Category: Stock Market

We might be in a new financial year, but unfortunately for income investors, the outlook for interest rates hasn’t changed.

Current cash rate futures continue to point to the cash rate being between zero and 0.25% until at least the end of 2021.

In light of this, I continue to believe dividend shares are the best way to earn a passive income. But which dividend shares should you buy? Here are three that I would buy:

Commonwealth Bank of Australia (ASX: CBA)

If you don’t already have exposure to the banking sector, then I think Commonwealth Bank could be the one to buy. I believe it is the best option in the sector due to its high quality operations. And while dividend cuts are highly likely to be made in FY 2021, I’m not convinced the cuts will be as bad as some fear. I expect Commonwealth Bank to pay a fully franked dividend of $3.70 per share in FY 2020. This would be a generous 5.3% dividend yield, based on its last close price.

Transurban Group (ASX: TCL)

Another dividend share to consider buying is Transurban. It is a leading toll road operator with a portfolio of key roads in North America and Australia. The pandemic has hit the company hard and led to a sharp reduction in traffic volumes over the last few months. The good news is that with restrictions now easing, traffic volumes are starting to recover. And while it may take time for its roads to be back to their former glory, I’m optimistic it will be generating enough toll revenue to pay a decent distribution in FY 2021. At this point, I’m forecasting a 49 cents per unit distribution in FY 2021. This works out to be a forward 3.5% distribution yield.

VanEck Vectors Australian Banks ETF (ASX: MVB)

Finally, if you’re not sure whether Commonwealth Bank is the best bank to buy, but you’re wanting exposure to the banking sector, then the VanEck Vectors Australian Banks ETF could be a great option. This exchange traded fund gives investors exposure to Commonwealth Bank and the rest of the big four banks through just a single investment. It also provides investors with access to the regional banks and investment bank Macquarie Group Ltd (ASX: MQG). I estimate that its units currently provide a forward dividend yield in the region of 5%.

More reading

• Top ASX Stock Picks for July 2020
• Top brokers name the latest ASX shares to buy today
• Morgans picks the best FY21 ASX buys for the COVID-19 world
• ASX bank shares have experienced a horrible financial year
• Is CommBank still the best ASX dividend share to buy?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I think more than ever before, earnings season is going to represent a volatile time on the ASX. Investors are looking everywhere for good shares to buy in what has become a very unpredictable market. As such, often companies that deliver decent earnings reports see a rise in their share prices.

Earnings season begins in August. I think the following are solid shares to consider picking up before the end of July. I believe these companies are likely to report strong earnings, which may see them deliver reasonable increases in their share prices. 

Mining shares

In the mining space, there are two sectors that have done remarkably well during H2 FY20. These are iron ore and gold. Having said that, I feel most of the ASX gold miners are currently priced far too high to consider buying.

Instead, in the iron ore space, I believe Fortescue Metals Group Limited (ASX: FMG) is a solid share to consider buying in July. This is because Fortescue is presently a pure play iron ore producer. BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO), on the other hand, both produce commodities in addition to iron ore that I feel will be a drag on their overall earnings.

During coronavirus lockdowns, the iron ore price actually rose. Today it is at a higher spot price than it was at the start of the pandemic. In Fortescue’s Q3 FY20 report, it declared record third quarter iron ore shipments which were up 10% on Q3 FY19 as well as record tonnages for the year to date. In addition, the company also reported a reduction in costs of 2% for the quarter.

Fortescue and the other large iron ore producers were also aided by continuing production troubles with Brazil-based iron ore leader, Vale.

Medical supplies

In the medical supplies space, I believe Ansell Limited (ASX: ANN) are great shares to buy ahead of earnings season. We have not heard a lot from this company since the release of its H1 FY20 report in February. The company produces a wide range of personal protective equipment (PPE) that has seen unprecedented demand during the coronavirus pandemic. Global demand for the company’s protective gloves and surgical masks has been particularly strong. 

Ansell’s H1 report highlighted the important role the company is playing during the pandemic in supplying PPE around the world. Particularly in China where Ansell is working with authorities to fast track its regulatory and import process in order to expedite supply.

Ansell improved its earnings before interest and taxes in H1 by 4.3%. However, this relatively modest increase was affected by one-off costs relating to restructuring; including asset impairment and costs of the company’s transformation program totalling USD$26.9m.

Foolish takeaway

Both of the companies highlighted above have been able to prosper during the pandemic. I believe they represent solid shares to buy prior to earnings season as they are likely to surprise the market. Fortescue is currently selling at a price to earnings (P/E) ratio of 5.89. This is less than half the P/E ratios of BHP (13.29) and Rio Tinto (13.83).

Ansell, on the other hand, already has a high P/E ratio. However, I expect the company to report truly stellar earnings come August. Moreover, this time its reporting won’t include the once-off costs of the transformation program and will reflect the unprecedented demand for its PPE.

More reading

• Top ASX Stock Picks for July 2020
• Morgans picks the best FY21 ASX buys for the COVID-19 world
• Searching for decent dividends? These 4 ASX shares are paying 6% or more
• The top 10 performing ASX shares over the past year
• Why I would buy these high yield ASX dividend shares

Motley Fool contributor Daryl Mather owns shares of Fortescue Metals Group Limited. The Motley Fool Australia has recommended Ansell Ltd. 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 S&P/ASX 200 Index (ASX: XJO) was on form last month and recorded a decent 2.5% gain to end the period at 5,897.9 points.

While a good number of shares on the index pushed higher, some climbed more than most. Here’s why these were the best performing ASX 200 shares in June:

The Afterpay Ltd (ASX: APT) share price was the best performer on the index last month with a 28.6% gain. Investors continued to buy the payments company’s shares in June following a series of very positive industry updates. One that was released late in the month was related to its UK operations. That update revealed that Afterpay’s UK-based Clearpay business has reached 1 million active customers just one year after launching. Management also advised that the frequency of use in the UK has been stronger than at the same point after launch in the United States.

The Healius Ltd (ASX: HLS) share price wasn’t far behind with a 25.5% gain in June. Investors were buying the healthcare company’s shares after it announced the sale of its medical centres business. Healius is selling the assets to private equity firm BGH Capital for an enterprise value of $500 million. The proceeds will be used to reduce net debt and free up capital for investments.

The Boral Limited (ASX: BLD) share price jumped a sizeable 21.9% in June. The catalyst for this gain appears to have been speculation that the building materials company could be a takeover target. This follows news that Seven Group Holdings Ltd (ASX: SVW) has been increasing its stake in the company considerably. At the end of the month, Seven Group revealed that it now owns a 12.19% stake in the company.

The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price was on form again in June and rose 18.5%. This strong gain appears to have been driven by the increasing number of COVID-19 infections globally. Investors appear to believe this could lead to strong demand for its ventilators over the coming months. Also supporting its share price was the release of a stronger than expected full year result at the end of the month.

More reading

• Up nearly 33% in 12 months. Can the CSL share price climb higher?
• Webjet and these shares were the worst performers on the ASX 200 in June
• 5 things to watch on the ASX 200 on Wednesday
• Top ASX Stock Picks for July 2020
• ASX 200 rises 1.4%, Collins Foods delivers tasty returns

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Afterpay and these shares were the best performers on the ASX 200 in June appeared first on Motley Fool Australia.

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Despite an increase in volatility last month, the S&P/ASX 200 Index (ASX: XJO) still managed to record a solid 2.5% gain to end the period at 5,897.9 points.

Unfortunately, not all shares were able to follow the market higher. Here’s why these were the worst performing ASX 200 shares in June:

The Southern Cross Media Group Ltd (ASX: SXL) share price was the worst performer on the ASX 200 with a 25.5% decline. This media company’s shares have been incredibly volatile this year and regularly feature among the best and worst performers’ lists. Investors appear undecided on how much of a negative impact weak advertising markets will have on its business.

The Nufarm Limited (ASX: NUF) share price wasn’t far behind with a decline of 24.3% in June. The catalysts for this decline appear to have been a trading update and a broker note out of Macquarie at the start of the month. According to the note, the broker downgraded Nufarm’s shares to an underperform rating with a $4.85 price target. Its analysts were disappointed with the agricultural chemicals company’s trading update and appear concerned over its prospects in the important fourth quarter.

The Whitehaven Coal Ltd (ASX: WHC) share price was out of form in June and fell 21%. Investors may have been selling the coal miner’s shares due to concerns that it could be impacted negatively by the Australia-China trade spat. This follows reports that some Chinese power plant operators have been instructed to not buy Australian coal. Also adding to the selling pressure was news that its shares have been removed from the S&P/ASX 100 Index at the quarterly rebalance.

The Webjet Limited (ASX: WEB) share price was a poor performer in June and fell 19.8%. Investors were quick to sell travel shares after a spike in coronavirus cases in Victoria threatened to delay the recovery of the domestic travel market. It wasn’t just Webjet falling heavily. The Corporate Travel Management Ltd (ASX: CTD) share price fell 19.2% and the Flight Centre Travel Group Ltd (ASX: FLT) share price tumbled 15% last month.

More reading

• Up nearly 33% in 12 months. Can the CSL share price climb higher?
• Afterpay and these shares were the best performers on the ASX 200 in June
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises 1.4%, Collins Foods delivers tasty returns
• Why the Telstra share price lost 18% in FY20

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel 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.

The post Webjet and these shares were the worst performers on the ASX 200 in June appeared first on Motley Fool Australia.

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On Tuesday the S&P/ASX 200 Index (ASX: XJO) rebounded from its Monday selloff with a strong gain. The benchmark index climbed a sizeable 1.4% to 5,897.9 points.

Will the market be able to build on this on Wednesday? Here are five things to watch

ASX 200 expected to open lower.

The ASX 200 looks set to edge lower on Wednesday despite solid gains on Wall Street. According to the latest SPI futures, the benchmark index is poised to fall 6 points or 0.1% at the open. Over in the United States the Dow Jones is up 0.85%, the S&P 500 rose 1.5%, and the Nasdaq index pushed a sizeable 1.9% higher.

Oil prices drop.

Energy producers such as Oil Search Limited (ASX: OSH) and Santos Ltd (ASX: STO) could start the new financial year in the red. According to Bloomberg, the WTI crude oil price is down slightly to US$39.68 a barrel and the Brent crude oil price has fallen 1.4% to US$41.14 a barrel. Demand concerns weighed on oil prices.

Gold price jumps.

Rising coronavirus cases could mean gold miners such as Evolution Mining Ltd (ASX: NCM) and Newcrest Mining Limited (ASX: NCM) start the month in a positive fashion. According to CNBC, the spot gold price jumped 0.95% to US$1,798.20 an ounce after a spike in cases led to increasing demand for safe haven assets.

Nufarm announces changes to its manufacturing footprint.

The Nufarm Limited (ASX: NUF) share price will be on watch today after a late announcement on Tuesday. The chemicals company revealed that it will cease the manufacture of insecticides and fungicides at its Raymond Road site in Laverton, Australia. It will also curtail herbicide manufacturing at its operations in Linz, Austria. CEO Greg Hunt advised that the changes are part of a company-wide program launched in March to improve financial returns.

Westpac upgraded.

The Westpac Banking Corp (ASX: WBC) share price is in the buy zone according to analysts at Goldman Sachs. This morning the broker upgraded the banking giant’s shares to a buy rating with a $20.13 price target. Goldman believes Westpac is relatively well-placed to deal with the end of the loan deferral period.

More reading

• ASX 200 rises 1.4%, Collins Foods delivers tasty returns
• Why the Telstra share price lost 18% in FY20
• Why the TPG share price is up 38% in FY20
• Top brokers name the latest ASX shares to buy today
• What to expect from ASX 200 shares in FY2021

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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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