Reporting season is underway. At the current time, I think there are a few S&P/ASX 200 Index (ASX: XJO) dividend shares that could make solid picks for income at their current prices.

Examining results gives us a chance to get a look under the ‘hood’ of businesses. Companies that have been sold off over the last few months could be attractive opportunities because investors have put them on a lower valuation.

While not every business is worth buying just because it has fallen, I do believe that some of them may have been oversold.

In my opinion, there may be some real estate investment trusts (REITs) that now look like good ASX 200 dividend share opportunities because of investor concerns surrounding inflation and rising interest rates.

Here are two I’ve been looking at:

Charter Hall Long WALE REIT (ASX: CLW)

Since the end of April 2022, the Charter Hall Long WALE REIT share price has dropped almost 20%. That’s a hefty drop for what is typically seen as a defensive sector. It’s invested across a range of property sectors including industrial, retail, and agri-logistics.

In its FY22 result, the business noted that its operating earnings had grown by 4.5% and that the net tangible assets (NTA) per unit rose by 18.2% to $6.17.

The REIT noted that the portfolio weighted average lease expiry (WALE) was 12 years at year-end, which provides “long-term income security”. I think this also provides useful visibility for the potential future distributions.

Rental income looks as though it’s going to grow at a good pace. In FY22, 51% of leases were fixed with an average fixed increase of 3.1%, while 49% of leases were CPI-linked, up from 40% in FY21. The CPI-linked leases are expected to grow by 6.3% in FY23.

The ASX 200 dividend share is expecting to pay a distribution per security of 28 cents in FY23. That translates into a forward distribution yield of 6.4%.

Centuria Industrial REIT (ASX: CIP)

As the name suggests, this REIT is focused on industrial properties.

In FY22, its portfolio expanded to 88 “high-quality” industrial assets worth $4.1 billion. It had an 8.3-year WALE with a 98.8% portfolio occupancy.

Its NTA per unit increased by 11% to $4.24 and its funds from operations (FFO) (the net rental profit) rose 22%.

In FY23, the business is expected to generate FFO per unit of 17 cents and it expects to pay a distribution of 16 cents per unit. That would translate into a distribution yield of 5.35%.

The Centuria Industrial REIT share price has dropped almost 30% in 2022.

Jesse Curtis, the fund manager of the ASX 200 dividend share, gave commentary on the state of play for industrial property, which could also be applied to some of Charter Hall Long WALE REIT’s properties:

Globally, industrial real estate continues to benefit from strong tailwinds. Increasing e-commerce, and securing supply chain resilience, are driving strong demand. Domestically, despite recording strong rental growth during FY22, Australia’s industrial market continues to see robust tenant demand. Labour shortages, supply change disruption and limited industrial zoned land have resulted in new industrial accommodation being in short supply.

Coupled with sustained demand generated from trends of growing e-commerce adoption and increased reshoring, this is creating an environment for prolonged rental growth, particularly within urban infill markets where Centuria Industrial REIT has 85% of its portfolio.

The post I think these ASX 200 dividend shares look like good income picks after reporting appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Why the Charter Hall Long WALE REIT share price isn’t rocking the boat
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• In this most volatile of years, the ASX 200 is within shouting distance of turning positive

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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The ASX is well-known as one of the highest dividend yield payers in the world.

One of the big reasons for this is Australia’s generous taxation rules, which prevent dividend income from being taxed twice.

The franking credits and dividend imputation system dictates that if the business has already paid company tax on the money distributed, the investor does not have to pay income tax on that yield.

The Australian share market is also dominated by the major banks and miners. 

Both sectors are known for large dividend yields. But due to the cyclical nature of mining, banks are the more consistent payers for investors seeking income.

So with this in mind, one expert was asked which are his favourite bank ASX shares and how he would maximise dividend payouts this reporting season.

The 3 best bank shares right now

Shaw and Partners portfolio manager James Gerrish, across his two portfolios, holds these three banks:

• Bank of Queensland Limited (ASX: BOQ)
• Commonwealth Bank of Australia (ASX: CBA)
• Macquarie Group Ltd (ASX: MQG)

“At this stage we don’t see any reason to deviate away from our current portfolio holdings,” he said in a Market Matters Q&A.

Other analysts are somewhat divided on these picks.

According to CMC Markets, eight out of 12 rate Bank of Queensland as a buy. Nine out of 15 recommend buying Macquarie shares.

Meanwhile, Commonwealth Bank is actually very unpopular — 10 out of 17 analysts rated it as a sell.

Commonwealth Bank will report its financials on Wednesday. 

How to reap the dividends this reporting season

As for a dividend strategy, Gerrish suggested staggering the harvest.

“CBA is due to pay its next juicy morsel this month and BOQ in October,” he said.

“Conversely the other three members of the Big 4 don’t pay their next dividends until November, providing plenty of room to switch from a time perspective to garner future pay-outs if value opportunities arise.”

Among the other three major banks, he does have one standout that he would switch to grab those November dividends.

“National Australia Bank Ltd (ASX: NAB) would be our preferred choice at this stage.”

Investors are reminded that each stock needs to be held for a minimum of 45 consecutive days in order to claim franking credits from the tax office.

“The rule is designed to prevent franking credits to be claimed by share traders who hold shares for a short period of time and then sell as soon as they qualify for a dividend,” states Aston Accountants.

“The rule applies to all individual taxpayers, entities and SMSF.”

The post How to play ASX bank shares for dividends this reporting season: expert appeared first on The Motley Fool Australia.

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More reading

• CBA share price on watch after FY22 cash earnings jump to $9.6bn
• Is the NAB share price a buy following the bank’s latest update?
• 5 things to watch on the ASX 200 on Wednesday
• Why Block, CBA, Mesoblast, and NAB shares are dropping today
• NAB share price lags other ASX 200 banks following quarterly update

Motley Fool contributor Tony Yoo has positions in Macquarie Group Limited. 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 Macquarie Group 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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The A2 Milk Company Ltd (ASX: A2M) share price will be one to keep an eye out on Wednesday.

At yesterday’s market close, shares in the infant formula and fresh milk company finished at $5.11 apiece.

Let’s take a look at what was released to the market this morning.

A2 Milk suffers setback

In its statement, A2 Milk advised that the Food and Drug Administration (FDA) was deferring further consideration for an enforcement discretion to import infant milk formula (IMF) products into the United States.

The company also said it was informed by the International Dairy Foods Association that similar letters have been sent to all other pending enforcement discretion applicants.

It noted that the FDA was deferring any further review of all such applications at this time.

Earlier this month, A2 Milk shot down media speculation that suggested it was nearing approval from the FDA to sell IMF products into the US.

The news led the company’s shares to reach an intraday high of $5.08 on the day before closing at $4.90, up 7.93%.

In late May, A2 Milk rival, Bubs Australia Ltd (ASX: BUB) was granted FDA approval to ship 1.25 million tins of baby formula.

Other dairy companies have been lining up to get in on the action as the US relaxed its restrictions to import IMF products.

This comes after US consumers faced an infant formula shortage following potential contamination at one of its largest manufacturing plants.

A2 Milk share price snapshot

A2 Milk shares have gradually been sold off over the past 12 months on the back of weakened investor sentiment.

Its shares are down 13% for the period.

However, looking at year-to-date, A2 Milk shares have outperformed the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) – down 6% vs. down 17%, respectively.

A2 Milk commands a market capitalisation of roughly $3.80 billion.

The post A2 Milk share price on watch amid FDA update appeared first on The Motley Fool Australia.

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More reading

• Own A2 Milk shares? Here’s how the company is battling to rebuild lost daigou sales
• Here are the top 10 ASX 200 shares today
• Why A2 Milk, Qualitas, Telix, and Ventia shares are pushing higher today
• Here’s why the A2 Milk share price just popped then stopped
• Own A2 Milk shares? Here’s what to expect from its FY22 results

Motley Fool contributor Aaron Teboneras has positions in A2 Milk. 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 A2 Milk and BUBS AUST FPO. 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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This year looks like a good year to go hunting for ASX shares to buy in my opinion.

No one really knows what will happen next with share prices, the economy, or anything else of that nature.

However, as investors, it’s probably a good idea to buy shares when the prices are at a lower price rather than at a higher price. That may seem obvious. But, when uncertainty increases, some investors suddenly don’t want to buy assets at discounted prices.

But for me, it’s times like this that make it a good time to buy ASX shares. I have been putting money to work in some of my old favourites as well as some new names.

At the current prices, I think there are plenty of opportunities. In my opinion, these two are looking good after their declines in 2022.

VanEck Video Gaming and eSports ETF (ASX: ESPO)

I think this is one of the most interesting exchange-traded funds (ETFs) on the ASX. It aims to give investors exposure to the global video gaming and e-sports sector.

In this portfolio are names like Nvidia, Activision Blizzard, Advanced Micro Devices, Tencent, Nintendo, Bandai Namco, Electronic Arts and Take-Two Interactive Software.

One of the main things that attracts me to this ETF is the solid underlying revenue growth. According to VanEck, e-sports revenue has grown by an average of 28% per year since 2015. The wider video gaming sector has seen average annual revenue growth of 12% per annum since 2015.

VanEck said:

E-sports reflect the convergence of entertainment, video gaming, sports and media businesses. With an active, engaged and relatively young demographic, the stage is set for sustainable long-term growth.

Adore Beauty Group Ltd (ASX: ABY)

Adore Beauty is a leading ASX growth share in the beauty e-commerce space. It sells thousands of products from many different brands.

One of the attractions for me is the heavy fall of the Adore Beauty share price while revenue keeps growing. Since the beginning of 2022, Adore Beauty shares have dropped 65%. Yet, in the third quarter of FY22, Adore Beauty noted that its revenue was up 9% to $42.7 million, active customers was up 7% to 880,000, and returning customers increased 47%.

In my opinion, Adore Beauty’s revenue could be more defensive than some investors are giving it credit for.

Adore Beauty CEO Tennealle O’Shannessy pointed out:

Beauty, especially skincare, is unique within the broader retail market and is resilient to economic challenges. Our products are used daily by customers, who consider these items essential and frequently re-purchase. The nature of premium beauty means our customers spend more as they mature on the platform, with returning customers typically contributing more than 70% of total revenue.

The company’s app now accounts for more than 10% of revenue and continues to deliver “elevated” levels of engagement, conversion and average order values. I also think that its new private-label products could help the company’s long-term profit margins.

The ASX share operates in a large and growing $11 billion market. So, ongoing investment in the business can help it tap into this long growth runway.

The post Why I think it’s time to load up on these 2 ASX shares appeared first on The Motley Fool Australia.

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More reading

• 3 ETFs for ASX investors to buy right now
• Here are 2 ASX ETFs I would buy for 2022 and beyond
• 2 excellent ETFs for ASX investors in August
• 3 quality ETFs for ASX investors in July
• Why is the Adore Beauty share price up 22% this week?

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 Activision Blizzard, Advanced Micro Devices, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited and Electronic Arts. The Motley Fool Australia has recommended Activision Blizzard, Adore Beauty Group Limited, Nvidia, and VanEck Vectors ETF Trust – VanEck Vectors Video Gaming and eSports 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened 

Shares of electric-vehicle (EV) stocks were sinking today after a new report showed that Tesla‘s (NASDAQ: TSLA) vehicle deliveries in China tumbled 64% in July. Nio (NYSE: NIO) — which is based in China — may be reacting negatively to that news, along with new data that showed the company continues to lag behind its rival in China.

Additionally, Lucid Group (NASDAQ: LCID) may be losing some ground after Ford announced today that it’s raising the price of its F-150 Lightning pickup truck due to rising material costs. 

In the nascent EV industry, any dramatic news for one automaker can often affect the share price of other automotive companies, which appears to be the case today. As a result, Tesla was down 2.2%, Nio had fallen 4.6%, and Lucid was down 6.6% at the end of the trading day. 

So what 

News data released today by the China Passenger Car Association (CPCA) showed that Tesla’s July vehicle deliveries were 28,217, down significantly from 77,938 in June.  

Lucid investors are already on edge right now after the company had to raise its own vehicle prices beginning in June due to rising costs. Additionally, just last week, the company slashed its production guidance for the full year. Lucid now estimates it will produce between 6,000 to 7,000 vehicles this year, down from the previous guidance range of 12,000 to 14,000. 

While the CPCA didn’t mention why Tesla’s China sales fell, Tesla had been working on upgrading the plant during the month in order to boost production, according to Bloomberg. This could eventually help production increase by 33%. That didn’t seem to appease Tesla investors though, who aren’t ready to hear about any production delays in China after they’d seen lengthy shutdowns of Tesla’s Shanghai factory due to China’s strict zero-Covid policy. 

Nio investors appeared a bit jittery about the news, as well, but they may have been focusing on other CPCA data showing that rival BYD remains the uncontested EV leader in the country. BYD delivered 163,042 cars in July, while Nio delivered just 10,052.  

Finally, Lucid’s shares were likely reacting to the fact that Ford raised the price for its all-electric F-150 Lightning because of “significant material cost increases and other factors.” The price bump means that customers will pay between $6,000 to $8,500 more for the truck, depending on the model.

With another EV maker raising its prices, Lucid investors are likely taking this as a cue that the broader EV industry is feeling the effects of rising inflation and higher material costs. 

Now what 

EV investors have been on a rollercoaster ride lately after the Senate passed the Inflation Reduction Act. The new bill, which could be passed by the House and signed by President Biden as early as this week, provides expanded tax credits for both new and used EV purchases. 

While that news gave some EV stocks a temporary lift, today’s drop shows just how volatile these stocks are right now as investors try to assess the impact of inflation and rising material costs for the industry. All of this means that Tesla, Nio, and Lucid investors can likely expect more share-price swings in the near term.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why the Tesla share price sank today appeared first on The Motley Fool Australia.

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More reading

• Tesla shareholders approved a 3-for-1 stock split — is the stock a buy?
• Here’s why Tesla stock popped today
• Think you can’t afford to buy Tesla shares? Think again…
• Why Tesla and other EV stocks rocketed higher in July
• Why Tesla shares bounced ahead of its stock-split vote

Chris Neiger 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 Nio Inc. and Tesla. 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.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Megaport Ltd (ASX: MP1) share price soared on the back of the company’s FY22 results, but is it a buy?

The technology company’s share price surged 10% on Tuesday. What’s more, the Megaport share price has rocketed 37.4% in the past month.

So what’s the outlook for Megaport following the results?

What do analysts predict for Megaport?

UBS analysts have expressed optimism on Megaport’s FY22 earnings. In a recent note, UBS said the result “helps build [a] bridge to future accelerating growth”.

As The Motley Fool reported on Tuesday, Megaport reported a 40% lift in revenue in FY22. However, the net loss was $48.5 million, 12% better than the $55 million loss in FY21.

Megaport reported the total number of customers jumped 16% in FY22, while services sold lifted 26%.

In comments on Megaport’s results cited by The Australian, UBS said:

Good additional detail around cohort analysis, LTC/CAC, PartnerVantage training… strong ongoing growth in rev/customer within cohots, reducing levels of churn after two years within a cohort, and improving pipeline for PartnerVantage sales force.

LTC refers to loan to cost, while CAC relates to the customer acquisition cost. With regard to LTC and CAC, Megaport said in its results on Tuesday: “early days LTV to CAC reflective of meteoric growth in scale of reach (lower GM) and investment in customer acquisition in new markets”.

Megaport added:

Apparent slight drop in LTV to CAC reflects additional investment in sales in FY22 to stand up channel.

Megaport share price snapshot

The Megaport share price slumped 49.7% in the past year, while it has shed nearly 52% year to date.

For perspective, the benchmark S&P/ASX 200 Index (ASX: XJO) has lost 7% in the past year.

Megaport has a market capitalisation of more than $1.4 billion based on the current share price.

The post Is the Megaport share price a buy following the company’s latest results? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why Coronado Global, Lake, Megaport, and REA shares are storming higher
• Megaport share price rises as revenue lifts 40%
• 5 things to watch on the ASX 200 on Tuesday
• These are the 10 most shorted ASX shares

Motley Fool contributor Monica O’Shea 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 MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. 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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Due to the decarbonisation megatrend, many investors are no doubt interested in gaining exposure to the lithium industry.

But which lithium stocks should you consider buying? Two ASX lithium stocks that are rated as buys are listed below. Here’s what analysts are saying about them:

Allkem Ltd (ASX: AKE)

The first ASX lithium stock to consider is Allkem. It is one of the world’s largest lithium miners with projects spanning across Argentina, Australia, and North America. From these projects, the company is aiming to maintain a 10% share of global lithium supply over the long term.

According to a recent note out of Morgans, its analysts are bullish on Allkem and have an add rating and $16.72 price target on its shares. Based on the current Allkem share price of $12.05, this implies potential upside of 39% for investors over the next 12 months.

It commented:

AKE holds long lived brine assets that are well leveraged to the lithium carbonate price and Mt Cattlin looks to be highly profitable for its remaining life with high exposure to the spot market. Additionally the Naraha plant will give the company exposure to lithium hydroxide prices in addition to spodumene and carbonate. We believe that the strong cash flows we’re anticipating in FY23 will make the value proposition more compelling than the uncertainties of the lithium market.

Liontown Resources Limited (ASX: LTR)

Another ASX lithium stock that is rated highly is Liontown Resources. It is a lithium developer which owns the Kathleen Valley and Buldania projects in Western Australia.

A note out of Bell Potter reveals that its analysts have a speculative buy rating and $2.87 price target on the company’s shares. Based on the current Liontown share price of $1.70, this suggests potential upside of 69% for investors over the next 12 months.

Bell Potter commented:

LTR is fully funded for Kathleen Valley’s initial development capital where a definitive feasibility study outlined 658ktpa SC6 production and potential for conversion into 86ktpa lithium hydroxide. LTR is independent and in a strong strategic position in a market for lithium facing supply shortages.

The post Here are 2 ASX lithium stocks analysts rate as buys appeared first on The Motley Fool Australia.

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• Could this new development boost Allkem shares heading into 2023?
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Could this development further energise ASX lithium shares in FY23?
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has positions in Allkem Limited. 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 ASX 200 index is home to a large number of blue chip shares. Two that could be in the buy zone right now are listed below.

Here’s what brokers are saying about these ASX 200 shares:

BHP Group Ltd (ASX: BHP)

The first ASX 200 blue chip share for investors to look at is mining giant BHP. It owns a portfolio of world class operations across a range of commodities and geographies.

This week, the company announced that it wants to add to this portfolio with the acquisition of copper miner OZ Minerals Limited (ASX: OZL). And while this offer was swiftly rejected, it seems unlikely that the story ends here.

The team at Morgans was pleased with the news and believes it is consistent with the Big Australian’s strategy. In response, the broker retained its add rating with a $48.40 price target on the miner’s shares.

It commented:

If nothing else, this development should reduce any concern that BHP might have been considering a larger more transformative acquisition. There has been a consistent fear from some that history would repeat itself and BHP eventually become attracted to a +$100bn acquisition/merger at a high point in the cycle. Instead, BHP has remained on-strategy and focused.

REA Group Limited (ASX: REA)

Another ASX 200 blue chip share that is highly rated is REA Group. It is the dominant player in online real estate listings in the Australian market.

Earlier this week, the company released its full year results and revealed a 26% increase in revenue to $1.17 billion and a 25% jump in net profit to $408 million. This was underpinned by a whopping 124.1 million average monthly visits to its key realestate.com.au website.

This went down well with analysts at Goldman Sachs, which have reiterated their buy rating and $164.00 price target on its shares. It said:

Overall we thought the REA result, commentary and cash performance was positive. […] We remain Buy (on CL), with this result and positive yield outlook supporting our recent upgrade of REA.

The post 2 ASX 200 blue chip shares brokers rate as buys appeared first on The Motley Fool Australia.

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More reading

• 2 ‘high quality’ ASX shares now going for a discount: Elvest
• Here are the top 10 ASX 200 shares today
• What’s so good about copper anyway?
• Why Coronado Global, Lake, Megaport, and REA shares are storming higher
• What could another acquisition mean for BHP shares?

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 recommended REA Group 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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One of the most popular options for income investors on the Australian share market is the Telstra Corporation Ltd (ASX: TLS) dividend.

In light of this, readers may be curious where the telco giant’s dividend is heading in the coming years. Let’s take a look and see what analysts are saying.

Where is the Telstra dividend heading?

The good news for investors is that the Telstra dividend could be close to increasing for the first time in almost a decade. Though, it may be a little too soon to expect a dividend increase with the company’s upcoming full year results.

According to a note out of Goldman Sachs, its analysts are expecting Telstra to declare a fully franked final dividend of 8 cents per share this month. This will bring its full year dividend to a fully franked 16 cents per share, which is in line with what was paid a year earlier.

Based on the current Telstra share price of $4.03, this will mean a yield of approximately 4% for investors.

Next year, in FY 2023, Goldman expects the company to increase its dividend for the first time since 2014 and is forecasting a fully franked dividend of 17 cents per share. This represents a 4.2% dividend yield for any income investors buying shares at today’s price.

Pleasingly, the trend is expected to continue in FY 2024, with Goldman forecasting another increase in the Telstra dividend to 18 cents per share. This will mean a fully franked yield of approximately 4.5% for investors.

Is the Telstra share price good value?

Although Goldman Sachs sees value in the Telstra share price at the current level, it isn’t enough for a buy recommendation.

The broker currently has a neutral rating and $4.40 price target on the company’s shares. This implies a potential return of 9.1% over the next 12 months before dividends and over 13% including them.

The post Here’s the Telstra dividend forecast through to 2024 appeared first on The Motley Fool Australia.

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More reading

• ‘Exciting’ ASX 200 dividend share expected to deliver material returns: expert
• ‘Wouldn’t have been on my radar previously’: Why WAM likes Telstra shares right now
• Looking to buy Telstra shares? Here’s what to watch when the telco giant reports this week
• Own Telstra shares? Here’s what to expect from its FY22 results
• Road to retribution: Can the Telstra share price continue its upwards trajectory under a new CEO?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation 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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Rising interest rates are expected to bite both Australian consumers and businesses, causing an economic slowdown.

With this in mind, many experts are urging investors to buy “quality” companies.

Elvest portfolio managers Adrian Ezquerro and Jonathan Wilson told clients in a memo that they are nervous about financial projections revealed this month.

“The August reporting season will go some way to enlightening investors, and we suspect aggregate forecast earnings will be pared back further in the coming months,” read the memo.

“Nonetheless, we continue to selectively build positions in high quality companies at material discounts to assessed valuations.”

The Elvest team gave two examples of ASX shares it has been buying up recently:

‘Resilient in times of economic stress’

Lotteries reseller Jumbo Interactive Ltd (ASX: JIN) meets the “high quality” test because it operates in an evergreen industry.

“History suggests lotteries to be resilient in times of economic stress,” read the Elvest memo.

“While in more recent years, a significant increase in the penetration of internet ticket sales have created near perfect tailwinds for the digital sale of lottery tickets.” 

Jumbo Interactive has enjoyed consistently growing ticket sales — from $2.4 billion in 1990 to $7.2 billion in 2021.

The Elvest portfolio managers said conditions continue to be “fertile” for the company.

“Now embedded as a duopoly in the digital channel alongside Lottery Corporation Ltd (ASX: TLC), Jumbo Interactive also offers a substantial global growth opportunity from its software and managed services divisions.”

The Jumbo share price has dipped 24% year-to-date but has returned 431% over the past five years. It currently pays out a dividend yield of 2.75%.

Other analysts almost unanimously agree with the Elvest team, with five out of six surveyed on CMC Markets rating Jumbo Interactive as a strong buy.

The company will report its latest financials on 25 August.

True value of this business is hidden

The image of News Corporation (ASX: NWS) as a newspaper and media company “masks its true value” from casual investors, reckon the Elvest portfolio managers.

“Today, the business encompasses digital real estate services, subscription video services, news and information services and book publishing.”

While newspapers are a struggling industry, the reality is much of News Corp’s market cap is taken up by its holdings of non-news subsidiaries.

This means that the news business practically comes for free when you buy shares in News Corp.

“Much of News’ $14 billion market value is underwritten by its 61.4% stake in REA Group Limited (ASX: REA) and its 80% ownership of Move Inc,” read the Elvest memo.

“This values the balance of the business below 2 times forecast EBITDA, which totals more than US$1 billion.”

The company also has “a strong balance sheet“, enabling it to fund an array of growth options”. 

“Yet [it] trades on an attractive free cash flow yield of over 8%.”

Elvest’s faith in News Corp has already paid off.

The company, which is dual listed, reported its financials on Tuesday morning from the US. News Corp showed off its highest earnings ever, with net income almost doubling.

News Corp shares jumped 5.89% for the day to close Tuesday at $25.70.

The post 2 ‘high quality’ ASX shares now going for a discount: Elvest appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why Coronado Global, Lake, Megaport, and REA shares are storming higher
• News Corporation share price flies 6% higher on  FY22 earnings surge
• REA share price marches higher on record final FY22 dividend
• 5 things to watch on the ASX 200 on Tuesday

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 positions in and has recommended Jumbo Interactive Limited. The Motley Fool Australia has recommended Jumbo Interactive Limited and REA Group 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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