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.

If you follow Netflix Inc (NASDAQ: NFLX) you likely already know the company missed expected subscriber growth projections when it reported its latest earnings. Specifically, the streaming giant’s net addition of a little less than 4 million paying customers fell short of forecasts for 6.25 million new members. Some see this news as a sign that the pandemic-prompted swell of streaming sign-ups is all but over.

Largely lost in the noise of a membership shortfall, however, is that Netflix more than doubled its year-over-year profits. The first quarter’s bottom line of $1.7 billion is a 140% improvement on net income of $700 million earned during the first quarter of 2020.

So what’s the problem? The reason profits grew so dramatically appears to be the same reason subscriber growth was so poor. If this dynamic represents the new normal, it’s a hint that Netflix may have to choose strong profits or strong customer growth because it can’t have both.

Customers don’t just show up

For the majority of its existence, Netflix has faced no serious competition. Walt Disney Co (NYSE: DIS) only launched Disney+ in late 2019, and HBO Max from AT&T Inc (NYSE: T) wasn’t available until the middle of last year. Disney’s Hulu and Fox Corp.‘s ad-supported platform Tubi have been around longer, but have only become contenders within the past couple of years. And that’s just a sampling of new (or newly budding) streaming names.

Netflix hasn’t responded in earnest, however, opting to play more defense against the pandemic than it’s played offense against streaming newcomers. Namely, marketing spending has dwindled — a lot — since early 2020 rather than growing in step with revenue. Last quarter’s marketing outlay of $512 million was barely better than the year-ago figure of $504 million, and that $504 million was the second-lowest amount Netflix had spent on marketing in any quarter since the final quarter of 2017.

One can’t say with certainty the cause-and-effect relationship in play here is an absolute one. The company’s subscriber additions are being held up to tough comps, after all. In the first quarter of last year, Netflix picked up nearly 16 million new subscribers, and it added another 10 million in the second quarter of 2020. It’s arguable that anyone who wanted to subscribe to Netflix is already on board.

But there’s growing evidence that consumers are simply more responsive to other on-demand options despite Netflix’s dominance of the market.

Research outfit Kantar delivered the latest salvo in this argument, estimating HBO Max picked up more of last quarter’s new US streaming business than any other platform: 14.4% of new customers. Prime, from Amazon, won second place in terms of streaming subscriber additions. ViacomCBS‘s Paramount+ (formerly known as CBS All-Access) came in third with its 11.8% share last quarter, followed by Disney’s Disney+ and then its Hulu. Netflix was sixth-best in terms of new US customer growth, winning only 8.5% of the nation’s new on-demand business.

In a similar vein, Ampere Analysis suggests Netflix’s share of the US market fell from 29% to 20%.

This doesn’t necessarily point to subscriber losses. It does, however, make it clear that at least some new streaming customers are choosing a rival’s platform over Netflix.

Content spending was way down too

It’s not just cost-cutting on marketing that may ultimately be undermining Netflix’s dominance, either. The company spent relatively less on content, too, during Q1. The first quarter’s $3.9 billion cost of revenue (what it spent on content) is only 7% more than the year-ago figure even though revenue grew by an incredible 24%. The graphic below puts things in perspective. 

On the surface, it may seem irrelevant. The streaming giant still has a huge library of stuff to watch, after all.

It’s not that simple though. Not only does Netflix need more kinds of content to keep its now-bigger audience entertained, it needs more new content to do so. CFO Spence Neumann explained during a post-earnings conference call, “We also have a near-global shutdown in production which we’ve been ramping safely and at scale through much of last year and into this year, but it did push some key title launches into the back — kind of the back end of — of this year,” which he conceded “does create some noise” in terms of subscriber growth.

To this end, the company’s already assured investors it’s going to ramp content spending back up to $17 billion this year, a jump from 2019’s budget of $15 billion and on par with 2020’s pre-pandemic content budget of $17 billion.

In so doing though, last quarter’s gross margin of 46% is apt to be whittled back to a historical norm closer to 38%. This will dial back Q1’s operating income rate of near 27% of revenue to the company’s historical net operating profit margin in the high teens. In terms of dollars, these more normalized margin rates would have meant net operating income closer to $1.2 billion last quarter (or less) rather than the $1.7 billion worth of net operating income Netflix actually posted.

The bottom line

It’s possible that the first quarter’s weak subscriber growth is just the result of bad timing.

Possible, but unlikely. Other streaming services are adding more paying members with what appear to be more aggressive ad campaigns and — in some cases — more aggressive spending on content. For instance, AT&T’s WarnerMedia was willing to undermine box office ticket sales of its new $155 million flick Godzilla vs. Kong by offering it at no additional cost via HBO Max. Kantar says it picked up more new streaming subscribers in Q1 as a result.

Rather, Netflix may mostly be struggling with subscriber growth simply because it’s spending too little on the effort.

If that is indeed the case, don’t look for last quarter’s (or even last year’s) profit growth and profit-versus-expense profile to become the new norm. It’s the exception to the norm. Netflix has already told us it’s going to be spending more on content, but don’t be surprised if the company again ramps up marketing spending. That’s certainly what it should do anyway, given how competitive the streaming market has become in just the past year.

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

More reading

• Broker weighs in on the Redbubble (ASX:RBL) share price after its 20% dive
• Are Netflix’s woes a warning for ASX tech shares?
• Analyst sees Netflix falling 38% after earnings
• Netflix misses sub addition target, shares crash
• Earnings: 2 hot stocks to watch this week

James Brumley owns shares of AT&T. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Netflix, and Walt Disney and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon, Netflix, and Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Netflix doubled profits, but it can’t keep paying this price appeared first on The Motley Fool Australia.

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

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The COVID-19 pandemic might have pushed more Australians into the habit of shopping online, but there’s still one physical retailer that’s looking great for growth.

That’s according to Wilson Asset Management portfolio managers Matthew Haupt, Catriona Burns and Oscar Oberg.

In a memo to investors, the trio co-wrote that 3 of Wilson’s listed investment companies have held Universal Store Holdings Ltd (ASX: UNI) shares since their initial public offering (IPO) last November.

“Universal Store retails a curated range of third-party branded products, which equated [to] approximately 70% of FY20 revenue, supported by a range of customer-led and complementary private label products,” the note said.

“The company reported a record 6 months in its FY21 maiden interim result, with underlying earnings before interest and tax growing 69% to $31.5 million, surpassing guidance given in January 2021 of $30 million to $31 million.”

The retailer runs 65 casual clothing stores across Australia and New Zealand. The chain specifically targets the 16 to 35-year-old age bracket.

Universal shares were flat on Friday, closing at the same price as Thursday on $7.11. They started the year at $5.51.

Universal will soar as the COVID-19 vaccine rolls out

The Wilson portfolio managers said they had reduced exposure to e-commerce companies that benefitted last year from pandemic-led consumer habits.

But Universal is still held and remains a favourite.

“We believe retailers leveraged to increasing foot traffic through shopping centres will benefit as the vaccine [rolls out] nationally,” the Wilson memo read.

“We are positive on the outlook for growth, as the company has a net cash balance sheet of $22.5 million, with strong opportunities for store network growth and a product range expected to benefit from the return of occasions and triggers for wardrobe renewal as Australia moves toward post-coronavirus normal.”

Wilson’s flagship investment vehicle WAM Capital Limited (ASX: WAM), as well as WAM Research Limited (ASX: WAX) and WAM Microcap Ltd (ASX: WMI), have been shareholders since Universal’s float 5 months ago.

Universal sold for $3.80 during its IPO, so it has already returned 87% for those funds.

Last week, Morgans also rated the retailer’s stock as a buy, slapping a price target of $8.37 on it. That would be another tidy 18% return on the current price.

More reading

• 2 rapidly growing small cap ASX shares to watch
• Top fund manager names these 2 ASX shares as buys
• Wilson Asset Management (WAM) thinks these 2 ASX shares are a buy
• Wilson Asset Management to launch new LIC
• Here’s why SEEK (ASX:SEK) and these ASX shares are at 52-week highs

Motley Fool contributor Tony Yoo owns shares of WAM Capital Limited. 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 Bruce Jackson.

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The US housing market is about to explode, and there is one ASX share that will give Australian investors exposure.

That’s according to Firetrail Investments portfolio manager Ramoun Lazar, who said that last year’s government and Federal Reserve COVID-19 stimuli lit a fire under the real estate market.

“That really got their housing market started and [gained] some significant momentum through the second half of the calendar year,” he said in a Firetrail video.

“That momentum was being driven by millennials coming back into the market — so first-home buyers… People in their mid-20s to around 40 years of age who haven’t been active in that US housing market for some time.”

If the record-low mortgage interest rates can stick around, that momentum will continue over the next 12 to 24 months, according to Lazar.

The pandemic in the US also compelled existing homeowners to spend up.

“What we saw in the US was an initial uptick in do it yourself activity. So people were just doing small repair jobs around the home, making their homes more presentable, more livable.”

40 years: average age of an American house

Lazar pointed out that the typical US residential home is about 40 years old.

“So quite an old footprint for the US housing stock. As that millennial cohort start to buy houses, get married, have a family, what we’re going to see is an increased level of repair and remodel activity,” he said.

“And that’s going to underpin spend in that renovation sector of the market or segment of the market.”

There will also be a driver for new houses.

“We estimate the US needs about 1.5 million new homes every year, just to stand still,” said Lazar.

“Over the last 10 years, we’ve seen housing starts materially below that one and a half million… The reason for that is after the 2008 housing-led financial crisis, that millennial cohort was very slow in embracing homeownership.”

But now that the government and federal reserve stimulus is in people’s pockets, construction activity will ramp up.

ASX share that doubles its addressable market

Remarkably, there is an ASX share that’s perfectly placed to take advantage of this housing frenzy in the US.

Construction materials maker James Hardie Industries plc (ASX: JHX) is ready to double its total addressable market, according to Lazar.

“The real exciting factor we think over the next 2, 3, 5 years for James Hardie is the new product portfolio that they’re about to introduce into that US housing market,” he said.

“Traditionally, James Hardie has targeted that wood look market… but it’s about to release a portfolio of products in the US that will target other segments of the market, such as brick and stucco. Stucco’s known [in Australia] as cement render, which is a very popular exterior siding product in the US.”

If James Hardie’s execution takes proper advantage of the real estate boom, the world is their oyster.

“We think there are significant earnings and valuation upside potential in James Hardie from that new product portfolio.”

Lazar was also excited that James Hardie’s margins in the US seem to be growing.

“We’ve several periods now of margin expansion in their North American business, and we think that’s going to continue. And what that’s been driven by is a lot of self-help initiatives around manufacturing,” he said.

“What that’s underpinned is margins growing close to 30% in the last couple of quarters. Historically Hardies targets between 20% to 25% margin. We think that uplift is sustainable.”

The James Hardie share price was up 0.91% on Friday, to trade at $44.34 at market close. It started this year at $38.74.

More reading

• Top broker picks ASX shares next in line for a profit upgrade
• BlueScope (ASX: BSL) share price could get cut of Biden’s US$3tn boost

Motley Fool contributor Tony Yoo 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 Bruce Jackson.

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The AGL Energy Limited (ASX: AGL) share price has been under pressure lately. Shares in the Aussie energy group fell 1.0% lower on Friday to close at $8.71 per share.

That’s a new 52-week low for the electricity generator and retailer or ‘gentailer’, so what does May 2021 look like from here?

Why the AGL Energy share price is at a 52-week low

April was a busy month for the Aussie energy company. AGL announced on 30 March that it intended to create a demerger of sorts to create “two leading energy businesses”.

That plan was unveiled by AGL managing director and CEO, Brett Redman. Mr Redman said there will be a structural separation of the existing group into:

• “New AGL”, Australia’s largest multi-product energy retailer focused on low carbon; and
• “PrimeCo”, Australia’s largest electricity generator.

The proposed structural separation was designed to give each business more freedom and further drill down into key areas of the Aussie electricity market.

That was all well and good, but the plan has changed. Mr Redman abruptly announced his resignation on 22 April and caused a rapid reshuffle at AGL during the month.

AGL chair Graeme Hunt will become interim CEO and managing director, while non-executive director Peter Botten has been appointed chair.

News of the leadership change saw the AGL share price fall lower in April. The announcement took many in the market by surprise given Mr Redman’s short tenure and structural plans. The Aussie energy company has commenced a search for its next CEO willing to commit to the transition phase.

What else is happening for AGL?

Leadership changes weren’t the only thing moving the AGL share price in April. AGL announced that its joint venture with Mercury NZ Ltd (ASX: MCY), Powering Australian Renewables (PowerAR), had increased its offer price to acquire Tilt Renewables Ltd (ASX: TLT).

The revised NZ$8.10 per share or NZ$3.07 billion offer came after Canadian pension fund CDPQ had lobbed a late competing offer for the Kiwi renewables group. That was ultimately enough to clinch the deal for Tilt over and above CDPQ.

There have also been concerns about testing domestic electricity and gas supply and demand issues. Market commentators and regulators continue to watch the market to ensure ongoing electricity security, particularly in the retail market.

Foolish takeaway

The AGL share price has been under pressure in April. Shares in the Aussie energy company are sitting at a 52-week low prior to Monday’s open as the latest CEO departure makes investors wary.

More reading

• What’s been happening with ASX renewable energy shares lately?
• History is on the side of the battered AMP (ASX:AMP) share price as it plans its demerger
• AGL (ASX:AGL) share price at 17-year low, dividend hits 9.2%
• The AGL Energy (ASX:AGL) share price falls as CEO steps down
• Why the Mercury (ASX:MCY) share price is on watch

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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Coles Group Ltd (ASX: COL) share price will be one to watch this week when it releases its third quarter update.

Ahead of the release, I thought I would take a look to see what is expected from the supermarket giant.

What is the market expecting from Coles?

According to a note out of Goldman Sachs, its analysts note that the supermarket industry is entering an “interesting phase”. This is due to it cycling through the COVID-19 pantry stocking boom late in the third quarter of FY 2020.

In fact, according to the Australian Bureau of Statistics, supermarket and grocery sales grew 24.8% in March 2020. As a result, Goldman expects both Coles and rival Woolworths Group Ltd (ASX: WOW) to have seen comparable sales decline notably during March. Particularly given recent data out of National Australia Bank Ltd (ASX: NAB).

The broker commented: “NAB reported cashless retail sales in the Supermarket and grocery segment to have been down c. -14% in March 2020. By comparison, our comparable growth estimate for COL implies March 2021 trading at -14.5% assuming that the early quarter trends continued into end of Feb 2021. Similarly, for WOW our estimates imply a comparable sales decline of c. -13% for March 2021.”

What does Goldman expect Coles to report?

Goldman expects Coles to report a 3% decline in comparable food sales for the quarter but a 2% increase in liquor sales.

This is expected to lead to total sales of $9,039.6 million, comprising food sales of $7,960.4 million and liquor sales of $802.5 million.

Is the Coles share price in the buy zone?

Despite the softer trading, Goldman Sachs remains positive and believes the Coles share price is in the buy zone.

It commented: “While sales are expected to be volatile, we continue to believe that industry profitability will be manageable over CY21 and believe the current market concerns over a price war in the sector are overstated.”

Goldman has therefore retained its buy rating and $20.70 price target on its shares. Based on the current Coles share price, this represents potential upside of almost 32%.

More reading

• 3 ASX dividend shares with fully franked yields over 5% today
• 2 growing ASX dividend shares for income investors
• Wesfarmers’ (ASX:WES) Bunnings open to hosting COVID vaccine hubs
• Coles (ASX:COL) share price rises on “supercharged” renewable targets
• Why the Australian Primary Hemp (ASX:APH) share price is up 5%

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Commonwealth Bank of Australia (ASX: CBA) share price edged 0.3% higher on Friday to close at a new 52-week high. Shares in Australia’s largest bank finished the day at $89.39 per share with a $158.6 billion market capitalisation.

This caps off another strong month of trade for the ASX bank share. The CBA share price has climbed 3.8% higher in April as we approach the end of the month. So, what’s pushing the Aussie bank’s valuation higher in 2021?

Why the CBA share price is hitting new heights

2020 was a remarkable period for ASX bank shares and CBA was no exception. Shares in the Aussie bank were smashed in the March bear market as the coronavirus pandemic took hold. 

However, we’ve seen a consistent recovery in bank valuations since late last year. The CBA share price is now up 29.5% since the start of November while the S&P/ASX 200 Index (ASX: XJO) has climbed 19.1%.

Favourable conditions including a strong housing market have helped maintain consistent borrowing demand. The banks have been able to write significant business in recent months as the Aussie housing market has heated up, particularly in major cities.

Government stimulus measures and central bank interventions to drive down lending rates have also been good for the banks. That has allowed them to access cheaper funding and maintain liquidity in Aussie credit.

Another factor has been the continual economic recovery since mid-last year. Stronger jobs and retail numbers have helped increase confidence in an economic bounce back from COVID-19.

As a result, earnings have been strong and the CBA share price has climbed to a new 52-week high. That’s despite a couple of recent hiccups including a deceptive conduct fine and a big four bank class action.

Foolish takeaway

The big four bank shares have been strong performers to start the year. The CBA share price has jumped to a new 52-week high as at Friday’s close and it will be interesting to see how it performs in May.

More reading

• Is the CBA (ASX:CBA) share price a buy for a recovery of dividends?
• Top brokers name 3 ASX shares to sell next week
• Can Commonwealth Bank (ASX:CBA) share price beat its record in 2021?
• Aussie adds digital home loans in an effort to keep up with the big four
• Aussie investors snapped up Coinbase (NASDAQ:COIN) shares last week

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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Friday the Telstra Corporation Ltd (ASX: TLS) share price pushed higher after it announced a $277 million investment in 5G spectrum.

The telco giant expects this investment to further extend its leadership in 5G now and into the future.

Was this a good move by Telstra?

This morning analysts at Goldman Sachs gave their verdict on this investment and the one that rival TPG Telecom Ltd (ASX: TPG) made in the same auction.

In respect to Telstra, Goldman was pleased with its investment, which was broadly in line with its expectations. However, TPG’s investment was smaller than the broker was expecting.

It commented: “TLS secured 1,000MHz (in-line with GSe, auction limit), TPG secured a smaller amount than expected, with 400MHz across Melbourne/Sydney/Perth and 600MHz across other geographies (GSe 700MHz), while Optus secured 800MHz nationally excl. Margaret River/Hobart (600MHz).“

As for pricing, the broker notes that prices per Mhz were broadly in line with expectations.

What was Goldman’s overall thoughts?

Overall, Goldman Sachs believes Telstra did better than TPG from the auction and is now in a position to grow its fixed wireless business in the coming years.

It said: “We believe TPG’s lower than expected share of the mmWave spectrum (especially underweight Syd/Melb) could limit overall capacity on their fixed wireless networks (launching in 1H21), which we see as somewhat surprising given we believe it is a key focus. While for Telstra, the outcome is broadly as expected; we forecast Fixed Wireless to grow to a meaningful level for TLS (>10% Fixed wireless penetration of broadband subs by FY24), noting their Fixed Wireless product launch is expected in coming months.”

In light of this, the broker has retained its buy rating and $4.00 price target on the Telstra share price and neutral rating and $7.10 price target on the TPG share price.

More reading

• What’s next for the Telstra (ASX:TLS) share price?
• 2 ASX dividend shares with generous yields
• ASX 200 finishes flat, Kogan drops, Accent jumps
• What’s with the Telstra (ASX:TLS) share price and other telcos today?
• History is on the side of the battered AMP (ASX:AMP) share price as it plans its demerger

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you’re on the lookout for growth shares to add to your portfolio, then you may want to look at the two listed below.

Here’s why these ASX shares could be good additions right now:

REA Group Limited (ASX: REA)

The first ASX growth share to look at is REA Group. It is the dominant player in real estate listings in the Australian market with its realestate.com.au website.

REA Group has been (successfully) battling difficult trading conditions over recent years caused by a housing market downturn and COVID-19. However, those tough trading conditions have now eased and the housing market is booming.

This is expected to lead to a significant increase in listings over the coming years. Which, combined with cost cutting, price increases, and new revenue streams, could support solid earnings growth.

Macquarie is a fan of REA Group. Its analysts currently have an outperform rating and $171.70 price target on its shares.

Xero Limited (ASX: XRO)

Another ASX growth share to look at is this leading cloud-based business and accounting software platform provider.

Due to the quality and stickiness of its platform and its international expansion, Xero has been growing both its customer numbers and subscription revenues at a very strong rate over the last few years.

Positively, this has continued in FY 2021 despite many small businesses struggling during the pandemic.

For example, during the first half of FY 2021, Xero’s subscriber numbers increased to 2.45 million, underpinning a 21% increase in operating revenue to NZ$409.8 million.

The good news is that while these are large numbers, they are still only a small portion of its addressable market. Analysts at Goldman Sachs believe Xero can triple its subscriptions to 7.4 million by 2030.

Furthermore, if Xero can successfully broaden and monetise its app ecosystem and expand into new geographies, Goldman believes it would open a further NZ$62 billion in total addressable market (TAM). This is on top of its core TAM of NZ$14 billion across key markets.

The broker currently has a buy rating and $153.00 price target on its shares.

More reading

• 2 excellent ASX 200 blue chip shares to buy
• How $20,000 turns into $250,000 in 10 years with ASX shares
• 2 of the best ASX 200 shares according to analysts
• Broker tips REA Group (ASX:REA) share price to shoot higher from here
• 2 five-star ASX 200 shares that are rated very highly

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 Xero. 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 Bruce Jackson.

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There are a group of ASX shares that keep growing the dividend every year, including through the difficult COVID-19 year.

It can be useful to know that there are businesses that aim to increase their shareholder payout every year. Particularly in this world of limited income growth. 

These three ASX shares have been steadily growing the dividend for multiple years:

Charter Hall Long WALE REIT (ASX: CLW)

This is a real estate investment trust (REIT) which owns a high-quality portfolio of properties with a long weighted average lease expiry (WALE). It has increased its distribution in each of the last few years.

The ASX dividend share looks to pay out 100% of its operating profit each year, which helps keep it at a relatively high dividend yield. At the moment the FY21 yield is expected to be at least 5.9% based on management’s guidance.

It has high-quality tenants like Telstra Corporation Ltd (ASX: TLS), Australian government entities, BP and Woolworths Group Ltd (ASX: WOW).

Charter Hall Long WALE REIT has been steadily acquiring more properties that have long-term rental agreements. The WALE at 31 December 2020 was 14.1 years, giving the business good rental visibility.

The REIT is currently rated as a buy by Morgan Stanley, with a price target of $5.35.

APA Group (ASX: APA)

APA is one of the largest infrastructure businesses on the ASX. It owns large gas pipeline networks around Australia. It also has investments in gas storage, gas-powered energy generation and renewable energy.

The ASX dividend share has been growing its distribution in consecutive years going back to before the GFC.

It funds its distribution from its operating cashflow, which is steadily growing as the business finishes more projects. In the last few months it has announced a couple of projects in Western Australian which will unlock further cashflow growth.

In the coming months, APA may be able to announce an acquisition or opportunity in the US. It has been looking for growth ideas there for quite a while. COVID-19 has delayed that search.

At the current APA share price, it has a distribution yield of 5%.

Bapcor Ltd (ASX: BAP)

Bapcor is an auto parts business, it says it’s the leader in Australasia.

The ASX dividend share has managed to grow its dividend every year since it started paying one several years ago.

Car parts are a pretty defensive sector and the demand has steadily increased over time. Things are booming right now with all of the impacts of COVID-19 and Bapcor is really seeing profit soar across its diverse array of businesses.

FY21 half-year pro flrma net profit after tax (NPAT) grew by 54% to $70.2 million, whilst pro forma earnings per share (EPS) grew by 28.9% to 20.7 cents.

Thanks to the profit growth and the continued strong performance into the second half of the financial year, the Bapcor board decided to increase the interim dividend by a further 12.5% to 9 cents.

At the current Bapcor share price it has a grossed-up dividend yield of 3.2%.

More reading

• Brokers think these shares can outperform the ASX 200
• 2 compelling ASX 200 shares that should be in your portfolio
• Why brokers think these 3 top performing ASX 200 shares can beat the market
• 2 high-yielding ASX 200 dividend shares
• 4 reliable ASX dividend shares to buy for income

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor and Telstra Limited. The Motley Fool Australia owns shares of APA Group and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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According to the latest Westpac Banking Corp (ASX: WBC) weekly economic report, the banking giant continue to expect the cash rate to remain on hold for some time to come.

In light of this, the interest rates on offer with savings accounts and term deposits are likely to remain at significantly low level for the next few years at least.

But don’t let that hold you back from generating a decent passive income. Listed below are two ASX dividend shares that offer investors attractive yields.

Here’s what you need to know about them:

Aventus Group (ASX: AVN)

The first dividend share to look at is Aventus. It is Australia’s largest fully integrated owner, manager, and developer of large format retail centres.

Thanks to the quality of its tenancies and its exposure to everyday needs and national retailers, Aventus has been able to collect rent largely as normal during the pandemic. This has led to the company reporting both revenue and profit growth during the first half of FY 2021.

Goldman Sachs was pleased with its performance and appears to believe more of the same is coming in the future.

It currently has a buy rating and $3.04 price target on its shares and is forecasting a ~16.6 cents per share distribution this year. Based on the current Aventus share price of $2.83, this represents a 5.9% yield.

Rural Funds Group (ASX: RFF)

Another ASX dividend share to look at is Rural Funds. It is the owner of a portfolio of high quality Australian agricultural assets that are leased to experienced operators.

Like Aventus, it has been on form in FY 2021. In February  Rural Funds released its half year results and revealed adjusted funds from operations (AFFO) per unit of 6.6 cents. This means it is on track to achieve its full year forecast.

It also revealed that its ultra-long weighted average lease expiry (WALE) metric had increased further. It was up from 10.9 years to 11.1 years over the last six months.

Another positive was that management reaffirmed its FY 2021 distribution guidance of 11.28 cents per share and unveiled its FY 2022 guidance of 11.73 cents per share.

Based on the current Rural Funds share price of $2.38, this will mean yields of 4.7% and 4.9%, respectively.

More reading

• Is the CBA (ASX:CBA) share price a buy for a recovery of dividends?
• Top brokers name 3 ASX dividend shares to buy today
• Top brokers name 3 ASX shares to buy today
• Westpac, ANZ, CBA share prices dip after class action for ‘junk’ insurance
• ANZ Bank’s (ASX:ANZ) profit result could get an extra boost: Macquarie

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia has recommended AVENTUS RE UNIT. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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