-store sales.

Now it’s impossible to predict how consumer spending will fare over the coming months. Most of that is up to the microscopic virus that’s thrown a spanner into the global economy.

What is a near certainty is that humanity will triumph over COVID-19, hopefully within the next 12–18 months. And when we do, people are likely to go on historic spending sprees, splurging on travel, dining, and all the other goodies social distancing and lockdowns have denied them.

With the growing popularity of stocks like Afterpay Ltd (ASX: APT), not everyone will use Visa, which also offers debit cards. But many will.

After a lacklustre year, with the Visa share price up a mere 2.9% since 2 January, Visa is one global share you should consider adding to your own holdings, in my opinion.

A note on international shares

There are many good reasons to add international shares to your portfolio. Aside from diversification, the simple fact is many of the world’s best companies are listed outside of the ASX.

But not everyone is comfortable buying international stocks. While it’s become much simpler and cheaper in recent years, there are a few other aspects you need to consider. Currency fluctuations are chief among them.

If the US dollar falls against the Aussie, as it’s been doing in recent weeks, it would see your Aussie dollar returns increase once you sell your shares. But if the greenback rises, it will diminish your gains or increase your losses.

More reading

• Kanye West – ASX shares for his US presidential campaign
• Are Afterpay shares the next Visa?

Bernd Struben 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 Visa. The Motley Fool Australia owns shares of AFTERPAY T 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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