The pool of reliable high-yield dividend paying stocks is shrinking!

It’s income investors who depend on regular distributions from their ASX share portfolio who are the biggest losers from the coronavirus pandemic.

You can still find stocks generous defensive dividends if you cared to look, and I think these stocks will outperform the S&P/ASX 200 Index (Index:^AXJO) due to their scarcity.

Growth beating income

It’s easier to find stocks with good growth potential despite COVID-19 than dependable dividend paymasters, in my view.

Look at the tech sector in the US and Australia. The likes of Amazon.com, Inc. (NASDAQ: AMZN) and Afterpay Ltd (ASX: APT) surged to record highs recently.

Meanwhile, the list of ASX stocks suspending or lowering their dividends is growing. We don’t have to mention the big banks like Westpac Banking Corp (ASX: WBC) or Australia and New Zealand Banking GrpLtd (ASX: ANZ). The big hit they took to profits forced them to postpone paying an interim dividend.

Even stocks like CSR Limited (ASX: CSR) which delivered a much better than expected profit result is erring on the side of caution and suspending its payout.

I am not suggesting that turning into a scrooge as we face off what is probably the worst recession in living memory is a bad idea. But some stocks are going from strength to strength, and are offering up an enticing dividend that’s hard to ignore.

Rock solid dividend

One such candidate is iron ore miner BHP Group Ltd (ASX: BHP). I’ve long been overweight on the stock for this reason, and UBS just upgraded the stock to “buy”.

“In our view, BHP is in a strong position with gearing at 17% and net debt of US$12bn,” said the broker.

“This should enable BHP to continue to return surplus cash to shareholders at a time when other more traditional dividend-paying stocks are not.”

BHP is forecast to deliver at least a 5% yield before franking credits.

Perfect package

Another stock that is proving its dividend mantle is AMCOR PLC/IDR UNRESTR (ASX: AMC). The global packaging giant released its quarterly results yesterday, which I believed was a cracker.

JP Morgan shares this view and describes the stock as its top pick in the sector. The highlight was the cost control for Amcor’s Flexibles business (soft plastic packaging).

“We believe that AMC has ample opportunity to grow ahead of peers in the years ahead due to Bemis synergies, efforts on sustainability, further M&A or buy-backs,” said the broker.

“The primary concern we hear from investors relates to top line performance, but if 3Q20 trends can be sustained over the medium term (as management has suggested), we would expect to see a multiple re-rating.”

The stock is yielding around 5% and there’s scope for dividend increases, in my view.

More reading

• Why CBA, CSR, Fortescue, & Northern Star shares are pushing higher
• 2 quality ASX shares to buy for long-term growth
• 3 top ASX 200 shares you can buy on sale today
• Why diversification is important and how to diversify your portfolio with ASX shares
• 3 ASX 200 value plays for an economy hell-bent on recovery

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors.

Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, BHP Billiton Limited, and Westpac Banking. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon 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 Amcor Limited. 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.

The post Safe dividend stocks to buy today for the COVID-19 world appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/35Ww5QJ

Looking for ASX shares with strong long-term growth potential?

I believe that the following 2 ASX shares are worth considering, and falls in their share prices over the past few months add to their appeal.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Some of our leading companies on the S&P/ASX 200 Index (ASX: XJO) that are normally viewed as strong and consistent dividend payers have either suspended or reduced their next dividend payments this year. This includes the likes of Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ), and National Australia Bank Ltd. (ASX: NAB). However, there are so far no indications that ‘Soul Patts’ will follow down this path.

Soul Patts currently offers an attractive fully franked grossed-up dividend yield of around 4.7% and has increased its dividend every year since 2000. The group keeps a meaningful amount of cash on its balance sheet and this cash can be used as a buffer in difficult operating times. Soul Patts funds its dividends from its net regular cashflow and its next dividend is expected to be similar to the prior year for FY 2020.

This strong balance sheet also places it in an ideal position to capitalise on any worthwhile investment opportunities if they suddenly arise, which is one of the reasons why I think Soul Patts has strong long-term growth potential. These growth prospects are also supported by its excellent management team and strong diversification across a broad range of industries.

Blackmores Limited (ASX: BKL)

There is no doubt that Blackmores’ recent financial performance has been somewhat disappointing.

In its most recent half-year results back in February, Blackmores revealed a 20% revenue decline in its Australia and New Zealand segment and the company’s China segment saw revenue drop by 6%. However, on a more positive note, the company does now appear to be getting its business back on track again after its entry strategy into China, in particular, has struggled in recent times.

Blackmores has put in place plans to strengthen its Australian business as it realigns its overall business strategy, which includes plans to further extend its investments into China. The company also plans an increased focus on the Indonesian market and aims to enter the Indian market within the next 12 months.

Blackmores’ management has also reported the coronavirus pandemic has resulted in a spike in demand for vitamin C and other immunity products both in Australia and internationally.

I believe that the coronavirus pandemic could potentially even change the mindset of some consumers to the benefit of supplements, leading to higher demand in the years ahead.

More reading

• Safe dividend stocks to buy today for the COVID-19 world
• 3 top ASX 200 shares you can buy on sale today
• 3 ASX 200 value plays for an economy hell-bent on recovery
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 drops over 1% at the market close

Motley Fool contributor Phil Harpur owns shares of Australia & New Zealand Banking Group Limited, Blackmores Limited, and Westpac Banking. The Motley Fool Australia owns shares of and has recommended Blackmores Limited and Washington H. Soul Pattinson and Company 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 2 quality ASX shares to buy for long-term growth appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3dGrdSu

The REA Group Limited (ASX: REA) share price has been a strong performer over the last seven weeks.

Since dropping to a 52-week low of $62.05 around seven weeks ago, the property listings company’s shares have zoomed approximately 45% higher.

Is it too late to invest?

While REA Group is far from the bargain buy that it was in March, I still see a lot of value in its shares at the current level for long term-focused investors.

I continue to be very impressed with the resilience of its business and the way it can generate earnings growth during very tough trading conditions.

For example, last week REA Group released its third quarter update and revealed a 1% increase in revenue to $199.8 million and an 8% lift in quarterly EBITDA to $119.6 million. This was despite it dealing with a 7% decline in national residential listings during the three months.

And while things are going to be tougher in the current quarter, the company is attempting to offset this with a 20% reduction in operating costs.

Overall, when trading conditions improve, and they will, I believe REA Group will be well-positioned to accelerate its growth again.

Goldman Sachs rates REA Group as a buy.

One broker which agrees that REA Group is a buy is Goldman Sachs. This morning it retained its buy rating and lifted its price target to $107.00. This implies potential upside of approximately 18% over the next 12 months.

It lifted its price target after upgrading its earnings forecasts for the company.

The broker explained: “Given our increased confidence on the outlook for property listings in Australia, given April numbers that were well ahead of our expectations, and a relaxation of auction/open home restrictions in parts of Australia, we see less risk around our listings forecasts.”

Goldman is forecasting listings growth of 12% in FY 2021 and then 8% in FY 2022.

“As a result, we revise higher the multiple we ascribe to REA Australia and Domain Digital assets by 1X, with REA increasing to 25X and DHG to 19X.”

REA Group remains it preferred option in the space. It has held firm with its neutral rating for Domain Holdings Australia Ltd (ASX: DHG) and has a $2.70 price target on its shares.

More reading

• How Westpac could be about to send house prices tumbling
• 5 things to watch on the ASX 200 on Wednesday
• Leading brokers name 3 ASX shares to sell today
• Is the REA Group share price a buy?
• The latest ASX shares to be downgraded by top brokers

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.

The post Leading broker tips REA Group shares as a buy appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3dJa0In