Category: Stock Market

Some ASX growth investors dismiss the idea of dividends and dividend income entirely. After all, if you don’t need the income today, why would you buy a company weakening its balance sheet every 6 months by shovelling cash out the door.

But dividends have advantages of their own (not least franking credits) that can help any investor accumulate wealth faster. This choice isn’t always mutually exclusive. There are some ASX shares that offer investors both dividend income today, as well as the opportunity for significant future capital growth tomorrow.

Here are (in my opinion) two such shares.

Telstra Corporation Ltd (ASX: TLS)

Telstra is not the kind of company that has a reputation for growth. It’s Australia’s largest telco that makes a crust selling phones, data plans and fixed-line broadband internet. It does have a reputation for dividend income, however. On current prices, Telstra shares are offering investors a trailing dividend yield of 5.1%, or 7.20% grossed-up (based on Telstra’s annualised 16 cents per share dividend over the past 12 months).

That’s a fine yield to be sure, but I also think Telstra has significant growth potential in front of it. That’s because the company is heavily investing in the rollout of 5G technology. 5G is the next ‘big leap’ in mobile internet and promises many new applications like NBN-beating speeds and the Internet of Things.

If all goes well with 5G in the next few years, I see Telstra as a stock with both income and growth potential.

Magellan Global Trust (ASX: MGG)

This share isn’t one company, but a listed investment trust (LIT) consisting of an entire portfolio of companies. But not just any companies. Magellan Global Trust has a management team that selects companies from all over the globe that they think are the ‘world’s best’. Right now, these include Facebook, Alibaba, Alphabet (Google), Visa and Tencent, amongst others. All of these names are growth engines that have helped this LIT deliver a performance of 12% per annum since its inception in 2017.

But one of the great features of MGG is that its also geared for income as well. The trust aims to provide its investors with a 4% distribution yield every year, which you can either choose to receive in cash or reinvest at a discount. In this way, I think Magellan Global Trust is a great share to hold for both capital growth and dividend income.

More reading

• Why Macquarie, Telstra, United Malt, & Westpac are dropping lower
• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
• How to earn $50,000 of passive income with ASX shares
• ASX shares can help millennials retire before their parents
• 2 ASX shares for a first-time investor

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares), Facebook, Telstra Limited, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Facebook, and Visa. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Alphabet (A shares) and Facebook. 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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‘Just buy the index’ is a common refrain you hear from investors these days. Index-tracking exchange-traded funds (ETFs) have become a popular pathway for investing in recent years. So much so that the most popular ETF in Australia – the Vanguard Australian Shares Index ETF (ASX: VAS) – now has over $4.8 billion in funds under management.

The ease, simplicity and passive nature of ETFs have driven this surge, together with the (quite frankly) dismal performance of ETFs’ actively managed counterparts.

So why bother trying to buy shares yourself when you can just ‘buy the market’?

Weighing up index ETFs

ETFs work by buying every share in an index – the good, the bad and the ugly. VAS, for example, holds the largest 300 companies in Australia, with the largest companies (like CSL Limited (ASX: CSL)) having far more weighting than the smallest.

The good news is that you can buy the market just through one single ASX share. ETFs typically have very low fees and expenses as well (VAS only charges a fee of 0.1% per annum for instance).

The bad news is that ETFs are designed to blindly follow an index – meaning the fund will be buying the strong shares along with the weak, the good companies along with the bad – with no discretion in between.

That means you are never going to outperform the ‘market’ because the ETF is the market. You are accepting an average return forevermore.

That might be just fine for those investors who don’t want to put any work into investing and have a very long-term horizon. History shows that even just investing in an ETF like VAS will give you far superior returns to just having your money in cash (even in a high-interest term deposit).

But if you want to use the stock market to generate market-beating returns, ETFs are not the best place to be.

Foolish takeaway

We Fools think anyone has the potential to beat the market (although it’s not easy). But it does require dedication, patience, and the right temperament.

For some people, active investing in this manner just isn’t the right fit, and so index-tracking ETFs might be the best option for those individuals. But if you want to learn how to beat the market, you will have to branch out beyond index ETFs and dive into the world of finding good quality businesses to buy into.

More reading

• Don’t delay: Start investing today in shares to become rich
• How to invest $5,000 in ASX 200 healthcare shares today
• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
• Here’s how to create a $1 million ASX portfolio by investing $1,000 a month
• Top brokers name 3 ASX shares to buy next week

Sebastian Bowen 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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Is Whitefield Limited (ASX: WHF) the best ASX dividend share? It just grew its dividend in its FY20 result.

What is Whitefield?

Whitefield is a listed investment company (LIC). It’s one of the oldest on the ASX, it has been around since 1923.

Why Whitefield might be one of the best ASX dividend shares

It can point to a record of dividends that have been maintained or grown every year over the past 25 years.

In today’s FY20 result the LIC declared a final dividend of 10.25 cents per share, compared to 10 cents per share last year. That is in addition to the 10.25 cents per share it paid as the interim dividend, compared to the prior year’s 9.75 cents per share.

That brings the FY20 grossed-up dividend yield to 6.6% at today’s share price. I think that’s a solid yield in today’s environment. 

FY20 result

The ASX dividend share announced an operating profit after tax of $17.66 million. This equated to earnings per share (EPS) of 17.8 cents, a decrease of 3.7%.

Whitefield said that the financial year to March saw two periods. The first 10 months of the year saw moderately widespread dividend and distribution growth from a majority of shares in the portfolio. There was some weakness in the financial and banking sectors. However, the emergence of COVID-19 and the containment measures in February and March meant companies began to cut or defer dividends to preserve cash. I think we’re likely to see cuts for the next 12 months. 

Some of the businesses that delivered distribution growth was Brambles Limited (ASX: BXB), ASX Ltd (ASX: ASX) and Medibank Private Limited (ASX: MPL).

Whitefield’s portfolio return for the full year amounted to a negative 8.88%. This outperformed the S&P/ASX 200 Industrials Accumulation Index by 3.15%. I think that’s a solid performance. 

Whitefield’s outlook

The ASX dividend share said that the outlook is dominated by COVID-19. I don’t think that’s surprising. Remember its profit is determined by investment returns. The near-term is full of uncertainty and the financial impacts are “profound”. Whitefield said there is likely to be a very material downturn in both 2020 and 2021.

Whitefield expects to maintain its dividend in the December 2020 result, but said investors should be aware it may have to review its dividend payments if conditions continue to deteriorate.

Seeing as Whitefield is currently trading at around its net asset value, I’m not in a rush to say it’s a buy. But I think Whitefield is one of the best ASX dividend share ideas for conservative income.

More reading

• 2 ASX shares I would buy for growth and income
• Should ASX investors just buy ETF index funds for better returns?
• Where to invest $500 in ASX shares right now
• ASX 200 climbs 1% in positive start to the week
• Why this overlooked ASX 200 stock just got upgraded by 3 leading brokers to “buy”

Motley Fool contributor Tristan Harrison 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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If you have $500 to invest in the share market, I believe you should be thinking long term.

This is because brokerage costs (which are usually around ~$10 a trade) will eat into your profits if you are constantly buying and selling.

With that in mind, here are three top ASX shares which I think could be fantastic buy and hold investments:

Afterpay Ltd (ASX: APT)

I think this payments company would be a great buy and hold investment. Due to the growing popularity of buy now pay later as a payment method with consumers and retailers and its global expansion opportunity, I think Afterpay has the potential to become a payments giant over the next decade. In addition to this, it is worth remembering that the company has signed a strategic partnership with Visa to support the development of innovative new solutions. This could be another driver of growth in the future.

Kogan.com Ltd (ASX: KGN)

A second option for that $500 investment could be Kogan. It is a growing ecommerce company and the home grown equivalent of Amazon. While the company may not be destined for global domination like Amazon, I believe it has the potential to grow enormously in the local market thanks to the ongoing shift to online for shopping. At present only ~10% of consumer spending is made online, but this is likely to grow materially over the next couple of decades. With this tailwind in its sails, the future looks bright for Kogan.

Pushpay Holdings Ltd (ASX: PPH)

A final option to consider is another payments company, Pushpay. It provides a donor management system to churches and non-profits. The company’s sales have been growing at a very strong rate in recent years and look likely to continue doing so in the coming years. Management recently revealed that it has set itself a target of winning a 50% share of the medium and large church market. This represents a US$1 billion revenue opportunity for Pushpay and compares favourably to the operating revenue of US$127.5 million it recorded in FY 2020.

More reading

• This ASX fintech share is soaring again as the economy reopens
• 3 industries that may never recover from COVID-19
• Why all ASX investors should avoid this easy mistake in 2020
• Will the Afterpay share price stop at $40 or keep on running?
• The smartest shares to buy if you have $2,000

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd and PUSHPAY FPO NZX. 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.

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The S&P/ASX 200 Index (ASX: XJO) went up more than 1% today in a positive start to the week.

It was another strong day for some of the ASX 200 gold miners. The Saracen Mineral Holdings Limited (ASX: SAR) share price rose by 11.3% and the St Barbara Mining Limited (ASX: SBM) share price went up 7.5%.

Elders Ltd (ASX: ELD) was a top performer within the ASX 200

Agri business Elders reported its half-year result today, causing the share price to rise almost 10%.

Elders reported that statutory net profit after tax (NPAT) went up by 90% to $52 million. Underlying NPAT rose 68% to $47.6 million. Operating cash flow jumped 309% to $27.4 million.

The company declared the same interim dividend as last year at 9 cents per share.

It said that the result reflected a solid performance from its Rural Products with the gross margin boosted by recent winter crop confidence, high prices for both cattle & sheep and steady earnings in Real Estate and Financial Services.

Elders was one of the best performers in the ASX 200.

Virgin Australia Holdings Limited (ASX: VAH) closer to a white knight?

The administrators of Virgin have moved the rescue process to a bidder shortlist.

According to Vaughan Strawbridge, lead partner of the administrators, each bidder is well funded and possesses deep aviation experience. Each of the bidders has a plan which could secure the future of thousands of employees.

The ABC has reported those remaining bidders are Bain Capital and BGH Capital, US aviation firm Indigo Partners, and New York-based investor Cyrus Capital Partners.

Ramsay Health Care Limited (ASX: RHC) keeps making progress

The ASX 200 private hospital operator continues to make announcements regarding agreements it has achieved with health bodies.

Today the healthcare business said it has finalised the agreement with Western Australia and it has also finalised the agreement with NHS England.

The market sent the Ramsay share price up more than 3% today in positive reaction.

Returns as of 7/4/2020

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Elders Limited and Ramsay Health Care 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.

More reading

• Why this overlooked ASX 200 stock just got upgraded by 3 leading brokers to “buy”
• Why the Ramsay share price is climbing
• Why ASX iron ore miners like BHP aren’t afraid of the China trade war
• 3 top Warren Buffett quotes to start off your week
• Virgin narrows its shortlist down to 4 suitors

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The listed real estate sector is finding support today, but there’s one stock in particular that’s capturing the attention of brokers.

The stock in the limelight is Charter Hall Group (ASX: CHC) as three leading brokers upgraded their recommendation on the stock to “buy” following its latest update released last week.

The Charter Hall share price jumped 2.5% to a two-month high of $8.10 when the S&P/ASX 200 Index (Index:^AXJO) added 1% on Monday.

More fuel in the tank

While the group may not be the best performer in the sector as the Stockland Corporation Ltd (ASX: SGP) share price surged 4.4% and the Vicinity Centres (ASX: VCX) increased 4% to $1.45, experts believe there’s plenty of room for Charter Hall to outperform.

UBS is one that believes in the upside as it upgraded the stock to “buy” from “neutral”.

“A concern of real estate valuations, funds flows/capital raisings and transactions in a COVID-19 world has seen CHC underperform the AREIT market by 11% over the past 3 months,” said the broker who put a 12-month price target of $9.80 on the stock.

“On rebased earnings CHC is trading on a 14x PE multiplied with growth of 6% from FY21.”

Limited retail exposure

The diversified property portfolio of the group will give some protection against the looming structural risks facing retail landlords.

Credit Suisse believes there is too much focus on Charter Hall’s retail exposure.

“At 30 Apr 2020, CHC had A$18.0bn of Office and A$8.1bn of Industrial FUM pre any gross-up from its Long WALE exposure,” said the broker.

“Importantly, we estimate Retail provides only ~25% of ‘base’ earnings (i.e. pre any performance or transaction fees).”

Credit Suisse lifted its rating on the stock to “outperform” from “neutral” with a 12-month price target of $9.17 a share.

One of the safest ASX property stocks you can buy

JP Morgan also took the opportunity to upgrade its call on Charter Hall to “overweight” from “neutral”. There were a few reasons for this, including management’s update that showed little impact from the coronavirus fallout on group earnings.

It also noted that the group is among the lowest risk and most defensive property stocks in the Australian real estate investment trust (A-REIT) sector.

Further, Charter Hall can grow its industrial platform through transactions like sale and leaseback and JP Morgan sees scope for the stock to re-rate.

The broker’s price target on Charter Hall is $9 a share.

More reading

• 2 high yield ASX dividend shares to buy for 2021
• 3 industries that may never recover from COVID-19
• Why ASX iron ore miners like BHP aren’t afraid of the China trade war
• 3 top Warren Buffett quotes to start off your week
• How is the ASX 200 soaring despite rising unemployment?

Motley Fool contributor Brendon Lau 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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Since bottoming out at $2.90 on March 25, shares in ASX automotive retailer AP Eagers Ltd (ASX: APE) have almost doubled in price in recent weeks and are now back up to $5.43 as at the time of writing. With sales slumping during the coronavirus lockdowns, new investors have responded positively to the raft of cost-cutting measures the company has put in place to see it through the crisis.

Towards the end of April, AP Eagers announced that it had made the difficult decision to cut around 1,200 employees from its workforce at a saving of around $6 million a month. Those at the top of the company will be feeling the pinch as well, with non-executive directors foregoing their director fees and senior executives taking a 50% pay cut. AP Eagers has also been working with its landlords, suppliers and other key stakeholders to defer lease commitments and other payments. It has also frozen all non-essential capital expenditure.

The company’s balance sheet remains strong, with $270 million worth of cash and undrawn debt facilities still at its disposal. Additionally, the company’s suppliers have provided it with $122 million worth of working capital facilities.

Finally, it’s also worth noting that the sale of the company’s refrigerated logistics business to private equity firm Anchorage Capital Partners is still progressing. However, AP Eagers has now had to settle on a $75 million sale price instead of the originally agreed $100 million due to the negative economic impacts from the coronavirus.

Shares in ASX digital car classifieds business Carsales.com Ltd (ASX: CAR) have also performed well recently, up almost 40% from their 23 March low of $10.47 to $14.27 as at the time of writing. In its most recent COVID-19 update, released to the market on 23 April, it announced a similar range of cost-cutting measures that it hoped would see it through the crisis.

As with AP Eagers, Carsales has decreased the size of its workforce, temporarily standing down around 250 mostly frontline staff. Board and executive remuneration for the remainder of the financial year have also been slashed by 20%.

Interestingly, Carsales noted that traffic to its website had remained high throughout the pandemic, despite lead volumes dropping by 25% in April. The international arms of its operations have seen varying impacts from COVID-19: while the Brazilian geography has suffered in recent weeks after escalating outbreaks in that country, revenues in South Korea have continued to grow.

Should you invest?

Even in an economic downturn, people will still have a need for cars and other vehicles. This doesn’t exactly make AP Eagers or Carsales defensive plays, but both should continue to generate revenue even in a prolonged period of economic recession. After all, the AP Eagers company has a history dating back over 100 years.

However, there may still be a shift in demand away from luxury brands and towards cheaper used cars. If this occurs, it could theoretically present a greater rebound opportunity for online classifieds business, Carsales. Consumers may be less inclined to visit dealerships and may instead choose to buy their cars directly from the seller online.

Not only that, but as Carsales is now an internationally diversified company with operations in both Brazil and South Korea, these global revenue streams could also help to keep the company afloat during these uncertain economic times. And with its shares trading almost 25% below their pre-coronavirus highs, Carsales may still offer good value to new long-term investors.

More reading

• 3 ASX shares growing dividends over the last decade
• Carsales share price down 26% since February. Is it now a good buy?
• ASX 200 starts the week strongly, up 1.3%
• Analysts think this ASX auto share could be turning the corner
• Market close: ASX 200 ends 0.5% higher

Motley Fool contributor Rhys Brock owns shares of carsales.com Limited. The Motley Fool Australia has recommended carsales.com Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I think that one of the most promising areas of the market to invest in at the moment is the tech sector.

In this area there are a good number of companies with the potential to grow strongly over the next decade and generate outsized returns for shareholders.

Three ASX tech shares that I think are worth considering are listed below. Here’s why I like them:

Bravura Solutions Ltd (ASX: BVS)

Bravura Solutions is a provider of software products and services to financial institutions including BNP Paribas, Fidelity, and Mercer. Thanks to the increasing popularity of its Sonata wealth management platform, it has been growing its earnings at a strong rate over the last few years. I believe there is still a long runway for growth for Sonata, which should be complemented by recent acquisitions. These acquisitions look set to provide Bravura with new avenues for growth in industries benefiting from structural tailwinds.

Xero Limited (ASX: XRO)

Another tech share to consider buying is Xero. It is one of the world’s leading cloud-based business and accounting software providers with a high quality and sticky product. Xero recently reported its full year results and revealed further impressive growth in sales and EBITDA. This was driven by strong customer growth and increases in average revenue per user. While the next few months may be trickier than normal because of the pandemic, I believe its long term prospects remain as positive as ever.

Zip Co Ltd (ASX: Z1P)

A final tech share to consider buying is Zip Co. I’ve been very impressed with the performance of the buy now pay later provider over the last couple of years and feel confident its strong growth can continue. Especially given its international expansion and the ever-increasing customer and merchant numbers on its platform. Another big positive was that Zip Co recently released a business update which showed that its growth has continued during the pandemic and its bad debts have remained low.

More reading

• Is the Xero share price a buy after last week’s dip?
• Leading brokers name 3 ASX shares to buy today
• Why Aristocrat Leisure, Newcrest, Santos, & Zip Co shares are charging higher
• 5 ASX 200 winners and 5 losers of the week
• These are the 10 most shorted ASX shares

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Bravura Solutions Ltd, Xero, and ZIPCOLTD FPO. The Motley Fool Australia has recommended Bravura Solutions 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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