Category: Stock Market

The turbulent times that investors have faced last year and this year are forcing many to turn to ASX dividend shares for comfort.

The idea is that the income can make up for the lack of capital growth, and the relative popularity of such stocks will keep their valuations steady.

Wilson Asset Management analysts this week named two such S&P/ASX 200 Index (ASX: XJO) shares that are ripe for buying at the moment:

‘Exceptional asset allocators’

DEXUS Property Group (ASX: DXS) is a real estate group that’s best known for its office assets.

Despite the flight of workers away from the office after COVID-19, the stock has been “a favourite” for Wilson equity analyst Anna Milne’s team.

“Although there has been this ‘work from home forever’ mentality, their last result really proved that this isn’t the case,” Milne said in a Wilson video.

“Operationally it looks like it’s improving.”

Dexus is paying out an impressive dividend yield of almost 7%.

But with the share price falling more than 31% since April, the biggest temptation for Milne is how cheap it is right now.

“For us, it’s a valuation call. They’re trading at a 30% discount to their net tangible assets. Their funds management business is valued at zero.”

Plus the Wilson team reckons the people running Dexus are “exceptional asset allocators”.

“So we’re happy to be with them for the medium term — Dexus is still a buy.”

Incredible pricing power

Telstra Group Ltd (ASX: TLS) shares may have been frustrating to own in the past, but the business seems to be on the up with a new chief executive at the helm.

The stock price is now 10.6% higher than it was six months ago, while paying a dividend yield of 3.84%.

Milne called the telecommunications stock “a certainty in an uncertain environment”.

“The Telstra dividend is safer than houses. So Telstra’s a buy,” she said.

“The industry is acting extremely rationally. All their competitors are lifting prices, which means it gives them the green light to lift prices again come June-July. So we really like Telstra.”

Milne is not the only one bullish on Telstra.

According to CMC Markets, a remarkable 13 out of 15 analysts currently rate the stock as a buy.

The post ‘Safer than houses’: 2 ASX 200 shares that are pumping out the dividends appeared first on The Motley Fool Australia.

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More reading

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• Why Goldman Sachs is bullish on the Telstra share price
• 5 things to watch on the ASX 200 on Tuesday
• Forget term deposits and buy these ASX 200 dividend shares: analysts
• AMP share price dips despite $337m sale win

Motley Fool contributor Tony Yoo 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 Telstra 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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I think that Nick Scali Limited (ASX: NCK) is one of the most underrated ASX dividend shares on the ASX. In FY25, it could pay a very handsome dividend, resulting in strong cash returns, regardless of what the Nick Scali share price does.

Over the past year, the Nick Scali share price has dropped by over 20%. Since 3 February 2023, it has fallen by close to 30%.

The fall of Nick Scali’s valuation means that the forward dividend yield, whatever it ends up being, is boosted.

Let’s have a look at how big that dividend is currently projected to be.

ASX dividend share’s FY25 payout estimate

Forecasts are just educated guesses, so don’t take these estimates as guaranteed at all.

The estimates on Commsec are as good as any projection at this stage.

At the moment, for FY25, Nick Scali is projected to pay an annual dividend per share of 61.3 cents. At the current Nick Scali share price, that translates into a grossed-up dividend yield of 9.7%.

There aren’t too many S&P/ASX All Ordinaries Index (ASX: XAO) dividend shares that are projected to pay a dividend yield that large in the 2025 financial year.

Of course, there may be a bit of dividend and profit pain before then, in FY24.

In FY24, the dividend per share is currently expected to be 58.8 cents per share. That translates into an FY24 grossed-up dividend yield of 9.25%. In other words, the dividend yield could remain above 9% despite an expected decline in profit in FY24.

The good nor the bad to last forever?

The COVID-19 period saw a large increase in demand for Nick Scali’s furniture as people put greater value on spending on their homes, and had the funds to do it.

It would have been unrealistic to think that Australians were going to buy more furniture year after year. I do expect that FY24 is going to show a sizeable decrease in profit compared to FY23. We’ll just have to see what the size of the decline looks like.

But, I think it would also be unwise to think that weaker retail conditions are going to last forever for the ASX dividend share.

The current numbers suggest that Nick Scali’s earnings per share (EPS) could increase by 7.5% in FY25, compared to FY24.

Nick Scali can grow its underlying operations by expanding the store numbers of Nick Scali and Plush, growing online earnings and expanding their ranges. The business can also be an indirect beneficiary of Australia’s growing population.

Is the Nick Scali share price good value?

Nick Scali shares are currently priced at under 8 times FY23’s estimated earnings and under 10x FY25’s estimated earnings.

I think Nick Scali shares have been oversold when considering how earnings in FY25 and beyond may look more promising than how FY24 earnings may perform.

Even if the ASX dividend share’s same store sales don’t perform that well, the expanding store count can help offset some of the declines. I’d be happy to buy it for the sentiment recovery and store network expansion plans.

The post This ASX dividend share is projected to pay a yield of over 9% by 2025 appeared first on The Motley Fool Australia.

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More reading

• I reckon these are 2 of the best ASX income stocks to buy in March
• Top ASX small-cap shares to buy in March 2023

Motley Fool contributor Tristan Harrison 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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Do you want a passive income boost? If you do, then the ASX dividend shares listed below that analysts have named as buys could help you.

Here’s why these could be passive income shares to buy now:

Transurban Group (ASX: TCL)

The first ASX 200 dividend share for investors to consider buying is toll road operator Transurban.

Analysts at Citi are positive on the company. They were pleased with last month’s half-year results and appear confident that it can build on this in the second half and FY 2024. Particularly given that “CPI-linked increases come through with a delay,” which the broker believes is “indicating a strong growth path ahead.”

In respect to dividends, the broker is forecasting dividends per share of 58 cents in FY 2023 and then 60 cents in FY 2024. Based on the current Transurban share price of $14.12, this will mean yields of 4.1% and 4.25%, respectively.

Citi has a buy rating and $16.00 price target on its shares.

Woolworths Limited (ASX: WOW)

Another ASX 200 dividend share that has could provide investors with a passive income boost is Woolworths.

Goldman Sachs is very positive on the company and has it on its conviction list. It is a fan due to Woolworths’ strong market position and digital leadership, which it expects to support further market share and margin gains.

As for dividends, the broker is forecasting fully franked dividends of $1.03 per share in FY 2023 and $1.16 per share in FY 2024. Based on the current Woolworths share price of $37.32, this will mean yields of 2.8% and 3.1%, respectively.

Goldman has a conviction buy rating and $41.00 price target on the company’s shares.

The post Give yourself a passive income boost with these growing ASX 200 dividend shares: analysts appeared first on The Motley Fool Australia.

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More reading

• ‘Increased confidence’: Alphinity reveals 2 ASX 200 shares it just bought
• Experts name 2 high quality ASX 200 shares to buy for your retirement portfolio
• Where I would go hunting for defensive ASX 200 shares with upside
• Top brokers name 3 ASX shares to buy next week
• Buy these ASX dividend shares next week: analysts

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 share price of S&P/ASX 200 Index (ASX: XJO) giant Washington H Soul Pattinson and Co Ltd (ASX: SOL) is in focus after the company posted its first-half earnings this morning.

Stock in the $10 billion investment house last traded at $28.54.

Soul Patts share price on watch as dividend bolstered 24%

Here are the key takeaways from the six months ended 31 January:

• $475.7 million of regular profit – up 38.4% on that of the prior comparable period
• $453 million of statutory profit – up from the pcp’s $673.6 million loss
• $290.5 million of revenue from continuing operations – a 74% fall
• Net asset value came to $10.5 billion – a 16% improvement
• $246.5 million of net cash flows from investments – a 35% jump on the pcp’s
• 36 cent per share fully franked final interim dividend declared – up 24.1% year-on-year

The historic investment house noted its net asset value’s gain outperformed that of the All Ordinaries Index (ASX: XAO) by 10.2% over the year ended January.

Its strategic portfolio investments drove such growth, helped by high commodity prices and contributions from Brickworks Limited (ASX: BKW), Apex Healthcare, and New Hope Corporation Limited (ASX: NHC).

The company ended the period with $597.3 million of cash – a 257.7% improvement – with an average current yield of 4.2% per annum.

What else happened last half?

Soul Patts underwent $1.3 billion of transaction activity last half as it reduced exposure to cyclical and growth shares amid soaring inflation.

Much of the resulting cash was invested into its structured yield portfolio, which brought $18.8 million of cash flow.

Meanwhile, its private equity portfolio doubled down on agricultural and real estate assets, deploying $152.8 million into the space.

What did management say?

Soul Patts CEO and managing director Todd Barlow commented on the results that could drive the company’s share price today, saying:

The portfolio is defensively positioned, we are holding a material cash position, and our new investments target attractive, risk-adjusted returns.

In a higher rate, inflationary environment, we are seeking greater exposure to real assets given the potential to offset inflation through income and growth.

What’s next?

The ASX 200 giant didn’t provide any earnings guidance today. Though, it appears confident in its strong liquidity position amid economic volatility, with chair Rob Millner saying:

Our company is equipped to navigate an unpredictable market with significantly more cash reserves to invest in the best opportunities.

Soul Patts share price outperforms the ASX 200

The Soul Patts share price has bested the ASX 200 over recent months.

The stock has posted a 5% gain so far this year. It’s also risen 7% since this time last year.

That’s compared to the index’s 1% year to date rise and its 5% fall over the last 12 months.

The post Soul Patts share price in focus as dividend hiked 24% appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• I’d target just a handful of ASX shares to aim for a million!
• 2 ASX passive income stocks for the next 10 years and beyond
• 2 ASX 200 shares where the dividends don’t stop
• I’d aim for $1 million, thanks to just a few ASX shares

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 positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. 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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Some S&P/ASX 200 Index (ASX: XJO) dividend shares may be leading ideas for retirees. Passive income yields have seen a boost as interest rates and inflation take their toll.

Dividend yields are simply a measure of the business income payout compared to the share price. With share prices lower, this could be a great time to boost retirement income.

While higher interest rates are a bit worrisome for some businesses, I think that the lower share prices more than makeup for it.

With that in mind, these are some of my preferred ASX 200 dividend shares.

Charter Hall Long WALE REIT (ASX: CLW)

This is a real estate investment trust (REIT) that owns a diversified portfolio of properties that are all signed onto long leases, giving the business a long weighted average lease expiry (WALE).

The properties are spread across industrial, agri-logistics, retail, office, service stations, social infrastructure and so on. I think retirees can benefit from this diversification.

It says that 99% of its tenants are blue chips, being government, ASX-listed, multi-national or national tenants.

The ASX 200 dividend share says that its income growth is driven by annual rent increases in all leases. It revealed that half of its leases are linked to CPI, with a 7.2% weighted average increase in FY23.

This business pays its passive distribution income quarterly, so investors get pleasing regular cash flow.

Commsec numbers suggest that Charter Hall Long WALE REIT could pay a distribution yield of 6.7% in the 2024 financial year.

JB Hi-Fi Limited (ASX: JBH)

JB Hi-Fi is one of the largest (electronics) retailers in Australia (and New Zealand). It has sold a huge amount of goods during the COVID-19 pandemic period.

But, while the 2023 financial year and even the 2024 financial year could show earnings declines, I think the dividends will still remain solid.

I‘d guess that phones and computers are essential enough for most people that this ASX 200 dividend share may be able to continue to provide good passive dividend income returns during this period, particularly after the fall of more than 20% since March 2022. Retirees can get a piece of this business at a much lower price.

In my opinion, the business can benefit from the ongoing growth of the Australian population which should mean more devices are bought in total in the coming years.

The FY24 grossed-up dividend yield from the ASX 200 dividend share could be 7.6%, according to Commsec. In FY25, the grossed-up dividend yield could be 7.8%, which is when the growth of the passive income and profit is expected to happen again.

The post I think retirees will love these 2 ASX 200 dividend shares for passive income appeared first on The Motley Fool Australia.

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More reading

• Buy these 3 ASX retail shares: Morgans
• I’d target just a handful of ASX shares to aim for a million!
• Here are the 10 most shorted ASX shares this week
• Investing as little as $25 a week could help me retire with $104,000 a year in passive income!
• Buy these ASX dividend shares with big yields today: experts

Motley Fool contributor Tristan Harrison 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 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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There are many schools of thought when it comes to investing in ASX shares. Some of the most prominent boil down to long-term investing or short-term investing, and day trading is an extreme version of the latter.

While market watchers might find day trading tempting, it’s rarely a useful wealth-building tool. In fact, research conducted between 2013 and 2015, cited by CNBC, found 97% of persistent day traders lose money.

It’s also the opposite approach to that which billionaire investing great Warren Buffett recently touted as the stock market’s “secret sauce”. That is: time.

Let’s dive into the wisdom that helped Buffett build his US$104.6 billion fortune, and that might help me build mine.  

Warren Buffett’s ‘secret sauce’ to wealth building

Buffett’s recently released annual letter to Berkshire Hathaway shareholders once again reiterates the billionaire and his partner Charlie Munger are “not stock pickers; we are business pickers”.

And on that note, he delved into some of the massive wins he’s chalked up over the decades.

The first being Coca-Cola. Buffett’s listed holding company snapped up 400 million shares in Coke for US$1.3 billion over the seven years ended 1994. Similarly, Berkshire Hathaway bought US$1.3 billion of American Express stock over the years to 1995.

Today, those respective holdings bring in US$704 million and US$302 million in dividends. Not to mention, they were worth US$25 billion and US$22 billion respectively at the end of 2022.

Such massive wins bring a key lesson to investors, says Buffett:

The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders.

Investing for the long term

Even Buffett admits his investing results are “the product of about a dozen truly good decisions”. But, perhaps more importantly, they’re decisions he has stuck by.

That means investing for the long-term, rather than a day. It also means he’s seen his wealth compound over and over.

Meanwhile, Arizona State University finance professor Hendrik Bessembinder’s widely-cited research, later replicated in Australia, found just 4% of US stocks were responsible for all of Wall Street’s gains.

Bessembinder advises that building a diverse portfolio of shares is often the best way to build wealth on the stock market.

My takeaway from such advice is to invest in a diverse range of companies you truly believe can outperform when they’re trading at a reasonable price, then sit back and watch them do just that – a strategy that is quite the opposite of day trading.

Munger’s 2-cents

Buffett’s business partner Munger has also weighed in on what he thinks is the key to investing. He said the pair avoid the market’s ‘froth’, continuing:

The world is full of foolish gamblers, and they will not do as well as the patient investor.

Munger also pointed to a quote from Ben Graham, who is widely regarded as the father of value investing. He once said:

Day to day, the stock market is a voting machine; in the long term it’s a weighing machine.

In my opinion, the two quotes perfectly encapsulate the difference between day trading and long-term investing.

In the short term, investing is arguably a game of popularity. However, over time the market will typically weigh a company’s fundamentals, driving the value of quality businesses higher to the benefit of patient shareholders.

The post Forget day trading! I’d use Warren Buffett’s ‘secret sauce’ to build wealth appeared first on The Motley Fool Australia.

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More reading

• Is now the time to be bold and snap up cheap ASX 200 dividend shares?
• Warren Buffett’s $35 billion warning to investors
• Forget inflation! Warren Buffett urges investors to focus on the big picture
• Beginner investor? Warren Buffett says start early!

American Express is an advertising partner of The Ascent, a Motley Fool company. 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 positions in and has recommended Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool Australia has recommended Berkshire Hathaway. 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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For better or for worse, it is the norm here on the ASX for dividend shares to give their investors passive income every six months.

Almost without fail, every blue-chip dividend share on the share market, whether that be Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Woolworths Group Ltd (ASX: WOW), or Telstra Group Ltd (ASX: TLS), follows this bi-annual dividend model.

But there are some exceptions. Some ASX shares, like Rural Funds Group (ASX: RFF), pay out dividends every quarter. Likewise, most exchange-traded funds (ETFs) also give their investors a paycheque every three months.

But finding monthly dividend payers? These ASX shares are the white tigers of the ASX – you hardly ever find one in the wild. Luckily for those income hunters out there, the search is over. We’ve found three that will send a shareholder payment to investors 12 times a year.

3 ASX shares that pay dividends monthly

BetaShares Australian Dividend Harvester Fund (ASX: HVST)

This exchange-traded fund from provider BetaShares is our first monthly dividend payer to look at. This ETF is an income-focused one at its core. It’s structured in a way that allows the fund to exceed the average income that the broader ASX can offer.

It does this by using a ‘harvesting’ strategy of buying large-cap ASX 200 dividend shares when they are about to trade ex-dividend, selling afterwards, and cycling to the next dividend share.

In this way, this ETF is able to fund oversized dividend payments, typically with franking credits attached, which are distributed to investors every month.

Metrics Master Income Trust (ASX: MXT)

This investment is a listed investment trust (LIT), which functions in a similar manner to an ETF. The Metrics Master Income Trust invests in corporate debt instruments and loans. This is an asset class that most ordinary investors don’t have exposure to.

It targets a return of 3.25% per annum above the Reserve Bank of Australia’s cash rate, while prioritising capital stability and regular income.

That regular income comes in the form of monthly dividends. But since these payments are funded by loan interest and not from corporate dividends, the distributions from Metrics Master Income Trust don’t come franked.

Plato Income Maximiser Ltd (ASX: PL8)

Finally, let’s discuss a listed investment company (LIC) in Plato Income Maximiser. A LIC is basically a company that holds shares in other companies. In this case, Plato holds a diversified portfolio of high-yield ASX dividend shares.

These typically include names like National Australia Bank Ltd (ASX: NAB), Wesfarmers Ltd (ASX: WES), and Woodside Energy Group Ltd (ASX: WDS).

As you might guess, Plato Income Maximiser also pays its investors monthly dividends. These usually come fully franked too.

Foolish takeaway

So as you can see, the ASX does have several investments available for consideration if receiving monthly dividend paycheques is important for your investing strategy. Remember, monthly dividends don’t always equate to market-beating returns.

And it’s also important to consider what fees you are paying for the privilege of getting that monthly paycheque. But monthly dividend income is certainly available on the ASX share market for those willing to partake.

The post 3 ASX shares that will pay you dividends every single month appeared first on The Motley Fool Australia.

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More reading

• Here’s how I would secure monthly dividends in the 2024 financial year with these ASX stocks
• Guess which ASX ETF pays dividends every month?
• Top ASX ETFs to buy in March 2023

Motley Fool contributor Sebastian Bowen has positions in National Australia Bank and Telstra 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, Telstra Group, and Wesfarmers. 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 the economy set to slow down in a massive way after 10 consecutive months of interest rate rises, it pays to see which trends could remain resilient through this period.

The team at Firetrail had a couple of ideas: travel and gold.

Here are the two S&P/ASX 200 Index (ASX: XJO) shares from those thematics that Firetrail analysts are backing right now:

Australians are dying to travel

One of the greatest ironies at the moment is that consumers are tightening their belts due to massive rises in their mortgage repayments, but they’re still travelling.

“Post-COVID travellers could not care less about bank asset/liability mismanagement – they’ll be at the beach bar!” read the Firetrail memo to clients.

“Air travel is surging and still has a way to go before reaching pre-COVID levels in most regions.”

The analysts noted that the US has led the surge, with revenue per kilometre already back to 2019 levels.

“But Australia still has some ground to make up,” read the memo.

“Strong demand and lighter competition in the Australian market has Qantas Airways Limited (ASX: QAN) — held in the Firetrail High Conviction and Firetrail Absolute Return Funds — reaping the rewards.”

Indeed, the Qantas share price has stunningly risen more than 50% since July.

Despite the spectacular returns, the airline remains a darling among professional investors. According to CMC Markets, 12 out of 16 analysts currently rate the stock as a buy.

Eleven of those reckon it’s a strong buy.

Gold buying spree will continue

For thousands of years, gold has always been seen as a “safe haven” investment during troubled times.

And it’s no different this time around, reckon the Firetrail team.

“Recession fears and cracks in the banking system have led to a spike in the gold price from $1,650 to $1,919 in the past 6 months,” read the memo.

“We think gold plays an important defensive role in portfolios.”

In a separate note, Firetrail analysts noted that central banks are currently on a gold-buying spree.

“Despite a subdued first half of the year, 2022 central bank gold purchases were the highest on record with net purchases of 1,136 tonnes. 80% of this came in the second half of the year,” they wrote in a Firetrail blog post. 

“A recent World Gold Council survey suggests the momentum will continue. A quarter of central banks surveyed indicated that they expect to increase exposure to precious metals.”

Among gold producers, Newcrest Mining Ltd (ASX: NCM) is the team’s highest conviction pick.

“Gold miners with high-quality assets like Newcrest Mining are set to benefit from heightened uncertainty and a stronger gold price.”

The post Beach and bling: 2 ASX 200 shares Firetrail is loving right now appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo 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 exchange-traded fund (ETF) iShares S&P 500 ETF (ASX: IVV) could be one of the best ETF choices on the ASX for a long-term investment.

There are some great reasons to consider the ETF at the moment, such as the fact that its share price is close to 10% lower than where it was in December 2021.

However, I don’t think I’d change my thoughts on whether it’s a buy if it were 10% higher or lower than where it is today. Valuation matters, but I don’t think investors need to be as selective when it comes to an ETF like this one.

With that in mind, there are three reasons to consider this investment as an appealing buy today.

Very low fees

One of the most important reasons why I think this is a strong investment contender is that investors can get exposure to the US share market, which includes many multinational businesses, for a very low fee.

High fees can really hurt net returns. It doesn’t matter whether we’re talking shares, property, or cryptocurrency – fees reduce the net return. A 10% return is cut to 9% with a 1% fee. This can make a big difference over the long term.

A $10,000 investment turns into $67,275 if it returns 10% per annum over 20 years. If the return is only 9% per year then it’s cut to $56,044 over 20 years.

Lower fees help net returns. The iShares S&P 500 ETF has an annual management fee of just 0.04%. That means almost all of the gross returns translate into net returns for the business.

But, the lowest fee won’t necessarily achieve the strongest net return.

Diversification and quality

Many of the world’s strongest and most dominant businesses are listed in the US.

While all 500 of the businesses in the S&P 500 are listed on an American stock exchange, many of them generate earnings from all over the world.

I’m talking about businesses like Apple, Microsoft, Alphabet (Google), Amazon.com, Visa, Mastercard, Nvidia, McDonald’s, and Costco.

I think there’s good industry diversification across the ETF, with sectors like IT, healthcare, financials, consumer discretionary, industrials, communication, and consumer staples all having weightings of more than 5%.

In my opinion, a lot of the businesses within this ETF are among the best at what they do. Those are the sorts of names I think can keep performing over the long term.

Long-term track record

Past performance is not a reliable indicator, particularly in the short term. But, I think the long-term returns of this evolving group of businesses show what the combination of quality and low costs can do.

Over the past five years, the iShares S&P 500 ETF has returned an average return per annum of 12.7%. I’m not sure what the next five years look like, but I think the ETF can produce double-digit returns.

One of the useful things about this ETF is that if there are any rising stars, they will become a larger part of the portfolio and help future returns.

The post 3 reasons why I rate the iShares S&P 500 ETF (IVV) as a buy today appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison 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 Alphabet, Amazon.com, Apple, Costco Wholesale, Mastercard, Microsoft, Nvidia, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2025 $370 calls on Mastercard, long March 2023 $120 calls on Apple, short January 2025 $380 calls on Mastercard, and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet, Amazon.com, Apple, Mastercard, Nvidia, and iShares S&p 500 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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The recent collapse of US banks and Credit Suisse was a sharp reminder to all investors of how rapidly events can unravel.

Wilsons equity strategist Rob Crookston said his team hasn’t changed the portfolio due to those bank failures, but it did teach everyone a critical lesson.

“The event highlights how important defensives are in a portfolio, especially in such uncertain times,” he said in a memo to clients.

“As we continue through this slowdown period, investors will have to navigate a period where economic and earnings growth could be vulnerable to downward revisions.”

But defensive, for the Wilsons team, doesn’t mean merely protection of capital to the detriment of growth.

Crookston’s analysts focus on what they call “growth defensives”.

The Wilsons staff hunt down businesses that produce defensive goods and services but still have excellent growth potential.

“The focus portfolio holds a selection of high-quality, high-margin, defensive businesses with strong competitive advantages, pricing power, and relatively attractive long-term growth prospects,” Crookston said.

“We believe these companies are likely to grow their earnings faster than the market over the medium term, which should translate to outperformance over time.”

Three stocks that could grow through tough times

Three of their favourites in this category are Lottery Corporation Ltd (ASX: TLC), Ramsay Health Care Ltd (ASX: RHC) and Treasury Wine Estates Ltd (ASX: TWE).

“Our top defensive pick is the Lottery Corp, which has predictable, infrastructure-like cash flows that are underpinned by its long-dated licences and the defensive nature of lottery demand which has historically been resilient through the cycle.”

With a price-to-earnings ratio hovering just under 35, Crookston admitted Lottery Corp shares could look expensive.

“However, we believe the consensus earnings are too pessimistic,” he said.

“The increasing penetration of digital channels should lead to higher margins than consensus… The Lottery Corp’s monopoly on lotteries in Australia further contributes to the higher multiple.”

Recovery in elective surgery activity will continue to boost Ramsay Health Care.

“We believe RHC will continue to see patient volumes recover in a post-COVID world,” said Crookston.

“Wilsons healthcare analysts forecast an earnings per share CAGR of 36% (versus consensus of 26%) between FY23E and FY25E, driven by a recovery in surgeries, strong underlying utilisation trends, raised prices for payers, dwindling COVID costs, and continued brownfield activity.”

On the other end of the health supply chain, Treasury Wine will enjoy unwavering demand for alcohol this year.

“Wine consumption is typically relatively resilient through economic cycles,” read the Wilsons memo.

“On the structural growth side of the equation, the business is poised to deliver meaningful earnings growth as it executes its premiumisation strategy, which is poised to drive material margin expansion over the medium-term.”

The resurgence of the Chinese economy and the removal of politically motivated tariffs might revive what was once a massive market for Treasury.

“Treasury Wine trades at a 12-month forward PE multiple of 22.4x, which offers compelling value considering its 3-year consensus EPS CAGR of 15%, where we see material upside if China loosens its restrictions on wine imports.”

The post 3 ‘defensive growth’ ASX shares perfect for the current climate: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo 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 Treasury Wine Estates. 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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