Category: Stock Market

S&P/ASX 300 Index (ASX: XKO) stock Rural Funds Group (ASX: RFF) is one ASX dividend share that I have in my portfolio for passive income.

I think it’s a business worth investing in for the regular, attractive distributions that it pays.

While it doesn’t pay a distribution every week, the ASX 300 stock pays income to investors every quarter. We just need to split that quarterly payment into weekly amounts.

For readers who haven’t heard of Rural Funds, it’s a real estate investment trust (REIT) that owns a portfolio of farmland across Australia. The business is invested in a number of different farm types including almonds, macadamias, vineyards, sugar, cotton, and cropping.

Passive income goal

The ASX dividend share has a goal of increasing its distribution by at least 4% per annum, which it has done since listing several years ago.

Let’s assume for the sake of this article that the FY23 quarterly payment from the ASX 300 stock continues over the next 12 months.

In FY23, it’s expecting to pay a total distribution of 12.2 cents, which is a gross payment of 3.05 cents per quarter.

To get $200 per week, we’re essentially aiming for an annual target of $10,400. To reach that passive income goal, we’re talking about owning 85,246 Rural Funds shares. Buying this many shares would currently come at a cost of around $168,000.

Is Rural Funds a good ASX dividend share?

I think it’s one of the best REITs on the ASX. The 30% or so fall in the Rural Funds share price over the past year has pushed up the distribution yield to 6.2%.

It has 67 properties with quality tenants – around 80% of its forecast FY23 lease revenue is from corporate lessees. Those tenants are on long-term rental contracts, with the current weighted average lease expiry (WALE) being around 12 years. That’s a long time for rent to be locked in.

Higher interest rates are hurting the rental profits of the business. But it’s benefiting from CPI and fixed indexation of its rental income, as well as market rent review mechanisms.

The business also has a development and leasing pipeline, where productivity improvements and conversion to higher and better-use developments are expected to generate earnings growth in future years. For example, its 3,000-hectare development is forecast to be completed by FY25.

Higher interest rates may hurt the ASX 300 stock’s farm values, but I think the Rural Funds share price decline has made up for that.

The post Want $200 in weekly passive income? Buy 85,200 shares of this ASX 300 stock appeared first on The Motley Fool Australia.

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More reading

• Analysts say income investors should buy ANZ and these ASX dividend shares
• Building wealth through dividend investing: 5 ASX shares to boost your income
• 5 reasons I’m still positive about this ASX 300 share despite the 40% drop
• Analysts say these ASX shares will give you a passive income boost
• Need passive income? Turn $5,000 into $25 every month with these ASX shares

Motley Fool contributor Tristan Harrison has positions in Rural Funds Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Rural Funds Group. 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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There are countless ways of valuing businesses before deciding to pull the trigger on an investment. But, one often overlooked method for analysing an ASX share is its free cash flow (FCF) yield.

Essentially, the free cash flow yield measures the net cash generated by the company’s operations relative to its enterprise value. The enterprise value is simply its market capitalisation, plus its total debt, minus its cash and cash equivalents.

Simply put, this metric is similar to the price-to-earnings (P/E) ratio, but for cash flows. You might be thinking: why not just stick with the good ole’ fashioned P/E then?

Follow on to find out what the FCF yield offers over an earning multiple, what a good FCF yield is, and which ASX shares could be ‘good’ value based on this valuation method.

Why free cash flow yield can be useful

So much focus in the investing world is placed on earnings or net profit after tax (NPAT). However, the reality is this figure can sometimes be unintentionally misleading due to a variety of factors.

A common inclusion of a company’s bottom-line earnings is non-operational income. Examples of this might include one-off asset sales or property valuation gains. In such cases, the listed entity suddenly looks dirt cheap based on its temporarily improved P/E ratio.

Unfortunately, unless one is privy to the earnings-altering items, there is a good chance someone could buy into the ASX share believing they’ve found a deal too good to be true.

Whereas, the free cash flow portrays a truer reflection of the returns generated by the company’s operations.

Well, what is a good free cash flow yield? You might ask. Great question.

According to the legendary British investor and CEO of Fundsmith, Terry Smith, a 5% free cash flow yield is the minimum expectation.

During Fundsmith’s 2013 shareholder meeting, Smith explained:

I will only buy companies that have a free cash flow yield which is about 5% or more. The reason for that is if I buy those companies with that yield that is higher than those [4% to 4.5% yielding] bonds I can be sure of one thing… over the long term the free cash flow yield of our companies will rise […] I can be equally sure the coupon (yield) on the bonds won’t go up.

In other words, Smith seeks to own companies that generate a greater expected return than bonds. Which makes sense. If you didn’t think you could get a better return from your ASX shares, you’d buy bonds instead.

Next question… which companies listed in Australia fall into this ‘above 5%’ FCF yield category?

I’m glad you asked.

Which ASX shares are yielding more than 5%?

There are 35 companies on the ASX with a market capitalisation above $100 million and a free cash flow yield above 5% (as of Tuesday afternoon). Additionally, these companies posted a return on capital above 15% in the last 12 months, which is generally considered good.

The ASX shares with the highest FCF yield include coal shares Yancoal Australia Ltd (ASX: YAL), Whitehaven Coal Ltd (ASX: WHC), and Terracom Ltd (ASX: TER) as shown in the chart above. However, coal prices have fallen since the end of 2022, which could lead to a dramatic reduction in future cash flows.

Buying opportunities?

Most of the companies that make the cut are highly cyclical. This means they may not be the best fit for a portfolio if someone is looking for defensive ASX shares.

In saying that, there are still a few businesses that catch my eye as potential buys due to their sturdy balance sheets, growth history, dividends, and free cash flow yield.

Although retail shares could be prone to a weaker economy, the likes of Nick Scali Limited (ASX: NCK), JB Hi-Fi Limited (ASX: JBH), and Dusk Group Ltd (ASX: DSK) look relatively attractive. The share prices of these companies are down 5.6%, 8%, and 34% respectively over the last year.

Personally, I believe JB Hi-Fi is the pick of the bunch given its exceptionally cashed-up balance sheet. At the end of December 2022, the retailer held $391.2 million in cash and zero debt. And, its FCF yield is around 5.7%, surpassing Terry Smith’s bar.

The post Follow the free cash flow: Could these unloved ASX shares be worth buying? appeared first on The Motley Fool Australia.

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More reading

• JB Hi-Fi share price lifts on above pre-Covid sales
• Here are the 10 most shorted ASX shares
• This ASX share could pay a 16% dividend yield by 2025
• For a shot at $10,000 in annual passive income, buy 662 shares of this ASX 200 stock
• 2 ASX dividend shares offering exciting yields over 7%

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dusk Group and Jb Hi-Fi. 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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Are you looking for new addition to your income portfolio? If you are, then you may want to look at the ASX 200 dividend shares listed below.

That’s because they have both been rated as buys and tipped to provide investors with big, juicy dividend yields.

Here’s what you need to know about these buy-rated ASX 200 dividend stocks:

Stockland Corporation Ltd (ASX: SGP)

The first ASX 200 dividend share that could be a buy is Stockland.

It is a residential and land lease developer and retail, logistics, and office real estate property manager.

Citi is a fan of Stockland and feels the market is being too negative on its outlook. Particularly given its belief that property prices won’t fall as much as feared. In fact, the broker is so positive it has named it as its top pick in the sector.

As for dividends, Citi expects dividends per share of 27 cents in FY 2023 and FY 2024. Based on the current Stockland share price of $4.52, this will mean sizeable yields of 6% in both financial years.

The broker currently has a buy rating and $4.70 price target on its shares.

Whitehaven Coal Ltd (ASX: WHC)

Another ASX 200 dividend share that has been named as buy is Whitehaven Coal.

Morgans is very positive on the coal miner and feels that recent share price weakness has created a buying opportunity for investors.

It highlights that “WHC looks far too oversold on the recent NEWC correction (FY23F FCF yield +40%, P/NPV 0.69x)” and expects “the re-tightening of thermal coal pricing dynamics through April to be a key catalyst for WHC.”

As for dividends, the broker is expecting a 60 cents per share dividend in FY 2023 and FY 2024. Based on the current Whitehaven Coal share price of $6.80, this implies yields of 8.8% for both years.

The broker has an add rating and $9.60 price target on its shares.

The post Analysts expect big, juicy yields from these ASX 200 dividend shares appeared first on The Motley Fool Australia.

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More reading

• Did you buy the dip on Whitehaven shares? Here’s the dividend yield you’re earning now
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Invested $12,000 in Whitehaven shares 5 years ago? Here’s how much passive income you’ve earned
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Analysts say these ASX 200 dividend stocks are top buys

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that investors might want to be aware of are summarised below.

Here’s why brokers think investors ought to buy them next week:

BHP Group Ltd (ASX: BHP)

According to a note out of Goldman Sachs, its analysts have upgraded this mining giant’s shares to a buy rating with a price target of $49.90. While the broker has been busy incorporating the OZ Minerals acquisition into its valuation model, that isn’t the reason for the upgrade. Goldman made the move on valuation grounds after a sharp pullback since January. The BHP share price ended the week at $44.05.

Coles Group Ltd (ASX: COL)

A note out of Citi reveals that its analysts have retained their buy rating and $20.20 price target on this supermarket operator’s shares. This follows the release of a quarterly update that came in a little better than Citi was expecting. The broker highlights that the company’s private label offering has been a key driver of this outperformance and appears to believe the trend can continue given the cost of living crisis. The Coles share price was fetching $18.25 at the end of the week.

Woolworths Group Ltd (ASX: WOW)

Another note out of Citi reveals that its analysts have also retained their buy rating and $42.20 price target on Coles’ arch rival. This follows the release of a quarterly update that was well ahead of the broker’s estimates. Pleasingly, Citi believes more of the same could be coming in FY 2024. As a result, it feels the market consensus estimate is too low. The Woolworths share price was trading at $39.08 on Friday.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

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More reading

• If I invest $10,000 in BHP shares how much passive income will I receive?
• Analysts name 2 ASX 200 dividend shares to buy for passive income
• 4 ASX 200 shares just upgraded by brokers
• Why the iron ore price is ‘not out of the danger zone’
• Why did the Coles share price underperform the ASX 200 Index in April?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group. 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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ANZ Group Holdings Ltd (ASX: ANZ) shares were on form on Friday.

The banking giant’s shares rose 1.5% to $23.80 after the market responded positively to its half-year results.

As a reminder, ANZ reported a record half-year cash profit for the six months ended 31 March.

Its first-half cash earnings from continuing operations came in 12% higher than the prior half at $3,821 million. This was thanks to solid performances across the board and allowed the bank to declare an 81 cents per share fully franked dividend.

What did analysts say about the result?

Goldman Sachs has been looking over the result. While ANZ’s result was slightly ahead of consensus estimates, it was short of its own. It commented:

ANZ’s 1H23 cash earnings were up 23% on pcp and 4% below GSe, with the miss driven by higher expenses, partially offsetting a lower BDD charge, with revenues broadly as expected. The proposed final DPS of A81¢ implied a payout ratio of 64% (non-discounted DRP, which is to be neutralised via an on-market purchase), while the 1H23 CET1 ratio was 13.2% (12.1% on a pro-forma basis; 18.9% globally-harmonised).

In light of this, the broker has revised its earnings estimates lower for “FY23/24/25E EPS by -2.1%/-2.3%/-1.0%.”

Can ANZ shares keep rising?

Although Goldman only has a neutral rating on the bank’s shares, it does appear to believe they could be undervalued.

According to the note, the broker has a neutral rating and $26.17 price target on its shares. This implies potential upside of 10% from current levels.

In addition, Goldman is forecasting fully franked dividend yields of 6.8% per annum all the way through to at least FY 2025.

The broker summarises:

Today’s result provided further evidence of success for ANZ in improving the profitability of its Institutional business. Coupled with current market competitive dynamics, which we would characterise as still a tailwind for NIMs in Institutional, against a rising headwind for NIMs in Retail, ANZ’s business mix appears well-placed positioned.

That said, previous cycles have shown us that ANZ’s Institutional profitability can inflect suddenly, albeit we note the business mix today has evolved significantly versus where it was through the Global Financial Crisis. Risks appear evenly balanced and with our revised TP offering only 14% upside (ex-dividend adjusted; middle of ANZ Financials), we stay Neutral.

Overall, Goldman isn’t rushing in to buy ANZ shares, but appears to believe they could rise from here.

The post Is it time to buy ANZ shares after its strong results? appeared first on The Motley Fool Australia.

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More reading

• Why ANZ, Block, Pilbara Minerals, and SSR Mining shares are storming higher
• Banking crisis continues: What’s up (and down) with ASX 200 bank shares today?
• Everything you need to know about the 81 cents ANZ dividend
• ANZ shares gain as simplification strategy pays off
• ANZ share price on watch after record result beats expectations

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 good news for income investors is that there are a large number of quality ASX 200 dividend shares to choose from on the Australian share market.

Two that have been tipped as best buys by analysts at Morgans in May are listed below. Here’s what the broker is saying about them:

QBE Insurance Group Ltd (ASX: QBE)

The first ASX 200 dividend share that Morgans has on its best ideas list is insurance giant. The broker currently has an add rating and $16.96 price target on its shares.

It believes QBE is attractively priced, particularly given how rate increases are still flowing through its insurance book. In addition, the broker highlights its cost reductions plans and strong balance sheet as reasons to be positive. It explained:

With strong rate increases still flowing through QBE’s insurance book, and further cost-out benefits to come, we expect QBE’s earnings profile to improve strongly over the next few years. The stock also has a robust balance sheet and remains relatively inexpensive overall trading on 8x FY24F PE.

Morgans is expecting this to underpin dividends per share of approximately 83 cents in FY 2023 and 94 cents in FY 2024. Based on the current QBE share price of $15.35, this will mean yields of 5.4% and 6.1%, respectively.

Westpac Banking Corp (ASX: WBC)

Another ASX 200 dividend share that Morgans has on its best ideas list this month is banking giant Westpac. The broker has an add rating and $25.80 price target on its shares.

Its analysts are positive on Westpac due to their belief that Australia’s oldest bank is well-placed to deliver the best return on equity improvement in the sector. It is expecting this to underpin some big dividend yields in the coming years. It commented:

We view WBC as having the greatest potential for return on equity improvement amongst the major banks if its business transformation initiatives prove successful. The sources of this improvement include improved loan origination and processing capability, cost reductions (including from divestments and cost-out), rapid leverage to higher rates environment, and reduced regulatory credit risk intensity of non-home loan book. Yield including franking is attractive for income-oriented investors, while the ROE improvement should deliver share price growth.

The broker is forecasting fully franked dividends per share of $1.53 per share in FY 2023 and $1.59 per share in FY 2024. Based on the current Westpac share price of $21.35, this will mean yields of 7.15% and 7.45%, respectively.

The post Morgans names the best ASX 200 dividend shares to buy in May appeared first on The Motley Fool Australia.

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More reading

• Banking crisis continues: What’s up (and down) with ASX 200 bank shares today?
• 4 reasons to buy ASX 200 banks stocks right now
• Top ASX passive income shares to buy in May 2023
• Should you buy the dip in the Santos share price?
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. 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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With Australian consumers and businesses reeling after 11 interest rates rises in the past year, resilience is critical when buying ASX shares right now.

The team at QVG Capital agrees, saying in a recent memo to clients that it’s currently keen on investing in companies that can maintain earnings growth through difficult economic times.

“Examples of these sorts of stocks include Lovisa Holdings Ltd (ASX: LOV), Corporate Travel Management Ltd (ASX: CTD) and regional construction materials and commercial property developer Maas Group Holdings Ltd (ASX: MGH),” read the memo.

“The commonality among all these companies is that we believe they can generate double-digit, organic, through-the-cycle earnings growth.”

Don’t fall for the svengali chief executive

So how does one spot these resilient businesses?

For one, the QVG team has “a strong preference” for founder-led businesses.

“Or, in the case of Lovisa, ones where a major shareholder is actively engaged in the business,” the memo read.

“We tend to find companies with founders or ‘motivated insiders’ at the helm or on the board are more rational and patient when it comes to capital allocation.”

The analysts confessed that they have made grave mistakes in the past becoming dazzled by “professional CEOs with a mandate for growth”.

“Their short tenures, lack of true alignment and asymmetric incentive structures (heads I win, tails you lose) means they’re more likely to push too hard for growth, sometimes via transformative acquisition,” read the memo.

“We’ve learnt the hard way a ‘transformative’ acquisition often means we should ‘transform’ off the register.”

Are you sick of Zoom? You’re not the only one

Corporate Travel Management is a stock that the QVG team has “materially increased” its position in over the past month.

“The past 5 years have not been easy for CTD as they were hit with a much publicised short-report and then COVID. 

“Despite this they were the only large-listed travel company to not raise capital through COVID and are now poised to deliver earnings per share 25% ahead of pre-COVID levels.”

According to the QVG memo, travel is conventionally “a GDP-plus” industry.

And business travellers are itching to take off at the moment.

“With many of our portfolio companies flagging the limitations of Zoom for winning business and collaboration, we believe Corporate Travel Management can sustain high levels of organic revenue and earnings growth in the future as corporate travel continues to recover.”

Corporate Travel shares have risen an impressive 39% year to date.

The post ‘We’ve learnt the hard way’: 3 ASX shares that can grow in tough times appeared first on The Motley Fool Australia.

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More reading

• Why these ASX 300 retail shares could be immune to rising interest rates
• 2 ASX travel shares poised for a massive 2023
• ‘Under the radar success’: 3 quality ASX 200 growth shares to buy right now
• These were the best-performing ASX 200 shares in April
• These ASX 200 growth shares could generate big returns: broker

Motley Fool contributor Tony Yoo has positions in Corporate Travel Management. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa. The Motley Fool Australia has recommended Corporate Travel Management and Lovisa. 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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A couple of gold coins likely won’t get you much these days. But I reckon with just $3 a day, I could build a portfolio of S&P/ASX 200 Index (ASX: XJO) shares capable of providing more than $300 of monthly dividend income.

And all it would take to execute my plan is consistency, time, and patience.

How I’d turn $3 a day into $370 of monthly dividend income

Albert Einstein once called compound interest “the eighth wonder of the world”. Indeed, it’s a pretty incredible phenomenon.

Compounding, to put it simply, is realising gains on your gains. By realising small returns over a long period of time, wealth can compound to an astronomical extent.

By taking advantage of compounding, I believe I could turn $3 each day – or around $1,000 a year – into a reliable income by investing in ASX 200 dividend shares.

Let’s do the math

The average ASX 200 share also offered a 4.61% dividend yield at the end of April, according to S&P Global data.

Of course, past performance isn’t an indicator of future performance. But let’s just assume the index will continue providing dividends at that same rate for the next 30 years.

By setting aside $3 a day and investing the resulting cash in ASX 200 shares once a year, also reinvesting all the dividends I receive in that time, I could boast a portfolio worth around $72,300 by the year 2043. That’s not bad, considering I’d have invested just $32,850 in that time.

At that point, my figurative portfolio could be bringing in around $278 of dividend income a month – assuming my annual yield stays at 4.61%.

And that’s also before considering any share price gains I might also realise.

The ASX 200 has boasted an annualised capital return of around 4.1% since April 2018. I reckon that could push my monthly dividend income way higher than my $300 target.

Though, these equations haven’t considered a number of important factors, such as brokerage fees or tax. Not to mention, no investment is guaranteed to provide returns.  

Still, the returns that can feasibly be realised from a consistent and long-term investing strategy are eye-opening.

What if you’re not that into stock picking…

Of course, not every investor will have the time and patience to diligently build their portfolio from scratch. It’s also worth noting that building a portfolio in small increments isn’t likely conducive to diversification.

Fortunately, investing in exchange-traded funds (ETFs) like the Betashares Australia 200 ETF (ASX: A200) can provide exposure to the entire index with just one purchase.

The post Investing just $3 a day in ASX 200 shares could provide $300 of monthly dividend income. Here’s how appeared first on The Motley Fool Australia.

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More reading

• The cheapest index fund on the ASX revealed

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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When it comes to generating passive income from ASX shares, there a few options more popular than BHP Group Ltd (ASX: BHP) shares.

Every year, the Big Australian rewards its shareholders by paying them big dividends.

And while the amount that is returned will vary depending on commodity prices in a particular year, when times are good, this can amount to tens of billions of dollars being returned to shareholders in total.

The good news for passive income seekers is that times are relatively good right now. Sure, commodity prices aren’t as strong as they were a couple of years ago, but they are high enough to underpin some generous payouts from the mining giant. But just how generous?

How much passive income will BHP shares generate?

For our example, we’re going to imagine that we have $10,000 waiting in the wings, ready to be invested in BHP shares.

Based on its current share price of $44.05, if you were to invest that amount, you will end up owning 227 shares.

Now onto the passive income. A recent note out of Goldman Sachs reveals that its analysts are forecasting fully franked dividends per share of US$2.05 in FY 2023 and then US$1.63 in FY 2024.

This currently equates to A$3.04 per share and A$2.42 per share at current exchange rates, which represents dividend yields of 6.9% and 5.5%, respectively.

Based on the above, your $10,000 investment would yield passive income of approximately $690 in FY 2023 and $550 in FY 2024. Though, it is worth noting that BHP has already paid its interim dividend this year.

But the returns may not stop there. Goldman Sachs has a buy rating and $49.90 price target on BHP’s shares.

If its shares were to reach that level, your $10,000 investment would be valued at approximately $11,330. And that doesn’t include any passive income you would receive in the meantime.

Overall, based on the above, I don’t think it is overly surprising that BHP shares are popular with income investors.

The post If I invest $10,000 in BHP shares how much passive income will I receive? appeared first on The Motley Fool Australia.

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More reading

• Analysts name 2 ASX 200 dividend shares to buy for passive income
• 4 ASX 200 shares just upgraded by brokers
• Why the iron ore price is ‘not out of the danger zone’
• Why Goldman Sachs just slapped a buy rating on BHP shares
• Investing for passive income? Here’s your dividend yield if you bought BHP shares in July

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Warren Buffett has one of the best investment track records that you will ever see.

Over several decades, the Oracle of Omaha has delivered incredible returns for Berkshire Hathaway (NYSE: BRK.B) shareholders.

For example, according to the company’s most recent letter to shareholders, Buffett has overseen an average 19.8% per annum increase in Berkshire’s book value since all the way back in 1965.

This means that Berkshire Hathaway has returned a massive 3,787,464% over the period of almost six decades.

To put that into context, a single investment of just $1 would have turned into almost $3.8 million!

How did Buffett do it?

One of the keys to Buffett’s success has been down to his penchant for buying companies with wide economic moats.

Back in 2007, he explained why moats are important when he makes investments. He said:

A truly great business must have an enduring ‘moat’ that protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business ‘castle’ that is earning high returns.

Therefore a formidable barrier such as a company’s being the low-cost producer (GEICO, Costco) or possessing a powerful world-wide brand (Coca-Cola, Gillette, American Express) is essential for sustained success. Business history is filled with ‘roman candles’, companies whose moats proved illusory and were soon crossed.

Invest like the Oracle of Omaha with this ASX share

The good news for investors is that if they want to try and grow their wealth enormously like Buffett has done, they can follow in his footsteps with one ASX share.

That share is the VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT).

This exchange-traded fund (ETF) has been designed to replicate Warren Buffett’s investment style. It gives investors access to a diversified portfolio of companies with sustainable competitive advantages and fair valuations.

Over the last 10 years, the index that the fund tracks has generated a return of 19.14% per annum. This is approximately double the market return and in-line with Buffett’s long-term returns. Surely that isn’t a coincidence!

To put this return into context, it would have turned a $50,000 investment into almost $290,000 today.I feel this demonstrates why following Warren Buffett’s lead with ASX shares could help you grow your wealth enormously over the long term.

The post Invest like Warren Buffett with this ASX share to grow your wealth enormously appeared first on The Motley Fool Australia.

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More reading

• 2 top ASX ETFs I’d buy with the goal of long-term capital growth
• Worried about a recession? Here’s why these investors are backing Warren Buffett
• How I’d invest $20k in ASX stocks today to target serious wealth
• Want a possible $1 million in retirement? Invest $50,000 each in these 3 ASX shares and wait a decade
• Buy and hold these 3 ASX ETFs for a decade

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway and VanEck Morningstar Wide Moat ETF. 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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