“That’s the nightmare scenario,” El-Erian told Yahoo Finance after the US unexpectedly added 2.5 million jobs last month states started re-opening their economies and easing COVID-19 shelter in place measures.
“The big risk is…that this is a head fake, a major head fake that we are picking up the impact of both data distortions and policy distortions,” said El-Erian.
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Invesco Global Market Strategist Brian Levitt joins Yahoo Finance’s Kristin Myers to discuss the May jobs report, after the economy unexpectedly added 2.5M jobs in May and unemployment fell to 13.3%.
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The federal government’s $688 million cash handout to stimulate the home construction sector will benefit several S&P/ASX 200 Index (Index:^AXJO) stocks. But there’s at least one ASX small cap that’s also well placed to cash in.
This small cap is Beacon Lighting Group Ltd (ASX: BLX) and Citigroup believes the lighting retailer is better placed to outperform its peers in the post COVID-19 world.
“The introduction of the government’s $680 million HomeBuilder scheme, further entrenches Beacon Lighting as our top pick in small cap retail,” said the broker.
“In our view the HomeBuilder scheme means that Beacon is well placed to continue outperforming the broader discretionary retail sector once JobKeeper ends.”
That’s a big plus as there are worries about what would happen to discretionary spending in September.
Not only will the JobKeepter wage supplement come to an end, but other support measures, like JobSeeker and the moratorium on evictions, ends.
There are a few other reasons why Citi believes the $235 million small cap ASX stock will outperform most other retailers.
Beacon’s outlets remained open throughout the coronavirus outbreak when many other retailers shut their doors. This means it faced less competition.
Another reason is that consumers were actively engaging in home improvement projects during the lockdown, and that bodes well for Beacon.
“We expect FY21e LFL [like-for-like] sales of 2% to be underpinned by renovation activity, noting that ~60% of Beacon’s customers are home renovators,” added Citi.
“However, benefits from HomeBuilder may be skewed towards 2H21 given eligible building contracts can be executed up until 31 December 2020 and lighting is typically purchased at the later stages of a renovation.”
The stock is looking cheap too on the broker’s forecasts. Beacon’s shares are trading on an undemanding FY22 price-earnings multiple of 13 times, which is a 15% discount to its Australian housing retail peers.
Citi is recommending the stock as a “buy” and lifted its price target to $1.24 from $0.95 a share. This implies a 16% plus return over the next 12-months if dividends are included.
The way the HomeBuilder program is designed will benefit larger companies more than smaller ones.
This is one of the criticisms of the stimulus as eligible projects have to be worth between $150,000 to $750,000. Small contractors and sole traders are likely to miss out.
The same can be said about ASX companies. The grants will disproportionately benefit large cap stocks.
Some of these companies that I’ve highlighted include building materials supplier James Hardie Industries plc (ASX: JHX), Bunnings owner Wesfarmers Ltd (ASX: WES) and property developer Stockland Corporation Ltd (ASX: SGP).
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Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc. The Motley Fool Australia owns shares of Wesfarmers 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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One investment strategy that legendary investor Warren Buffett has utilised throughout his career is buy and hold investing.
This strategy involves investors buying shares in quality companies which have positive long term outlooks.
Investors will then hold onto them for as long as the investment thesis remains intact, which allows them to benefit from compounding.
The good news is that there are plenty of shares on the S&P/ASX 200 Index (ASX: XJO) which I think would tick a lot of boxes for someone like Buffett.
Three ASX shares that jump out at me are listed below:
The first ASX share which I think Warren Buffett would approve of is CSL. It is one of the world’s leading biotherapeutics companies and arguably Australia’s highest quality business. I’m a big fan of the company due to the strength of its portfolio of therapies, its expansive plasma collection network, and its heavy investment in research and development activities. Combined, I believe the company is well-positioned to continue growing its earnings at a strong rate for the foreseeable future.
Another top buy and hold option to consider is Domino’s Pizza. I think it would tick a lot of boxes for Warren Buffett, especially given his exposure to the industry through an investment in Restaurant Brands International. I like Domino’s due to its strong brand, in demand offering, and its bold growth plans. Over the next five years the company is aiming to deliver annual same store sales growth of 3% to 6% and annual organic new store additions of 7% to 9%. I expect this to underpin strong earnings growth for many years to come.
A final share that I believe Warren Buffett would like is REA Group. I think the realestate.com.au operator is a quality buy and hold option. This is due to its market-leading position and its incredibly resilient business model. And while trading conditions are likely to be tough in the near term, I believe it is worth focusing on the long term. When the headwinds it is facing ease, I expect its earnings growth to accelerate.
And recommended below are more top shares which I think Warren Buffett would be a fan of…
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One is a diversified conglomerate trading over 30% off it’s all-time high, all while offering a fully franked dividend yield of over 3%…
Another is a former stock market darling that is one of Australia’s most popular and iconic businesses. Trading at a significant discount to its 52-week high, not only does this stock offer massive upside potential, but it also trades on an attractive fully franked dividend yield of almost 4%.
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As of 2/6/2020
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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 recommended Domino’s Pizza Enterprises Limited and REA 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.
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ASX dividend shares could be key for retirees to be able to fund their lifestyle in the future.
Assets like bonds and term deposits don’t offer much income any more. Official interest rates have been pushed very low.
I think ASX dividend shares can be the answer because they can generate bigger profits.
Here are three ideas to look into for income:
Rural Funds is a farmland real estate investment trust (REIT). It has a diverse farm portfolio including almonds, macadamias, cattle, cotton and vineyards.
There is always going to be demand for food, so Rural Funds should always be able to find a quality tenant for its farms. At the moment its weighted average lease expiry (WALE) is longer than 10 years right now, so there is a lot of income visibility as an ASX dividend share for retirees.
It only has large businesses as tenants like Select Harvests Limited (ASX: SHV), Treasury Wine Estates Ltd (ASX: TWE) and Olam.
Rental indexation is built into all of its contracts, which is linked to either a fixed 2.5% increase or CPI inflation, plus market reviews.
As an ASX dividend share for retirees it has a solid FY21 yield of 5.5%. The most attractive thing could be that management aim to increase the distribution by 4% every year.
Brickworks is a very reliable option for income in my opinion. It hasn’t decreased its dividend for over 40 years. There aren’t many ASX dividend shares that could claim to be as reliable as Brickworks.
There are three great divisions to Brickworks. It has a building products business that has been around for decades. It’s the leading brickmaker in Australia, but it also has other attractive businesses involved in roofing, precast, masonry and cement.
The building product division was recently expanded with acquisitions in the US. It’s now the market leader in the north east of the country.
It has a large holding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares, which is seen as one of the most reliable, durable businesses on the ASX. Soul Patts itself is a great ASX dividend share for retirees.
Finally, Brickworks has a stake in a growing industry property trust along with Goodman Group (ASX: GMG). It is steadily growing its net rental profit with more completed properties and steady rental growth.
Brickworks has a grossed-up dividend yield of 5.1%.
The infrastructure giant has been one of the best ASX dividend shares for retirees this century. It has grown its dividend every year for the past decade and a half. Few shares on the ASX have a distribution growth record going back before the GFC.
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.
The ASX dividend share funds its distribution purely from its cashflow each year, which is steadily growing as new projects come online. It currently has a FY20 distribution yield of 4.4%.
For retirees, each of these ASX dividend shares have very reliable income prospects over the coming years. Their share prices are likely to move up and down quite a bit, but the dividends should be reliable. At the current prices I’d probably go for Brickworks first.
These aren’t the only dividend shares worth watching. This top dividend stock could be the best of all…
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This fully franked “under the radar” company is currently trading more than 24% below its all-time high and paying a 6.7% grossed-up dividend.
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Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, Treasury Wine Estates Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of APA 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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ASX shares are a great way for a beginner to start building their wealth.
Unlike property which takes tens of thousands of dollars to start investing, you can start with ASX shares with as little as $500.
Here are three ASX shares I’d buy as a beginner investor:
The easiest way to invest may be to just invest in the entire global share market in just one investment.
Vanguard is a world leader in providing exchange-traded funds. The idea is that Vanguard is owned by the investors and it shares its ‘profits’ by lowering steadily lowering fees.
This ETF is invested in over 1,000 businesses across the world. It’s invested in businesses like Alphabet (Google), Microsoft, Amazon, Nestle, LVMH, Unilever, SAP, Toyota and so on. It’s not focused on shares on the ASX.
It’s the type of investment that could be your only investment for many years. It pays a decent dividend and only has a management fee of just 0.18%, which is very cheap for such a diversified product.
I think everyone should take an interest in Future Generation. It’s a philanthropic listed investment company (LIC) that donates 1% of its net assets each year to youth charities. It amounts to millions of dollars every year.
The LIC invests in fund managers who work for free for Future Generation. It’s a great system. It offers excellent diversification with how many different funds it’s invested in, which each represents a portfolio of ASX shares. The shares it’s invested in are generally smaller, so they have more growth potential.
I also like that the LIC has the potential to outperform when the market is falling with the cash it’s holding.
An attractive portion of the returns come to investors in the form of fully franked dividends from Future Generation.
MFF Capital doesn’t invest in ASX shares, it invests in some of the best shares in the world like Visa and Mastercard.
Chris Mackay has expertly guided the globally-focused LIC to be one of the best performers over the past decade. I think MFF Capital can continue to be a long-term performer by the focus on quality and reasonable valuations.
MFF Capital is growth-focused, so I think it suits beginners well because you don’t need big income to start with.
I think each of these ASX shares would be a good way for beginners to start investing with their diversification and solid historical performances. At the current prices I’m more drawn to MFF Capital and Future Generation than the Vanguard ETF.
These aren’t the only shares that would make good investments today, I also really like these shares…
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One is a diversified conglomerate trading over 30% off it’s all-time high, all while offering a fully franked dividend yield of over 3%…
Another is a former stock market darling that is one of Australia’s most popular and iconic businesses. Trading at a significant discount to its 52-week high, not only does this stock offer massive upside potential, but it also trades on an attractive fully franked dividend yield of almost 4%.
Plus, this free report highlights 3 more cheap bets that could position you to profit in 2020 and beyond.
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But you will have to hurry because the cheap share prices on offer today might not last for long.
As of 2/6/2020
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Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO and Magellan Flagship Fund Ltd. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. 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 my view, 2020 could be the perfect time to get a credit card. There’s a lot of economic uncertainty right now, which has been reflected in how volatile the S&P/ASX 200 Index (ASX: XJO) has been lately.
But before you start spending like crazy on the plastic, here are a few things to consider…
I think one of the biggest advantages of using credit is keeping your money for longer. For instance, your card provider might afford you 60 or 90 days before payment is required.
That means your money could be sitting in a savings account or used elsewhere for those 90 days. It might seem like small amounts of money, but these can add up over time.
But the main reason why 2020 could be a good year for a credit card is the extra protection it can provide. When you pay on a debit card, that money is gone when you transact.
However, when paying on credit, the risk really remains with the credit provider. That could be especially helpful if you’re booking travel in 2020.
You might book a hotel or flight a few months ahead of time. If you pay by credit, and the hotel or airline cancels your booking, you could try and get a charge-back from the credit provider.
It’s a similar story with buying from retailers right now. If you pay by credit card and the retailer folds before you receive your goods, you have a better chance of getting your money back than if you paid by debit.
The important thing with credit cards is to not overspend. That can be particularly hard to do when economic times are tough.
If you don’t trust your self control, paying by credit may not be the best option. Credit card debt can quickly spiral if you don’t have a good handle on your expenditure.
There’s also the potential fees involved. Reward programs and sign-up bonuses can be enticing, but a no-fee credit card could be a better option depending on your goals.
You could also look to dip your toe in the water with a service like Afterpay Ltd (ASX: APT) to see if you can control your spending without paying by debit card.
If you want to invest rather than spend, here are a few ASX shares to add to the buy list.
NEW! 5 Cheap Stocks With Massive Upside Potential
Our experts at The Motley Fool have just released a FREE report detailing 5 shares you can buy now to take advantage of the much cheaper share prices on offer.
One is a diversified conglomerate trading over 30% off it’s all-time high, all while offering a fully franked dividend yield of over 3%…
Another is a former stock market darling that is one of Australia’s most popular and iconic businesses. Trading at a significant discount to its 52-week high, not only does this stock offer massive upside potential, but it also trades on an attractive fully franked dividend yield of almost 4%.
Plus, this free report highlights 3 more cheap bets that could position you to profit in 2020 and beyond.
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But you will have to hurry because the cheap share prices on offer today might not last for long.
As of 2/6/2020
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Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO. 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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Earning an income from traditional interest-bearing assets like term deposits is becoming increasingly difficult.
Right now, Westpac Banking Corp (ASX: WBC) is offering 1% per annum yields on 12-month term deposits. This is broadly in line with what other banks are offering.
This means that even if you invested $1 million into these term deposits, you’d only get $10,000 of income from them.
Fortunately, the Australian share market is home to a number of ASX dividend shares which offer vastly superior yields.
Three dividend shares which I think would be great as part of a balanced income portfolio are listed below. Here’s why I would buy them:
Dicker Data is one of my favourite ASX dividend shares. It is a wholesale distributor of computer hardware and software which has consistently grown its earnings and dividends at a solid rate for many years now. This looks set to continue in FY 2020 with management intending to increase its full year dividend by 31% to 35.5 cents per share. This represents a 4.5% fully franked dividend yield.
Another dividend share to consider buying is Rio Tinto. It looks well-positioned to deliver strong profits in the near term thanks to sky high iron ore prices and its world class and low cost operations. Last month analysts at Morgans suggested that Rio Tinto’s shares could offer a fully franked ~8.5% FY 2021 dividend yield.
A final option for income investors to look at is the Vanguard Australian Shares High Yield ETF. It invests in a wide range of high yielding dividend shares. This includes mining giants, the banks, and many other blue chip favourites. I like this exchange traded fund because of the diversity it gives investors. Which, as we have seen during the pandemic, is very important to have. I estimate that its units offer a forward dividend yield of at least 5%.
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When our resident dividend expert Edward Vesely has a stock tip, it can pay to listen. After all, he’s the investing genius that runs Motley Fool Dividend Investor, the newsletter service that has picked huge winners like Dicker Data (+92%), SDI Limited (+53%) and National Storage (+35%).*
Edward has just named what he believes is the number one ASX dividend stock to buy for 2020.
This fully franked “under the radar” company is currently trading more than 24% below its all-time high and paying a 6.7% grossed-up dividend.
The name of this dividend dynamo and the full investment case is revealed in this brand new free report.
But you will have to hurry — history has shown it can pay dividends to get in early to some of Edward’s stock picks, and this dividend stock is already on the move.
More reading
Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Dicker Data 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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