If you’re looking to bolster your portfolio with some growth shares, then you might want to take a look at the ones listed below.

Here’s why these quality ASX growth shares have been tipped as ones to buy right now:

Altium Limited (ASX: ALU)

The first ASX growth share to look at is Altium. It is the printed circuit board (PCB) design software provider behind the popular Altium Designer platform. Over the last few years, Altium has earned itself a leading position in a growing electronic design market.

But management isn’t settling for that and is now aiming to dominate this market with its cloud-based Altium 365 product. And while the short term will be tough because of the COVID headwinds it is facing, the future remains very bright. This is thanks to the proliferation of electronic devices globally, which is driving demand for specialist design software.

Analysts at Credit Suisse are positive on its future. The broker currently has an outperform rating and $35.00 price target on Altium’s shares.

IDP Education Ltd (ASX: IEL)

Another growth share to look at is IDP Education. It is a provider of international student placement and English language testing services. The company is also co-owner of the high stakes language test, IELTS. It has been operating for almost 50 years and has offices in over 30 countries.

Given how international student travel has come to a standstill, IDP Education has been hit hard by the pandemic. However, the company has a very strong balance sheet, which appears to have put it in a strong position to win market share once the crisis passes.

Analysts at Morgans are fans of the company and currently have an add rating and $25.09 price target on its shares. They believe that IDP Education is well placed for growth once trading conditions return to normal.

More reading

• 2 ASX dividend shares offering big yields today
• 3 compelling ASX tech shares to buy
• 2 fantastic ASX shares to buy this month
• ASX 200 Weekly Wrap: Reality (and GameStop) finally hits ASX
• 2 quality SaaS ASX shares to buy in February 2021

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 and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Idp Education Pty Ltd. 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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There are some ASX shares that a number of brokers like and have rated as ‘buys’

It can be quite hard to find good businesses that are trading at a good price. One investor might say that BHP Group Ltd (ASX: BHP) is a good buy, whilst another might say that Woolworths Group Ltd (ASX: WOW) is the share to buy.

Brokers are constantly looking at businesses and share prices, thinking about what would be a good investment. There are various brokers out there like Bell Potter, Macquarie Group Ltd (ASX: MQG) and UBS that provide different recommendations about shares.  

With that in mind, these ASX shares are liked by more than one broker. Of course, this still isn’t a guarantee of success – they could all be herding together.

Sonic Healthcare Ltd (ASX: SHL)

Sonic Healthcare is a global pathology business that’s currently involved in testing for COVID-19. It says that it has a pivotal role.

The ASX share is currently liked by at least four brokers.

It has operations across the world in North America, Europe and Australia. The northern hemisphere is/has been going through a second wave of the pandemic, leading to record testing in Europe.

Sonic is a market leader or major player across those markets. It’s a market leader in Australia, Germany UK and Switzerland. It’s a major player in Belgium and the USA.

In FY20 it grew revenue by 11% and underlying net profit increased by 7%.

The ASX share’s base laboratory business revenue (excluding COVID-19 testing) is up on prior levels in most countries, with negative but improving growth in the USA and UK. Strong COVID-19 testing volume is on top of this.

In a trading update, Sonic Healthcare said that its revenue was up 29% in the first quarter of FY21 to $2.1 billion and its earnings before interest, tax, depreciation and amortisation (EBITDA) went up 71% to $580 million.

In the AGM update it revealed that its October 2020 revenue was 33% higher than October 2019.

Brokers like Morgan Stanley thinks that the elevated levels of COVID-19 testing will more than offset any headwinds related to Sonic’s base pathology business.  

Audinate Group Ltd (ASX: AD8)

Audinate owns the Dante platform, which distributes audio signals across computer networks. The company boasts about being the lead supplier of digital and audio video networking for the professional AV industry.

The ASX share is liked by at least two brokers.

Brokers such as UBS said that Audinate is recovering better than expected, which the broker thought was impressive considering the difficult operating environment that it’s currently operating in.

Despite the stronger Australian dollar, UBS thinks the Audinate growth will be stronger than any headwinds being presented.

For the first half of FY21, Audinate made US$11.1 million of revenue which was a 19.3% increase compared to the second half of FY20 and in line with the first half of FY20. This translated to $15.4 million in Australian dollar terms.

At the time of the FY21 trading update, Audinate CEO Aidan Williams said: “Our first half revenue result is pleasing, yet we remain cautious of the near-term economic uncertainty associated with the ongoing impacts of COVID-19 around the world. However, our strong balance sheet has enabled us to remain focused on our medium-term strategic priorities.”

More reading

• 2 of the best ASX dividend shares to buy today
• 2 COVID-19 amplified ASX shares to buy
• 2 buy-rated small cap ASX shares with strong growth potential
• 3 ASX 200 shares that keep growing their dividends
• Leading brokers name 3 ASX shares to buy today

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended AUDINATEGL FPO and Sonic Healthcare 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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Although the Reserve Bank didn’t cut rates last week, it hasn’t stopped the banks from cutting savings rates.

Fortunately, even though the market has rallied strongly in recent months, there are still plenty of dividend shares offering generous yields. Here are two to take a closer look at:

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.

At the last count, the company owned a total of 20 centres with 536,000m2 in gross leasable area and 593 quality tenancies. Importantly, from these tenancies, national retailers make up ~87% of the total portfolio, with a good portion of these having exposure to the household goods sector.

Given the redirection of consumer spending and the thriving housing market, this appears to have left Aventus well-placed to collect the majority of rent as normal this year.

One broker that expects this to be the case is Goldman Sachs. It currently has a buy rating and $2.79 price target on its shares. Goldman is also estimating that it will pay a ~16.5 cents per share distribution this year. Which based on the current Aventus share price, will mean a 5.9% yield.

Rural Funds Group (ASX: RFF)

Another ASX dividend share to look at is Rural Funds. It is a real estate investment trust which owns a diversified portfolio of high quality Australian agricultural assets that are leased to experienced agricultural operators.

It generates revenues from long-term leases (WALE of 10.9 years) across five sectors: almonds, cattle, vineyards, cropping, and macadamias.

Rural Funds has an aim of delivering distribution growth of 4% per annum by owning and improving farms that are leased to quality counterparties. 

In line with this, the company intends to increase its distribution to 11.28 cents per share in FY 2021. Which based on the current Rural Funds share price, works out to be a generous 4.6% yield.

More reading

• 3 ASX dividend shares to own for retirement income
• 2 ASX dividend shares for steady income in retirement
• These ASX dividend shares offer attractive yields
• 3 reasons why Rural Funds (ASX:RFF) is a strong ASX dividend share
• 3 ASX dividend shares with yields above 4%

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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A strategy of buying and holding undervalued stocks has generally been successful in obtaining high returns.

It means purchasing high-quality companies when they trade at prices that do not take into account their long-term growth potential. They may offer scope for capital growth, as well as lower risks than lower-quality businesses.

With many companies trading at low prices, there may be opportunities to buy undervalued shares today. Here’s how I’d seek to find them.

Finding undervalued stocks in unloved industries

At any given time, there are always some industries that are favoured by investors, and others that are unloved. Undervalued shares may be more likely to be found in the latter, since valuations may be lower. This may provide scope to buy shares that offer wide margins of safety.

At the present time, industries that face challenging short-term operating environments are relatively unpopular among investors. They could, therefore, be the best places to start searching for undervalued shares. Industries such as banking, consumer goods and resources have been negatively impacted by the global economic slowdown and policymakers’ response to it. This may mean that they trade at low prices relative to their historic averages.

Although the financial performances of undervalued shares may reflect their low valuations in the short run, over the long term the past performance of the economy shows that a recovery is very likely. Through holding them over the coming years, it may be possible to capitalise on improving financial performance, as well as stronger investor sentiment.

Focusing on company releases

Within unpopular sectors, undervalued stocks are likely to be those businesses that have a mix of financial strength, solid strategies and the market position to deliver on their goals.

A simple means of finding out whether a business has these three criteria is to analyse its latest investor updates. For example, its latest annual accounts can provide guidance on its financial strength, while recent trading updates may paint a picture of the relative success of its strategy.

Together, this information can allow an investor to piece together whether the company in question has the means to deliver improving financial performance. Based on this, they can value a stock and determine whether it is undervalued at its current price level.

A prudent approach to buying shares

Undervalued stocks often face short-term difficulties. Otherwise, they are unlikely to be priced at a level that is below their intrinsic value.

As such, it is important to build a diverse portfolio of such companies instead of relying on a small number of them for growth. Otherwise, an investor may become overly exposed to a small number of businesses. Should they fail to deliver on their long-term potential, it could mean disappointing overall returns. Furthermore, diversification provides access to a wider range of businesses that can mean higher return potential in a recovering stock market.

More reading

• Got money to invest? Here are 2 ASX shares to buy
• 2 ASX shares to own according to fund managers
• How to turn $20,000 into $1 million in 10 years with ASX shares
• These were the best performing ASX 200 shares last week
• How to make a yearly income of $60,000 from ASX shares

Motley Fool contributor Peter Stephens 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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If you have some money to invest into ASX shares then there could be some businesses worth considering.

These investments could be interesting:

Pushpay Holdings Ltd (ASX: PPH)

This business is an ASX tech share, which specialises in helping large and medium US churches to receive electronic donations.

The company has been regularly increasing its profit guidance. In an update in the middle of January, it upgraded its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDA) guidance for FY21 to a range of US$56 million to US$60 million, up from US$54 million to US$58 million.

Pushpay explained that processing volume over the month of December 2020 was slightly higher than the company’s internal forecast, when guidance was last updated. While December donation volumes are usually significantly higher than other months, partially driven by tax year-end giving in the US, the level of the increase can vary from year to year. Pushpay’s processing volume and continued operating leverage was the reason for the guidance update.

The ASX share is also aiming for growth in the Catholic segment of the US faith sector. It has allocated an initial investment of resources into developing and enhancing the customer proposition for the Catholic segment. Pushpay said that this represents a significant milestone as it continues to execute on its strategy to become the preferred provider of mission critical software to the US faith sector.

Pushpay has other geographies in its sights. In an investor day presentation, it said that not only is the US a focus, but South East Asia and South America can also be places of growth. The company is also looking at smaller churches to provide services.

There are also the large categories of not for profit organisations as well as education and tertiary that could be areas for Pushpay to provide donation services.

The company has been steadily growing its EBITDAF margin over the last two and a half years. At March 2018, the EBITDAF margin was negative 21%. By March 2019 it had improved to 9%. March 2020 saw the EBITDAF margin rise to 22% and the September 2020 result saw an increase of the EBITDAF margin to 31%.

According to Commsec, the Pushpay share price is valued at 22x FY23’s estimated earnings.

Bubs Australia Ltd (ASX: BUB)

Bubs is an infant formula business which specialises in goat milk products. As well as infant formula, it also sells adult goat products, vitamins and minerals supplements and a grass-fed cow milk infant formula range.

The company’s first quarter update of FY21 showed a significant decline of revenue, but the period for the three months to 31 December 2020 showed a double digit recovery since the first quarter.

Bubs’ group quarterly gross revenue came in at $12.8 million, which was an increase of 36% over the first quarter of FY21, though it was down 12% on the prior corresponding period.

China cross border e-commerce (CBEC) sales were up 27% quarter on quarter and up 34% compared to the prior corresponding period.

Adult goat dairy gross revenue was up 45% quarter on quarter and up 25% against the prior corresponding period.

The Bubs infant nutrition portfolio, which represented 57% of the second quarter’s revenue, grew 27% compared to the FY21 first quarter.

The company boasted that Bubs Australia is the fastest growing infant formula manufacturer across Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL) and Chemist Warehouse, with combined retail scan sales at the checkout up 41% quarter on quarter and it was up 67% compared to the prior corresponding period.

Bubs said that export sales to markets outside of China continued to strengthen, with sales rising 194% quarter on quarter and up 138% compared to the prior corresponding period.

More reading

• 3 compelling ASX shares to buy in February
• Why AGL, Bubs, BWP, & Origin shares are dropping lower
• Got cash to invest? Here are 3 ASX shares to buy
• Why Bubs, Huon, Temple & Webster, & Unibail-Rodamco-Westfield are dropping lower
• 2 small cap ASX shares that are growing quickly

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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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Fund managers are constantly thinking about which ASX shares would be the best to own.

These are some of the picks of fund managers in recent times:

Bapcor Ltd (ASX: BAP)

Bapcor is one of the top picks from WAM Capital Limited (ASX: WAM), which is a listed investment company (LIC) operated by Wilson Asset Management (WAM).

This ASX share provides vehicle parts, accessories, equipment service and solutions to the Asia Pacific region.

WAM likes Bapcor because it has benefited from an increase in domestic travel, reduced usage of public transport and increased second-hand car sales. The fund manager said that Bapcor has a strong balance sheet and believes it’s well placed to make earnings accretive acquisitions.

Bapcor recently gave a trading update which said that it has continued to perform strongly since its October update. For the five months to the end of November, group revenue was up 26%, with net profit after tax (NPAT) achieving operating leverage.

For the first half of FY21, Bapcor anticipates it will achieve revenue growth of 25% and an increase of net profit after tax of at least 50%.

According to CMC, the Bapcor share price is valued at 20x FY23’s estimated earnings.

City Chic Collective Ltd (ASX: CCX)

City Chic is one of the ASX shares that’s liked by the investment team at Clime Capital Ltd (ASX: CAM).

Clime describes City Chic as an omni-channel retailer of extended-size ladies fashion and it has a strategy to acquire plus size customers online globally.

The fund manager said that the company is generating 70% of its sales online, up from 44% in FY19, with online exposure to much larger offshore markets including North America and the UK. The remaining 30% of sales comes from the Australian and New Zealand network of 92 stores.

City Chic has been growing both organically and through opportunistic acquisitions. Clime said that the COVID-19 environment has benefited players well-developed digital businesses, largely at the expense of those dependent on bricks and mortar networks.

In the COVID-hit countries of the US and UK, City Chic is looking for potential target acquisitions of quality digital assets of competitors that have been bankrupted by their under-performing physical store networks.

After being unsuccessful with the bid for the e-commerce assets of Catherines in the US, City Chic recently announced the acquisition of the e-commerce assets of UK plus-size brand Evans. The purchase price was $41 million, which was funded from existing cash (from a previous capital raising). This represented roughly 1x Evans’ FY20 online revenue of $46 million.

The acquisition came after a trading update from the ASX share that was given in the annual general meeting (AGM).

For the first 20 weeks of FY21, City Chic reported comparable sales growth of 18.7% excluding Victorian store closures (or 7.9% including store closures) and a “significant” improvement in gross margins since the peak of COVID-19 disruption in April to June. Gross margins are now above 50%.

The fund manager said that City Chic commands superior margins due to its vertically integrated structure. With a pro forma cash balance of $73 million and no debt, Clime believes City Chic is well positioned to execute on its strategy and it still thinks the business is an opportunity.

According to CMC, the City Chic share price is valued at 25x FY23’s estimated earnings.

More reading

• 3 compelling ASX shares rated as buys by brokers
• Got money to invest for dividends? Here are 3 ASX shares
• 2 little known ASX growth shares to buy
• Why this fund likes these 3 ASX shares
• 2 ASX dividend shares rated as strong buys by brokers

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. 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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I’m a big fan of buy and hold investing and believe it is the best way for investors to grow their wealth.

To demonstrate how successful it can be, I like to pick out a number of popular ASX shares to see how much a single $20,000 investment 10 years ago would be worth today.

This time around I have picked out the three ASX shares that are listed below:

ASX Ltd (ASX: ASX)

This Australian stock exchange operator may not be the most exciting place to invest your money, but it certainly has been a good one. Due to its near monopoly in Australia, ASX Ltd has been able to deliver consistently positive earnings and dividend growth over the last decade. This has led to the ASX Ltd share price generating an average total return of 9.9% per annum since 2011. This means that a $20,000 investment 10 years ago would be worth almost ~$51,500 today.

Jumbo Interactive Ltd (ASX: JIN)

Due to the shift to online lottery playing, Jumbo has been growing at a very strong rate over the last decade. During this time, the company has gone from targeting lottery ticket sales of $75 million to $80 million in FY 2011, to a target of $1 billion in FY 2022. The company has also developed its Powered by Jumbo software as a service platform, which allows lotteries to take their operations online without the need to develop their own platforms. Given the high proportion of lotteries that are still not online, management believes this side of the business has huge potential. So, although Jumbo’s shares have provided investors with an average total return of 49% per annum over the last 10 years, the gains may not be over. For now, though, a $20,000 investment into its shares 10 years ago would be worth a staggering ~$1.08 million today.

ResMed Inc. (ASX: RMD)

Finally, the ResMed share price has been a market beater over the last decade. This has been driven by the growing prevalence of sleep disorders and its industry-leading solutions. This has underpinned consistently strong earnings growth over the last decade. Unsurprisingly, this stellar earnings growth has led to similarly strong returns for its shareholders. Over the last 10 years, ResMed shares have provided investors with an average total return of 24% per annum. This means that an investment of $20,000 into its shares in 2011 would have grown to be worth ~$172,000 this year.

More reading

• Why ResMed (ASX:RMD) shares could be a fantastic buy and hold option
• 2 ASX shares rated as buys by brokers
• Leading brokers name 3 ASX shares to buy today
• Why Afterpay, ResMed, Temple & Webster, & Worley shares are dropping lower
• 3 very impressive ASX quarterly updates from last week

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 and recommends Jumbo Interactive Limited. The Motley Fool Australia has recommended Jumbo Interactive Limited and ResMed Inc. 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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Last week the S&P/ASX 200 Index (ASX: XJO) bounced back strongly from a sharp decline a week earlier to record a sizeable gain. The benchmark index jumped 3.5% over the five days to end the period at 6,840.5 points.

While a good number of shares climbed higher with the index, a few stood out with particularly strong gains. Here’s why these were the best performing ASX 200 shares last week:

Virgin Money UK CDI (ASX: VUK)

The Virgin Money UK share price was the best performer on the ASX 200 last week with a massive 22.8% gain. This follows the release of a stronger than expected first quarter update. That update revealed that the bank “had a profitable and positive first quarter.” In addition to this, although it acknowledged that some customers require further support upon exiting their payment holidays, it remains comfortably within the level assumed in its provision.

Zip Co Ltd (ASX: Z1P)

The Zip share price wasn’t far behind with an impressive 19.4% gain over the five days. This was despite there being no news out of the buy now pay later (BNPL) provider. However, a very positive update from PayPal revealed strong growth in the United States BNPL market. This may have given investor sentiment a further lift following a positive update from Zip itself last month. This latest gain means the Zip share price is now up 62% since this time last month.

Credit Corp Group Limited (ASX: CCP)

The Credit Corp share price was on form last week and recorded a 17.1% gain. Investors were buying the debt collector’s shares after the release of its half year results. For the six months ending 31 December, Credit Corp reported a 2% decline in revenue to $188 million and a 10% lift in net profit after tax to $42.3 million. The latter came in ahead of the market’s expectations, much to the delight of investors. Also giving its shares a boost was management lifting its guidance for the full year.

News Corporation (ASX: NWS)

The News Corp share price was a strong performer and jumped 16.9% higher last week. The majority of this gain was made on Friday following the release of the media giant’s second quarter update. Although the company’s update revealed a 3% decline in second quarter revenue to US$2.48 billion, this didn’t stop it more doubling its profit year on year. News Corp reported quarterly net income of US$261 million, which was up from US$103 million a year earlier. Management advised that this was its most profitable quarter since the new News Corp was launched more than seven years ago.

More reading

• These were the worst performing ASX 200 shares last week
• ASX 200 rises 1%, Zip soars, REA reports
• Short sellers doubling down on these ASX stocks despite the GameStop saga
• Why the Wesfarmers (ASX:WES) share price has soared 24% in a year
• RBA stimulus to fuel ‘raging bull market’ in ASX shares. Should you go all in?

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 ZIPCOLTD FPO. 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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It is possible to create a yearly income of $60,000 of dividends from ASX shares, if compound interest can be utilised.

How compounding can help

Albert Einstein once supposedly said about compound interest: “Compound interest is the eight wonder of the world. He who understands it, earns it, he who doesn’t, pays it.”

Compounding in financial terms means when your money earns interest and then that interest earns interest. It builds like a snowball.

With a 5% interest rate, a single $100 investment will only make $5 over one year. But if that $100 is given 10 years to grow at a 5% interest rate, and the money is re-invested each year, then it grows to $163. It takes less than 15 years for the $100 to double to be $200.

Over the long-term, the ASX share market has returned around 10% per annum over the decades.

According to Vanguard, Australian shares have produced returns of 9.6% per annum since 1970.

There are various compound interest calculators. Moneysmart has one.

If an investor put $10,000 into the ASX share market and it returned 10% per annum over the next two decades then it would turn into just over $73,000 over the next two decades. That’s assuming that no other investments are made.

Most employees make at least quarterly investments into their superannuation funds through their employer. Some people also decide to invest regularly into shares outside of superannuation.

If that same investor put in the $10,000 at the start and then invested $200 every month for the next 20 years, with the ASX share market making returns of 10% per annum, then it turns into $225,000 over 20 years.

There are many different scenarios that you can play around with using the calculator.

If the investor put in $1,000 a month instead of $200 a month then they’d have $832,650 after that 20 year period.

Where does the $60,000 of yearly dividends come in?

Given enough time and contributions, it is possible that the portfolio value would be well in excess of $1 million. That portfolio could generate dividends each year.

For example, if a 25-year old decided to invest $1,000 a month into the ASX share market over the next 25 years until they were 50 and the share market returned 10% per annum then it would turn into a portfolio worth $1.45 million.

If the portfolio were invested in ASX shares that had an overall dividend yield of 4.5% then it would generate $65,250 of dividends each year (which is actually more than $60,000).

Many ASX shares have a unique advantage in relation to dividends because of the Australian taxation system which generates franking credits for companies that pay corporate tax.

As the Australian Taxation Office (ATO) states: “Dividends paid to shareholders by Australian resident companies are taxed under a system known as imputation. This is where the tax the company pays is imputed, or attributed, to the shareholders. The tax paid by the company is allocated to shareholders as franking credits attached to the dividends they receive.

If you are an Australian resident, it will “reduce your tax liability from all forms of income (not just dividends) and from your taxable net capital gain” and/or “refund any excess franking to you after any income tax and Medicare levy liabilities have been met.”

The franking credits have the effect of boosting the after-tax dividend yield from ASX shares.

The 4.5% yield is just one example yield. If the dividend yield of the portfolio is lower, then it requires a higher portfolio value to generate the same amount of dividends. If the dividend yield of the portfolio is higher then the required portfolio value to generate the same amount of dividends is lower. Getting back to the $60,000 dividend target, a simple example would be a $1 million portfolio with a 6% dividend yield would make $60,000 of annual dividends. 

More reading

• 2 ASX dividend shares with yields above 4%
• To short or not to short? GameStop (NYSE:GME) ripple effect endures
• These were the worst performing ASX 200 shares last week
• 2 top ETFs to buy next week
• ASX 200 rises 1%, Zip soars, REA reports

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

The post How to make a yearly income of $60,000 from ASX shares appeared first on The Motley Fool Australia.

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Some of the dividend shares on the ASX have yields of more than 4%.

The Reserve Bank of Australia (RBA) interest rate is now just 0.1%, which is almost as close to 0% as you can go.

There are some businesses that currently have yields which are much higher than the RBA interest rate. The below businesses were among the few that increased their income payments to investors during the 2020 calendar year:

Brickworks Limited (ASX: BKW)

Brickworks increased its FY20 dividend by 4% to 59 cents per unit. That means at the current Brickworks share price it has a grossed-up dividend yield of 4.2%.

The business hasn’t cut its dividend since 1976.

The ASX dividend share funds its dividend from two core asset groups. The first area of long-term support for the Brickworks dividend is the holding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares. Major investments of Soul Patts include Brickworks, TPG Telecom Ltd (ASX: TPG), New Hope Corporation Limited (ASX: NHC) and Australian Pharmaceutical Industries Ltd (ASX: API).

Soul Patts has a diversified asset exposure to various industries including telecommunications, financial services, mining, energy, pharmaceuticals, agriculture and swimming schools.

Soul Patts is an ASX dividend share with the longest dividend record on the ASX, having increased its dividend to shareholders every single year since 2000.

Brickworks expects Soul Patts to continue to deliver a growing stream of earnings and dividends over the long term.

The other dividend-supporting segment of Brickworks is its joint venture property trust where the development activity at Oakdale West continues at an “unprecedented” scale.

Brickworks says that the trend towards online shopping, and demand for more sophisticated facilities will drive growth. It has enough land left for at least a 5-year development pipeline.

At the moment there are two large-scale warehouses being built at Oakdale West. One for Amazon and one for Coles Group Ltd (ASX: COL). After these facilities are completed over the next couple of years, it’s expected to increase the gross assets of the trust to more than $3 billion and the net rental distributions to Brickworks are expected to increase by more than 25%.

Charter Hall Long WALE REIT (ASX: CLW)

This is an ASX dividend share operating as a real estate investment trust (REIT).

It describes itself as Australia’s largest and most diversified long weighted average lease expiry (WALE) REIT.

Charter Hall Long WALE REIT is invested across various assets including telco exchanges, agri-logistics, industrial, office and long WALE retail.

It owns over 450 properties that are worth more than $4 billion and its occupancy rate is above 97%. The WALE is around 14 years, which is among the longest on the ASX.

The ASX dividend shares have a number of major tenants including Telstra Corporation Ltd (ASX: TLS), Australian government entities, BP, Woolworths Group Ltd (ASX: WOW), Inghams Group Ltd (ASX: ING), Coles, Metcash Limited (ASX: MTS), Arnott’s Group, Westpac Banking Corp (ASX: WBC) and Wesfarmers Ltd’s (ASX: WES) Bunnings.

In FY21 the REIT is expecting operating earnings per share (EPS) of no less than 29.1 cents per security, which translates to a yield of 6.2%.

More reading

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• 2 ASX 200 shares to buy for dividends

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, 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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