Author: therawinformant

With the cash rate at a record low of 0.25% and unlikely to change any time soon, the interest rates on offer with term deposits and savings accounts look set to stay lower for longer.

In light of this, I think income investors ought to consider investing in some of the quality dividend shares on the ASX.

Three that I would buy next week are listed below:

Dicker Data Ltd (ASX: DDR)

Dicker Data is a leading wholesale distributor of computer hardware and software. I think it is one of the best dividend shares on the local market and doesn’t get the recognition it deserves. Especially given how it has consistently grown its earnings and dividends at a solid rate for many years now. Pleasingly, this positive trend has continued in 2020 despite the crisis. Management recently revealed strong first quarter profit growth and plans to lift its full year dividend by 31% to 35.5 cents per share. This represents a 4.75% fully franked dividend yield.

Macquarie Group Ltd (ASX: MQG)

Another dividend share to consider buying is this investment bank. I like Macquarie due to the quality and diversity of its earnings and its ability to deliver growth when the rest of the banking sector is struggling. And while it will not be immune from the pandemic and FY 2021 could be an underwhelming year, it has a long history of bouncing back strongly and generating solid returns for investors. At present I estimate that its shares offer investors a partially franked 4.8% FY 2021 dividend yield.

Telstra Corporation Ltd (ASX: TLS)

A final option to consider is Telstra. I believe the telco giant is well positioned to return to growth in the not so distant future. Especially given the return of rational competition in the telco industry, its T22 cost-cutting plans, and its leadership position in the 5G market. In the meantime, I am optimistic that the dividend cuts are over and its free cash flows will be sufficient to sustain its current 16 cents per share dividend. This equates to a fully franked 5.2% yield. Incidentally, I’m not alone with this view. As I wrote here, Goldman Sachs believes Telstra’s current dividend is sustainable.

More reading

• How to reduce your work to part-time using ASX shares
• Here’s how I would put $10,000 to work on the ASX
• The latest ASX small caps broker picks to buy today
• Brokers name 3 ASX 200 shares to buy right now
• Is Telstra about to be caught in a new mobile phone war?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited, Macquarie Group Limited, and Telstra 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 3 ASX dividend shares I would buy to beat low rates appeared first on Motley Fool Australia.

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Is the REA Group Limited (ASX: REA) share price a buy? It has been a strong performer since 23 March 2020. It’s an interesting question now that property activity is returning.

The REA Group share price has risen by around 50% since 23 March 2020. It’s now only down by 15% from 21 February 2020. That’s some recovery considering how much the landscape had been hit for REA Group.

Property listings were down significantly a few weeks ago. In April national residential listings were down 33% with Sydney listings down 18% and Melbourne listings down 24%.

Obviously REA Group is quite reliant on volume to make up a lot of its profit and cashflow. With some restrictions being lifted in different states, property listings, auctions and open houses can start to go back to normal. A return of property listings is good for the REA Group share price.

I’m not sure how many people will be wanting to list their properties in this environment with buyers agents reporting that house prices in some areas have already dropped 10% compared to pre-coronavirus prices. There will always be some sales going on due to personal circumstances, which should keep things ticking over.

Is the REA Group share price a buy?

I think it’ll be very interesting to see what happens when the bank mortgage holidays stop and jobkeeper ends. Will there be lots of forced sellers coming onto the market? More volume would be good news for earnings and the REA Group share price. I definitely prefer it to Domain Holdings Australia Ltd (ASX: DHG) as it comes with potential international growth. 

Lower interest rates do justify higher asset prices, but I’m not sure if a share price of around $100 is worth buying in the shorter-term. Patience may be the way to go for now. It certainly isn’t cheap considering the earnings hit in 2020.

More reading

• 3 super strong ASX 200 blue chip shares to buy right now
• Investing $1,000 in these 3 ASX shares would be a smart move
• 3 ASX 200 blue chip shares I would buy today
• 4 ASX 200 shares exposed to a fall in house prices
• The newspaper killers: 3 ASX 200 online classifieds shares dominating the market

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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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Is the Wesfarmers Ltd (ASX: WES) share price a buy? The conglomerate announced yesterday that it will be culling many Target stores across the country.

Wesfarmers is a diversified business with several different divisions. It runs Bunnings, Officeworks, Kmart, Target, Catch and other industrial businesses.

Target has been a disappointment for Wesfarmers for some time. It has tried to turn it around but this coronavirus period seems to have been the catalyst for Wesfarmers to decide to make a big change to Target. Investors didn’t seem to mind either way about the announcement either way, the Wesfarmers share price was essentially flat.

What was in the Wesfarmers announcement?

Wesfarmers said between 10 to 40 large Targets will be converted to Kmarts, subject to landlord support. “Approximately” 52 Target Country stores will change to small format Kmart stores. Around 10 to 25 large Target stores and the remaining 50 Target Country stores will be closed. The Target store support office will be significantly reduced.

Kmart Group will take a non-cash impairment of between $430 million to $480 million. The industrial and safety division will also take a non-cash impairment of approximately $300 million.

The FY20 will include a number of significant items. Both the negative ones I just mentioned and the gain of the sale of Coles Group Limited (ASX: COL) shares.

Time to buy Wesfarmers at this share price?

The two department stores of Kmart and particularly Target are struggling. But it’s important to remember that Bunnings, Officeworks and Catch are actually performing well during this period. If earnings hold up well then the Wesfarmers share price should be able to keep doing well too.

I think the key will be what Wesfarmers does with its large balance sheet. It’s positioned to be able to make one or more large acquisitions. This could be a great time to do it with some businesses being distressed. If Wesfarmers acquires well then it could be a buy, otherwise it might be wise to wait for another market selloff considering the Kmart Group weakness and restructuring.

More reading

• ASX 200 drops 1% on Friday
• Myer share price bounces after announcing its doors will be reopening across the nation
• ASX 200 down 0.2%: Wesfarmers overhauls Target, Sydney Airport has no plans to raise equity
• Wesfarmers share price lower after announcing major Target overhaul
• 3 high yield ASX dividend shares you can buy right now

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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.

The post Is the Wesfarmers share price a buy? appeared first on Motley Fool Australia.

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There has been much discussion lately regarding whether we have seen the worst of the economic fallout from coronavirus or if the bottom is yet to come. Could clues lie in the performance of Afterpay and its cohorts?

What can we learn from Afterpay and other ASX FinTechs?  

Afterpay Ltd (ASX: APT), Tyro Payments Ltd (ASX: TYR) and EML Payments Ltd (ASX: EML) have all provided business updates that shed light on how the Australian economy may have bottomed in April. 

Afterpay Business Update 

Afterpay’s business update highlighted that its sales moderated in the second half of March at a Group level. This coincided with the introduction of government-enforced lock-down measures across the world. Global underlying sales in the second half of March versus the first half of March were 4% lower. 

However, the company experienced positive growth in the first two weeks of April, with average daily underlying sales up approximately 10% on the second half of March globally. 

Tyro Payments COVID-19 Trading Update 

Tyro has committed to providing the market with weekly transaction value updates. These transaction volumes are derived largely from its EFTPOs terminals installed at customer cites. It has so far highlighted the following transaction volumes: 

• January up 27% 
• February up 30% 
• March up 3% 
• April down 38% 
• May to 15 May down 20%

EML Payments Business Update 

EML’s unaudited Group EBITDA for March was $1.9 million, down 37% on the prior corresponding period. This was significantly impacted by its gift and incentive (G&I) segment reflecting global mall closures. 

While social distancing and lockdown measures continued in April, the group’s unaudited EBITDA was $2.7 million. It expects a gradual reopening of malls in various countries during May and June 2020 onwards. This should represent an improvement to the trading conditions experienced in April.

Is it a Bottom? 

All 3 businesses collect some form of commission from an economic transaction across multiple sectors. Afterpay has broad sector verticals including retail, travel, health, entertainment and services. It operates across Australia, the US and the UK. Tyro Payments provides payment services to over 30,000 Australian merchants. From its prospectus back in June 2019, it cited that 77% of its customers were SMEs and 86% were in health, hospitality and retail sectors. Finally, EML provides G&I services to retailers, general purpose reloadables for salary packaging and gaming and virtual banking accounts.

Recovering revenues from lows in April across these 3 companies may be reflective of a broader improving economy. Sectors such as retail and hospitality have already reopened, albeit at a limited capacity. Meanwhile, other sectors such as entertainment and travel are expected to resume later on this year.

Foolish takeaway

The current challenge is buying shares at today’s prices, as many have already soared on the assumption that we have, in fact, seen ‘the bottom’. If this is not the case, however, and further economic pullback is still yet to come, I believe this would present greater opportunities to buy shares at much more optimal risk/reward levels.

More reading

• How these 3 ASX financial shares have proved their doubters wrong
• How to use ASX shares to become a millionaire
• Is the Afterpay share price a buy at $44?
• 3 ETFs perfect for an ASX growth investor
• 2 ASX stocks that could replace cash

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited and Tyro Payments. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Emerchants 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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I’m a big fan of buy and hold investing and believe it is one of the best ways for investors to grow their wealth.

To demonstrate how successful it can be, every so often I like to pick out a number of popular ASX shares to see how much a single $20,000 investment 10 years ago would be worth today.

This time around I have picked out the three shares that are listed below:

BWP Trust (ASX: BWP)

BWP is a real estate investment trust with a focus on commercial properties throughout Australia. The majority of its properties are large format retailing properties leased to hardware giant Bunnings Warehouse. Despite its relatively simple business model, its shares have generated market beating returns for investors over the last decade. Since this time in 2010, its shares have provided investors with an average total return of 11.04% per annum. This would have turned a $20,000 investment into almost $57,000.

InvoCare Limited (ASX: IVC)

Although there have been a number of ups and downs along the way, this funeral company’s growth through acquisition strategy has been a success over the last decade. During this time the company has grown its network to 290 funeral locations and 16 cemeteries across the ANZ region and Singapore. This has underpinned solid earnings and dividend growth over the period, which has led to strong total returns for its shareholders. Over the last 10 years InvoCare’s shares have generated an average total return of 9.6% per annum. This would have turned a $20,000 investment into $50,000.

Magellan Financial Group Ltd (ASX: MFG)

This fund manager’s shares have been among the best performers on the Australian share market over the last decade. This strong form has been driven by its successful investments in high-quality global stocks that have benefited from a number of key themes over the past decade. These themes included the emerging consumer, the cashless society, and the dominance of business software giants. The sum of this was an average total return of 51.4% per annum over the last 10 years. This means a $20,000 investment in Magellan’s shares in May 2010 would now be worth a staggering ~$1.25 million.

More reading

• Why Downer, InvoCare, NRW Holdings, and Whitehaven Coal are dropping lower
• 3 high yield ASX dividend shares you can buy right now
• Why this ASX funeral share is well positioned for future growth
• Forget term deposits and buy these top ASX dividend shares
• Forget CBA and buy these top ASX dividend shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended InvoCare 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 to turn $20k into $1.25 million in 10 years with ASX shares appeared first on Motley Fool Australia.

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