Category: Stock Market

S&P/ASX 200 Index (ASX: XJO) dividend shares can be great sources of income. Share prices are a lot lower at the moment because of the coronavirus, which is boosting the potential dividend yields on offer.

If you’re after income there’s not much point having cash in the bank or bonds these days. It’s probably earning less than 1%.

But ASX 200 dividend shares could be the answer. They’re large enough to be able to get through a difficult period, but small enough to have plenty of growth potential.

ASX 200 dividend share 1: Brickworks Limited (ASX: BKW)

Brickworks has a grossed-up dividend yield of 6.3%. The diversified property business has maintained or grown its dividend every year for over 40 years. That’s a great ASX 200 dividend share record.

Australia has had a strong economy for a few decades, so obviously a construction company was going to do well during that period too. The current times are difficult for Brickworks’ building products divisions in Australia and the US, but construction will return to normal in the future.

In the meantime it’s Brickworks’ other assets that can continue to fund the dividend and hold up Brickworks’ valuation. Those assets are an ‘investments’ division and a 50% stake of an industrial property trust. Very defensive with reliable pretty cashflow. 

Share 2: Tassal Group Ltd (ASX: TGR)

Tassal has a trailing grossed-up dividend yield of 6.8%. The diversified fish business has both salmon farms and prawn farms under its belt now. The company is always trying to improve how it farms, improve its biomass and increase consumption of fish by the public.

Its operating earnings have been steadily growing in previous years which has supported a solid dividend.

Healthy food will continue to be important during this period, so I think Tassal is a solid alternative ASX 200 dividend share candidate to provide reliable income during this.

Share 3: Amcor Plc (ASX: AMC)

The global packaging business is one of the limited ASX 200 businesses to expect profit to increase during this coronavirus period.

Amcor has already been one of the best ASX 200 dividend shares over the best decade with regular dividend growth. It’s expected to increase its dividend again this year. It has an (analyst) projected 2021 dividend yield of just over 5%.

Foolish takeaway

All three of these ASX 200 dividend shares have promising long-term potential for growth and income. At the current prices I’d probably go for Brickworks. If you take the non-construction assets at book value, you get the construction side of the business for free essentially. That sounds good to me.

More reading

• This ASX 200 tech share is sinking 5% lower after its half year update
• How to invest $10,000 in ASX 200 shares today
• Should you invest $1,000 in Woodside Petroleum shares?
• 2 millionaire-maker ASX internet growth shares
• A vaccine (probably) won’t be a quick fix for the ASX 200

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Amcor Limited and Brickworks. 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 believe that buying shares and holding onto them for the long term is one of the most efficient ways of building wealth.

This is because buy and hold investing allows investors to benefit from compound interest. This is essentially interest on top of interest or returns on top of returns when it comes to shares.

A $1,000 investment earning a 10% return will be worth $1,100 after one year, but almost $2,600 after 10 years.

And then if we look even further into the future, this single investment becomes almost $120,000 in 50 years if you continue to earn the same level of return.

With that in mind, here are a few top shares which I think would make great buy and hold investments. They are as follows:

Appen Ltd (ASX: APX)

The first share to consider buying and holding is Appen. It is a leading developer of high-quality, human annotated datasets for the machine learning and artificial intelligence markets. Due to the growing importance of machine learning and artificial intelligence, these markets are expected to continue growing materially in the future. I expect this to underpin strong earnings growth over the next 10 years.

Nanosonics Ltd (ASX: NAN)

This pandemic has shown us just how important infection control is. I believe this bodes well for Nanosonics’ industry-leading trophon EPR disinfection system for ultrasound probes. In addition to this, the company is planning to launch several new products in the near future which have similar addressable markets. All in all, I feel Nanosonics is well-positioned to be a market beater over the next decade and beyond.

SEEK Limited (ASX: SEK)

Another share to consider buying with a long term view is this job listings giant. The pandemic will certainly put a lot of pressure on job listings in the near term, but I expect listings to recover once the crisis passes. Looking ahead, SEEK is aiming to grow its revenues to $5 billion later this decade. This will be a big increase on the revenue of $1,537.3 million it recorded in FY 2019.

More reading

• The newspaper killers: 3 ASX 200 online classifieds shares dominating the market
• Why I would buy these exciting ASX growth shares right now
• Want to invest like Warren Buffett? Buy and hold these ASX 200 shares
• 4 top ASX shares to invest $4,000 into immediately
• 2 of the best ASX 200 healthcare shares to buy for the long term

James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nanosonics Limited. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended Nanosonics Limited and SEEK 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 200 shares have had a rocky start to the year. The S&P/ASX 200 Index (ASX: XJO) is down 16.17% in 2020 with the coronavirus pandemic and an oil price war hitting share prices hard.

However, we could be at a turning point in global markets. OPEC+ have slashed their daily oil production by around 10%, while US markets stormed higher overnight on the back of optimism surrounding a possible conronavirus vaccine.

So, what’s a good way to invest some spare cash in the market right now?

How to invest $10,000 in ASX 200 shares today

I think it’s important to invest in high-quality companies for the long-term. However, I get that it’s not easy to just ignore all the short-term share price movements in the meantime. 

I believe CSL Limited (ASX: CSL) could be a smart, long-term choice for investing $10,000 today. It’s the largest ASX 200 share by market capitalisation and is worth $139 billion right now. The biotech giant is looking to develop a potentially lifesaving plasma-derived treatment for people with COVID-19. Other than these short-term efforts, I also think CSL has a great business model overall.

It’s a leader in blood plasma treatment and biotechnology with a strong business moat. The CSL share price is trading at over $300 per share which is a testament to its long-term success since listing in 1994 at a stock-split-adjusted $0.766 per share. It’s hard to bet against the ASX 200 healthcare share given its track record and strong research and development pipeline.

CSL aside, I also like another Aussie large-cap share right now. Commonwealth Bank of Australia (ASX: CBA) shares have crashed lower in 2020 with investors selling off ASX bank shares in droves. 

The CBA share price is down 24.97% since the start of the year thanks to the COVID-19 shutdown. There are fears for what the economic impact of the pandemic will be for Aussie businesses and their lenders. We’ve seen ASX 200 bank shares fall after announcing billions of dollars of impairments this year despite unprecedented government stimulus measures.

However, I think the CBA share price could be another way to successfully invest $10,000 today. The bank is a key pillar of the Aussie economy and could emerge with a refined business model and strong risk measures. This means CBA could be a leaner, stronger ASX 200 bank share that can churn out consistent profits in the decades ahead.

More reading

• This ASX 200 tech share is sinking 5% lower after its half year update
• 3 ASX 200 dividend shares I’d buy today
• Should you invest $1,000 in Woodside Petroleum shares?
• 2 millionaire-maker ASX internet growth shares
• 4 ASX 200 shares exposed to a fall in house prices

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 CSL Ltd. 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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Woodside Petroleum Ltd (ASX: WPL) shares have been smashed in 2020. The ASX 200 oil share is down 37% in 2020 (at the time of writing) amid an oil price war between Saudi Arabia and Russia.

But is Woodside going to keep falling lower or is it a good place to invest $1,000 right now?

Why are Woodside Petroleum shares falling lower?

The coronavirus pandemic has hit ASX 200 shares hard, but ASX energy shares have had something else to worry about. Tensions have been heightened between OPEC+ and Russia in 2020. The ongoing stand-off between the world’s largest oil producers has led to oversupply and even sent the oil price negative in May.

Woodside Petroleum shares have been smashed in response and Australia’s largest oil and gas producer has shed billions in value. However, there could be light at the end of the tunnel for Woodside and its shareholders.

There are signs of slowing oil supply in the world. OPEC+ has delivered oil production cuts which could help support global crude oil prices. The global alliance will trim supply by 9.7 million barrels per day or roughly a 10% cut to current levels.

That’s good news for the Woodside Petroleum share price. Higher oil prices are good for producers as they realise a higher average sale price. For shareholders, that could mean higher earnings and strong dividends.

Should you invest $1,000 in Woodside?

ASX energy shares are struggling right now. Woodside is being hit particularly hard despite slashing jobs to try and conserve cash amid the COVID-19 pandemic.

If you want to invest $1,000 in Woodside Petroleum shares, it could turn out to be a great investment. However, I think it would have to be part of a highly diversified ASX share portfolio. ASX energy shares like Woodside are volatile at the moment and no one knows how geopolitics will play out in the current environment.

That means Woodside Petroleum shares could fall lower before they recover in the long-term. I don’t think I’m willing to buy just yet, but a 37% share price decline is certainly tempting to any value investor.

More reading

• This ASX 200 tech share is sinking 5% lower after its half year update
• 3 ASX 200 dividend shares I’d buy today
• How to invest $10,000 in ASX 200 shares today
• 2 millionaire-maker ASX internet growth shares
• A vaccine (probably) won’t be a quick fix for the ASX 200

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. 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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The James Hardie Industries plc (ASX: JHX) share price will be in the spotlight this morning after it unveiled a rise in earnings and sales despite the turmoil from the COVID-19 pandemic.

The building materials group demonstrated again why it’s my top pick of the sector with CSR Limited (ASX: CSR) in second spot after it posted a better than expected result last week.

Expanding margins

But today belongs to James Hardie with management announcing a 17% increase in adjusted net operating profit of US$352.8 million for the year ended March 31, 2020.

Its adjusted earnings before interest and tax (EBIT) expanded by 20% to US$486.8 million while revenue increased 4% to US$2.61 billion.

This implies a much-improved margin that’s helped by its Lean manufacturing initiative, while its US operations were a standout.

US driving growth despite COVID-19

“I am particularly pleased with the outstanding North America performance, as we continued to grow above market while delivering exceptional returns,” said James Hardie chief executive Jack Truong.

“Underpinning our success in North America was 11% volume growth in the exterior business coupled with sustained volume growth of 5% in the interior business.”

US construction activity was already showing signs of weakness before the coronavirus outbreak. The pandemic further impacted on the sector with sector peer Boral Limited (ASX: BLD) looking worse for wear from the fallout.

There’s speculation that Boral may be forced to do a heavily discounted capital raising too, according to the Australian Financial Review.

Need for capital raising?

But there’s little worry that James Hardie will need to intrusively tap shareholders on the shoulder. While the group cancelled its final dividend to shore up capital, its liquidity position improved significantly in the fourth quarter.

Its cash pile increased from US$464 million at 31 December 2019 to US$510 million at 31 March 2020 and US$578 million at the end of last month.

Off to a good start in FY21

Interestingly, James Hardie commented that March was a cracker month with double-digit sales growth in all of its regions even though COVID-19 was already creating havoc around the world.

“In the fourth quarter, our Asia Pacific segment delivered good financial returns with revenue up 2% and Adjusted EBIT growth of 4% in local currency at an Adjusted EBIT margin of 20.5%,” added Dr Truong.

“Our Europe Building Products segment delivered strong revenue growth of 7% in Euros in the quarter, led by fiber cement growth of 50% and fiber gypsum growth of 3%.”

Europe is clearly the Achilles’ heel but at least its growing. The only downside to the results is the outlook.

Forecasting for more uncertainty

Management declined to offer any earnings guidance due to the volatility and uncertainty created by the global catastrophe.

James Hardie won’t be alone in not providing any specifics but this will keep investors on their toes as we have not seen the worst of the economic recession.

The only figures that management were willing to put in the open was its North America segment Adjusted EBIT margin. This is expected to range between 22% and 27% for FY21 compared with 25.3% in the March quarter.

Given the wide range, that doesn’t say very much in my view.

More reading

• 4 ASX 200 shares exposed to a fall in house prices
• ASX 200 finishes up 1.4%, gold miner share prices surge
• Why Boral, Corporate Travel Management, United Malt, & Xero are dropping lower
• ASX construction shares feel impacts of COVID-19 shutdowns
• What happens to ASX shares if Australian house prices do fall 30%?

Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc. Connect with me on Twitter @brenlau.

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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Xero Limited (ASX: XRO) released its FY 2020 annual results last Thursday morning, with the initial market reaction being quite negative. The online accounting software provider for small businesses saw a 10.4% share price drop by the close of trade last Friday. However, Xero regained some of those losses on Monday, with its share price up by 2.4% to close the day at $77.15.

So, was this unfavourable initial market reaction justified, and does Xero offer a good long-term buying opportunity to investors?

Before we address theses issues, lets first analyse Xero’s recent top-level results.

Another strong full year set of numbers

Xero delivered another strong annual result, with revenue increasing by 30% to NZ$718.2 million for the 12 months ending 31 March 2020, with annualised monthly recurring revenue (AMRR) also growing strongly by 29%. This impressive result was driven by a 2% increase in average revenue per user and a 26% lift in subscribers to 2.285 million.

Also, pleasingly, Xero’s gross margin market continues to expand due to its increasing economies of scale, increasing by 1.6% to 85.2%. This contributed to Xero achieving its first ever full year net profit, which came in at NZ$3.34 million, compared to a loss of NZ$27.14 million a year earlier. Xero’s earnings before interest, tax, depreciation and amortisation result was also impressive, growing strongly by 52% to NZ$139.17 million.

In terms of geographic performance, its Australian, UK, North American and ‘Rest of the World’ segments all performed strongly. Australia grew its subscriber base by 24%, UK by 32%, North America by 24% and the rest of the world by 51%. Of particular note was the accelerating subscriber growth in the US market, with its US subscriber base now reaching 241,000.

The impact to Xero’s overall results by the coronavirus was minimal, however as its results only include the period up to 31 March, only the initial impact of the pandemic was reflected in Xero’s financial and subscriber performance. There was with a slight reduction in AMMR during the month of March, and since then there has been further AMMR reduction, as the impact of the pandemic intensified.

Did the market initially overreact?

Overall, I believe that this was a very strong result for Xero and I think that the market initially was too harsh on what I see as continued strong growth across all geographic regions. In particular, I was pleased to see a strong and increasing gross margin, and the achievement of positive net profit for the first time, as the benefits of increasing economies of scale are now really starting to kick in.

Are Xero shares a long-term buy?

Despite the potential further impact by the coronavirus in the months ahead, and its share price no longer looking cheap, I believe that Xero still has a long runway for growth ahead of it over the next decade. I think it is worthy of consideration for your share portfolio.

Small businesses are increasingly turning towards Xero to manage their entire business, not just their finances. Although competition could increase over the next few years, especially from US rival Intuit Inc, I believe that there still are strong growth opportunities for Xero to tap into across all of its operating markets, especially in North America and its other operating markets outside of Australia and New Zealand.

More reading

• 2 millionaire-maker ASX internet growth shares
• 3 quality ASX tech shares to buy for strong long term returns
• Is the Xero share price a buy after last week’s dip?
• 5 ASX 200 winners and 5 losers of the week
• ASX 200 up 0.25% this week, CBA reveals Q3

Phil Harpur owns shares of Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. 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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I have studied internet growth shares very closely ever since 2010. In a stroke of genius, I valued Amazon.com, Inc. as too expensive at that time. The Amazon share price is up 1,675.83% since then.

Australia’s geographical remoteness, not only from the world but also from each other, is well suited to online commerce. The country is presently seeing a spurt of growth for internet banks, none of which are currently listed on the ASX, as well as a continual smattering of small startups predominantly in the software-as-a-service (SAAS) category.

Software as a service

There are several outstanding Australian SaaS companies on the S&P/ASX 200 Index (INDEXASX: XJO). The largest of these is Xero Limited (ASX: XRO). The internet growth share posted its first profit since listing on the ASX last week and saw its share price dip by 8.7% over the week. With ~2 million users, investors are keen to see the company focus on customer acquisition and product development.

The company has grown its customer offerings. Initially it was a pure play cloud-based accounting package. It has since added a range of related functionality areas. These include bank streaming for reconciliation, payroll and inventory tracking. The platform also includes ~800 add on business apps from other providers, embedding it further as business infrastructure. 

Xero sees an annual customer churn rate of ~10%. The majority of this is due to companies going out of business, underlining the company’s staying power. That is, most organisations purchase the service and stay with it.

Internet growth shares in retail

There are 2 major online service providers in the retail space. The first is the country’s current leading internet growth share, Afterpay Ltd (ASX: APT). The second is Kogan.com Ltd (ASX: KGN). Of these 2 shares, I prefer Kogan for a medium- to long-term growth prospect.

The Afterpay empire is built on foundations of unsecured debt. In times of economic hardship, unsecured debt is the first to see defaults. Additionally, the company has already spawned a range of copycat products. While its integration with providers and functionality is pretty slick, that alone doesn’t constitute a competitive advantage. 

Kogan, on the other hand, continues to grow steadily. Aided by stay-at-home conditions, Kogan delivered an impressive Q3 result. The company reported increases against the prior corresponding period of 30% gross sales and 23% gross profit. March saw the company record its largest ever increase in active customers since its IPO.

Additionally, the company announced on Friday the purchase of leading furniture company Matt Blanc for $4.4 million. This adds to its portfolio of companies with strong supply chains. Unlike Amazon, Kogan produces much of its own merchandise, meaning it can not only compete at higher margins, but its products can also be sold on Amazon’s Australian website. The company also has additional services such as insurance, which sets it apart. 

More reading

• Are Xero shares a top long-term buy?
• A vaccine (probably) won’t be a quick fix for the ASX 200
• ASX 200 expected to rocket higher on Moderna COVID-19 vaccine news
• 5 things to watch on the ASX 200 on Tuesday
• Where to invest $500 in ASX shares right now

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Amazon. 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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The third-quarter update from Commonwealth Bank of Australia (ASX: CBA) forecasts a fall in the Australian house price index, a proxy for house prices, from between 11% to a worst-case scenario of 32%.

In line with this, REA Group Ltd (ASX: REA) reported a 33% slide in residential listings during April. The REA result is slightly misleading. It reports on a period when people were not allowed to leave their houses.

Nonetheless, these 2 figures, combined with a similar National Australia Bank Ltd (ASX: NAB) forecast, paint a bleak picture of the short to medium-term real estate market.

A dip in house prices will reverberate throughout the economy. Companies operating in the construction, insurance, and mortgage sectors will feel the impact. However, some companies are likely to see a lesser impact than others. 

Direct exposure to a fall in house prices

ASX real estate investment trusts and companies dedicated to developing residential housing have the most direct exposure. According to its 2019 portfolio report, Stockland Corporation Ltd (ASX: SGP) has a development pipeline of 76,000 lots of residential real estate. The company estimates this has an end market value of $21.4 billion. A financial impact on this company is inevitable in the case of a fall in house prices.

The Boral Limited (ASX: BLD) share price fell by 10.6% last week. On 15 May, Boral reported concrete volumes were down ~16% and revenue down ~6% for the 4 months ending April 2020, compared with the prior corresponding period.

One ASX share I believe is likely to be less impacted than others is the REA Group share price. When the economy resumes, its previous activity real estate listings are likely to remain constant or slightly lower.

It is likely developers will want to move existing inventory as quickly as possible to limit their losses. As any recession drags on, of course, retail listings become a way for people to downsize and survive in a turbulent market. So while REA too will feel the impact, I believe it will escape the worst of any market downturn. 

Financiers and insurers

The KPMG 2019 report on the mortgage market reports the big 4 banks as holding 81% of the total mortgage market. As CBA is the nation’s largest mortgage holder, it will be the most exposed to a fall in house prices.

However, long-suffering investors in Westpac Banking Corp (ASX: WBC), of which I am one, will also see a hit to revenues. The company launched a $2,000 rebate last year. In January, Canstar reported that Westpac had deliberately positioned itself in the lowest priced 10 loans in the market in all fixed investment loan categories. In any other year, this would have been a canny loss-leading strategy. Alas, 2020 is not any other year.

Foolish takeaway

It is very easy to get wrapped up in the moment. However, I believe all of the companies mentioned here are good companies with good management teams in place. They are likely to see lower share prices in the near term until the actual scale of any fall in house prices is known.

This may be a good time to “buy the dip” as they say. Only you may need to be patient before the turnaround comes. 

More reading

• This is the latest ASX 200 stock to unveil double digit profit growth
• The newspaper killers: 3 ASX 200 online classifieds shares dominating the market
• NAB is going to question borrowers with loan holidays
• Forget term deposits and buy these top ASX dividend shares
• Why this overlooked ASX 200 stock just got upgraded by 3 leading brokers to “buy”

Motley Fool contributor Daryl Mather owns shares of Westpac Banking. 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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