The Praemium Ltd (ASX: PPS) share price is on watch after what a “transformational” half year for the Aussie company.

Why is the Praemium share price on watch?

Shares in the Aussie portfolio management platform are worth watching as the company released its half-year report for the period ended 31 December 2020 (1H 2021).

Praemium reported record funds under administration (FUA) up 69% from 31 December 2020 (1H 2020) to $34.3 billion. Platform FUA surged 99% to $20.3 billion in another record for the company.

The Praemium share price is on watch as the records continued to tumble. Australian platform FUA jumped 132% to a record $16.4 billion while International platform FUA was up 24% to a record $3.9 billion.

FUA aside, Praemium also recorded net platform inflows of $1.85 billion, up 77% from the prior corresponding period (pcp). The Praemium share price is certainly one to watch after strong increases across various earnings metrics.

On the income side, Praemium’s revenue jumped 20% from the prior corresponding period (pcp) to $31.7 million for the half. That saw underlying earnings before interest, tax, depreciation & amortisation (EBITDA) increase by 5% from 1H 2020 to $7.3 million.

Net profit after tax jumped 113% to $3.0 million compared to 1H 2020 with a 98% increase in earnings per share. It was also the fourteenth consecutive half of profit increase for the Aussie company.

CEO Michael Ohanessian described the first half result as “truly transformational”. “The addition of Powerwrap positions Praemium positions Praemium as a major player in the fast-changing Australia wealth management landscape”, he added.

The Praemium share price has surged 71.4% higher in the last 12 months thanks to strong inflows across the platform. The company has a market capitalisation of $421.2 million after closing at a 52-week high on Tuesday.

Foolish takeaway

The Praemium share price is on watch in early trade after reporting a bumper half-year result. Strong earnings and FUA numbers across the business have given Praemium solid momentum heading into the second half of the year.

More reading

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Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Praemium Limited. The Motley Fool Australia has recommended Praemium 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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Dividend shares do not only offer the chance to make a generous passive income right now. They also have the potential to deliver impressive total returns over the long run as a result of a lack of other income opportunities available to investors.

This could increase their popularity, and mean that they outperform the wider stock market in the coming years. They could even ultimately provide an annual income of $40,000 from a modest monthly investment that grows at a relatively fast pace in the coming years.

Passive income opportunities among dividend shares

Clearly, an investor who has a $1 million portfolio today could generate a passive income of $40,000 from buying a selection of dividend shares. However, those same stocks could be used to gradually build a portfolio of a similar size from regular investment over the long run.

Dividend shares could become increasingly popular in the coming years because of a lack of opportunities available elsewhere. Low interest rates mean that cash and bonds have very disappointing return prospects that may even lag inflation. Meanwhile, low yields in the property sector due to high house prices may push an increasing number of income investors towards dividend stocks.

Building a retirement nest egg

The impact of higher demand for dividend shares may be rising stock prices that outperform the stock market. Even if they match the performance of equity markets, which have risen by around 8% per year on a total return basis in the past, a modest monthly investment could produce a $1 million portfolio that provides a $40,000 annual passive income.

For example, investing $750 per month over a 30-year time period would lead to a portfolio being valued at over $1.1 million. From this, a 4% dividend return would provide an annual income in excess of $40,000.

Managing a portfolio of dividend shares

Of course, simply buying the highest-yielding dividend stocks may not necessarily lead to the largest portfolio or passive income in the long run. They could have high yields for a variety of reasons, including weak financial prospects that have caused investor sentiment to decline.

As such, it is logical to buy dividend shares that can afford their payouts, and can grow them in the coming years. They may prove to be the most appealing income shares to a wide range of investors. The result could be rising stock prices that catalyse an investor’s retirement portfolio.

Furthermore, diversifying among dividend shares could be a logical move. It will reduce company-specific risk, which is the threat from a small number of companies underperforming and their impact on a wider portfolio. Diversification also allows an investor to capitalise on multiple growth opportunities. This may increase their potential rewards and lead to a larger portfolio, and passive income, in the long run.

More reading

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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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It has been a disappointing 12 months for shareholders of ASX payments solutions provider EML Payments Ltd (ASX: EML). Despite the EML share price climbing almost 250% off its March 2020 52-week low of $1.20 to $4.17 as at the time of writing, it is still well short of its pre-coronavirus record high of $5.70 recorded last February.

So what’s going on?

What does EML do?

Broadly speaking, EML offers three key payments services to its clients: general-purpose reloadable cards, branded gift cards, and virtual account numbers.

General-purpose reloadable cards are the sorts of cards used by online bookmakers like Ladbrokes or Sportsbet to distribute winnings to their clients. The cards allow their customers to make instant withdrawals or push back amounts to their gaming accounts. However, these types of cards can also be used for various other purposes by corporate and small business clients, such as for employee commission payments and incentives and rewards programs.

The company’s second payment solution is branded gift cards. EML is currently the largest provider of shopping mall gift cards in the world. Its branded gift cards category delivers tailored solutions to business clients and provides a suite of reports to help these clients track the effectiveness of their customer rewards programs.  

EML’s third payment solution is virtual account numbers. These offer a more secure way of facilitating payments between businesses and their suppliers. The payment is made using a unique, single-use card number that can be faster and more efficient than traditional payments methods. This also means clients do not have to regularly communicate their real account numbers, making the entire payments process more secure.

Why is the EML share price still lagging?

The EML share price was hit especially hard by COVID-19. Retail store closures, rising unemployment rates, declining business activity, and even the suspension of many international sporting leagues all hurt EML’s underlying payments business.

A strong performance over the first 8 months of FY20 helped the company deliver an annual revenue uplift of 25% to $121.6 million and a 10% increase in earnings before interest, tax, depreciation and amortisation expenses (EBITDA) to $29.7 million. But, despite this resilient result, these growth rates lagged well behind FY19, when revenue jumped 37% year on year and EBITDA surged 40%.

The company will be hoping that successful vaccine rollouts in many jurisdictions will soon spark a brick-and-mortar retail recovery. And one positive development out of the COVID-19 environment the company will be focussed on is the cultural shift away from cash and towards card as the preferred payment method for many consumers.

More recent news out of the company

All eyes will be on the EML share price when the company releases its first-half FY21 results to the market next week. And there may be some reasons for investors to be cautiously optimistic.

In a first-quarter trading update released to the market back in October, EML stated that it was seeing significant recoveries in gift cards and general-purpose reloadable cards, while virtual account number volumes had rebounded to pre-COVID levels. Total revenue for the quarter was $40.6 million, an increase of 75% over FY20 first-quarter revenue, and EBITDA was a record $10 million, up 215%.

These results appear encouraging, particularly during a quarter that has historically been the company’s weakest. Investors will be hoping for evidence of more green shoots next week and that this translates to a higher EML share price.

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Rhys Brock owns shares of EML Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments. The Motley Fool Australia has recommended EML Payments. 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 will be one to watch today.

This morning Australia’s largest bank released its highly anticipated half year results.

How did Commonwealth Bank perform in the first half?

For the six months ended 31 December 2020, the bank delivered operating income of $11,961 million, which was down 0.5% on the same period last year. This was due largely to COVID-19 impacts and a 10-basis point reduction in its net interest margin to 2.01%, which offset core volume growth.

Operating expenses increased 2.3% for the half to $5,566 million. This was driven by higher investment spend, the impact of COVID-19, and increased volume-related expenses.

In respect to earnings, Commonwealth Bank reported a statutory net profit after tax of $4,877 million. This was down 20.8% on the prior corresponding period, due mainly to lower gains realised on the sale of businesses.

Cash net profit after tax from continuing operations was down 10.8% on the prior corresponding period to $3,886 million. Excluding COVID-19 impacts and remediation costs, the bank’s cash profit would have been broadly flat.

From these earnings, the Commonwealth Bank board declared a fully franked interim dividend of $1.50 per share. This represents a dividend payout ratio of 67% of cash earnings.

How does this compare to expectations?

Commonwealth Bank appears to have delivered a stronger result than the market was expecting. This could bode well for the CBA share price today.

According to a note out of Goldman Sachs, it was forecasting cash earnings from continuing operations (pre-one offs) of $3,692 million and an interim dividend of $1.25 per share.

Provisions and credit quality

For the first half of FY 2021, the company recorded a loan impairment expense of $882 million. While this was higher than the prior corresponding period, it was down by over 50% from the second half of FY 2020.

The bank notes that arrears on home loans and consumer finance remain low and are being temporarily insulated by COVID-19 support measures.

As of the end of January, approximately 25,000 home loans with a balance of $9 billion remain in deferral. This is down from 145,000 loans with a balance of $51 billion at the end of FY 2020.

At the end of the half, total impairment provisions stood at $6.8 billion. This represents 1.81% of credit risk weighted assets.

Despite this, Commonwealth Bank remains well capitalised with a CET1 ratio of 12.6%. This is up from 11.6% at the end of FY 2020 and is materially higher than APRA’s unquestionably strong benchmark of 10.5%.

Outlook

Commonwealth Bank’s Chief Executive Officer, Matt Comyn, is cautiously optimistic on the future. He said:

“Australia is relatively well positioned having started from a position of fiscal and economic strength. We have a solid pipeline of infrastructure projects, the outlook for mining and agriculture exports is strong, and the community has benefitted from the Government’s significant income support measures.”

“Although the outlook is positive, there are a number of health and economic risks that could dampen the pace of recovery. We are prepared for a range of scenarios and have taken a careful approach to provisioning.”

“We also continue to monitor our lending portfolios closely for any signs of stress. The low interest rate environment will continue to put pressure on our revenue which is why we remain focused on performance, operational execution and capital allocation.”

“The Bank’s leading franchise and strong foundations mean it is well placed for the challenges ahead. The strength of our balance sheet and capital position enables us to support customers and help lead the country through recovery. We will also continue to work with government, regulators and our industry peers to support initiatives that stimulate economic activity and jobs.”

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• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor James Mickleboro 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 hit a new 52-week low yesterday. Shares in the Aussie energy producer slumped 2.1% lower to close at $10.93 per share on Tuesday. That means the AGL share price has now hit a new 10-year low with a $6.8 billion market capitalisation.

It’s been a steady decline since early 2020, but what’s going on with the Aussie utility?

Why the AGL share price is falling lower

AGL is a leading Aussie electricity and gas generator and retailer. It is part of the ‘big three’ alongside Origin Energy Ltd (ASX: ORG) and the unlisted Energy Australia.

The Aussie gentailer has a diversified portfolio of energy-producing assets across Australia. This includes coal-fired power plants, renewables (hydro, solar and wind) and gas projects.

One significant issue facing AGL is profitability. This is particularly important for AGL’s coal-fired power plants given the current low electricity prices.

Coal-fired plants are operating on tighter margins with revenue compression contributing to a negative outlook and pushing the company’s shares lower.

AGL is also facing the looming decommissioning of its Liddell coal-fired power plant with potential competitors, such as CEP Energy, keen to pick up some of the slack. 

What about the company’s dividends?

The AGL share price has been under pressure in recent years. This is reflected by a 43.7% drop over the last 12 months culminating in Tuesday’s closing price of $10.93.

As such, there is one thing that AGL investors would be watching closely right now – the company’s dividend. At the current AGL share price, this translates to a 9.0% per annum yield.

AGL is scheduled to release its half-year results for the period ended 31 December 2020 (1H FY2021) tomorrow. Investors will be paying close attention to what the dividend payout looks like and the latest earnings update from across the business.

Foolish takeaway

The AGL share price has been under pressure in recent months and is at its lowest point since the global financial crisis (GFC). With the company set to release its results tomorrow, all eyes will be on the Aussie gentailer for its latest numbers.

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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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Exchange-traded funds (ETFs) are able to give investors attractive levels of diversification.

Here are two to consider:

Vanguard MSCI Index International Shares ETF (ASX: VGS)

This ETF is about giving investors exposure to many of the world’s largest companies listed in major developed countries.

Vanguard, the ETF provider, says that it offers low-cost access to a broadly diversified range of securities that allows investors to participate in the long-term growth potential of international economies outside Australia.

It’s invested across many different countries including the USA, Japan, the UK, France, Canada, Switzerland, Germany, Netherlands, Sweden, Hong Kong, Denmark, Spain, Italy, Singapore, Finland, Belgium, Norway, Israel and Ireland. That’s the geographical diversification.

In terms of the industry diversification, there are five sectors that get a double digit allocation in the Vanguard MSCI Index International Shares ETF portfolio: information technology (22.5%), health care (13%), financials (12.3%), consumer discretionary (12.3%) and industrials (10.6%).

The ETF has an investment in over 1,500 businesses, but the largest companies in the world get the biggest allocation. Its biggest holdings include: Apple, Microsoft, Amazon, Alphabet, Facebook, Tesla, Johnson & Johnson, JPMorgan Chase, Visa and Proctor & Gamble.

It has an annual management fee of 0.18% per annum, which means a lot of the gross returns still turn into net returns for the ETF. Since inception in November 2014, Vanguard MSCI Index International Shares ETF has delivered net returns of 12% per annum.

Betashares Asia Technology Tigers ETF (ASX: ASIA)

This ETF is provided by BetaShares. It doesn’t have 1,500 holdings like the Vanguard one – it owns 50 of the biggest Asian technology businesses outside of Japan.

BetaShares said that due to its younger, tech-savvy population, Asia is surpassing the West in terms of technological adoption and the sector is anticipated to remain a growth sector. The ETF provider said that one of the main reasons to consider this investment is that in one trade, Betashares Asia Technology Tigers ETF provides diversified exposure to a high-growth sector that is under-represented in the ASX share market, and a complement to investors with US technology exposure.

The management cost of this ETF is 0.67% per annum.

For that cost, you get significant exposure to Asian names like Taiwan Semiconductor Manufacturing, Meituan, Samsung Electronics, Tencent, Alibaba, Pinduoduo and JD.com.

There is a heavy Chinese focus with Betashares Asia Technology Tigers ETF, with an allocation of 55% of the portfolio. Another 21.4% is invested in Taiwan businesses, 18.1% is invested in South Korea and 4.9% is invested in Indian companies.

Betashares Asia Technology Tigers ETF has delivered outperformance with its net fees in recent years. Over the last six months the net return has been 33.75%, over the last year the net return was 71.5% and since inception in September 2018 the ETF has made an average net return per annum of 37.2%.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. 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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Looking for dividend shares to buy? Then take a look at the ones listed below.

Not only do they provide investors with attractive yields, they also come highly rated. Here’s what you need to know:

Super Retail Group Ltd (ASX: SUL)

Super Retail is the company behind popular retail store brands BCF, Macpac, Rebel, and Super Cheap Auto. With international tourism off the cards for a little while longer, Super Retail has been tipped to benefit from a favourable redirection of consumer spending.

This certainly has been the case over the last six months. Its brands have been performing very strongly in FY 2021, with management expecting to report a 23% increase in half year sales this month.

Things have been even better for its earnings due to margin expansion. Super Retail’s net profit is expected to increase 135% to 139% over the prior corresponding period to $174 million to $177 million.

Analysts at Goldman Sachs are very positive on Super Retail and have a buy rating and $14.80 price target on its shares. The broker also expects the company to pay a fully franked dividend of 78 cents per share in FY 2021. Based on the latest Super Retail share price, this represents a sizeable 6.7% dividend yield.

Westpac Banking Corp (ASX: WBC)

It has been a difficult few years for the banks, but the worst does finally appear to be over. Especially given recent reductions in COVID-19 loan deferrals. These reductions appear to indicate that the banks have over-provisioned for losses, which could lead to a reversal in provisions in the future.

And with the banks well-capitalised and APRA removing dividend restrictions, Westpac and the rest of the big four have been tipped as generous dividend payers in the near term.

Analysts at Morgans are fans of Westpac. It is the broker’s preferred pick in the group and has an add rating and $25.50 price target on its shares. The broker is also forecasting a $1.24 per share fully franked dividend in FY 2021.

Based on the current Westpac share price, this represents a 5.6% yield.

More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail 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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The Computershare Ltd (ASX: CPU) share price will be on watch today following the after-hours release of its half year results on Tuesday.

How did Computershare perform in the first half?

Computershare had a very difficult six months due to the impact that record low interest rates had on its margin income.

For the six months ended 31 December, the company reported a 3.2% decline in management revenue to $1.1 billion and a 52.4% tumble in margin income to $55.2 million.

This ultimately led to the company’s management net profit after tax falling 25% to $117.8 million and its earnings per share falling 24.8% to 21.8 cents per share.

Despite this sizeable decline in earnings, the Computershare board has maintained its fully franked interim dividend at 23 cents per share.

How does this compare to expectations?

Although this was a weak result in comparison to the prior corresponding period, it was actually ahead of management’s guidance. This bodes well for the Computershare share price today.

It was also ahead of what analysts at Morgans were expecting. They were forecasting a 33% decline in management net profit after tax to $106 million. The broker also pencilled in a 15 cents per share dividend.

Outlook

The company is expecting a stronger second half performance, with management earnings per share forecast to come in at 30 cents for the half.

This is expected to lead to full year management earnings per share of 51.8 cents in constant currency, which will be down 8% year on year.

Computershare’s CEO, Stuart Irving, commented: “I am pleased to report Computershare’s operating business is performing ahead of plan. Although record low interest rates have impacted margin income, earnings for the half are ahead of guidance. Our operating performance supports a positive 2H outlook.”

“The 1H operating performance supports upgrading full-year earnings guidance. We now expect EBIT (excluding margin income) to be up around 14% for FY21 (previous guidance was around 10%). Management EPS is expected to be down around 8% (previously down around 11%) with margin income revenues expected to be approximately $105m this year,” he added.

More reading

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Motley Fool contributor James Mickleboro 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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Some ASX shares are seeing stronger levels of growth at the moment during this period of the COVID-19 pandemic. They could be worth looking at.

Here are two ideas:

Kogan.com Ltd (ASX: KGN)

Kogan.com is an e-commerce business that sells a wide variety of products and services on its website. That includes: TVs, computers, phones, tablets, ‘wearables’, cameras, drones, heating and cooling, appliances, clothes, shoes, tools and cars. The services that it sells includes mobile, home internet, energy, insurance and superannuation.

For customers that want it, there’s a membership service offered by the ASX share called Kogan First.

Mr Kogan, the founder of the company, spoke about the benefit to the company of its growing number of people using its loyalty scheme at the FY20 result: “The Kogan First community of members grew exceptionally during the second half, and importantly these loyal members on average purchase and save much more often than non-members, demonstrating loyalty to the platform, and also demonstrating the significant savings and other benefits available through the loyalty program.”

The ASX share’s FY20 saw gross sales growth of 39.3% to $768.9 million, which helped gross profit increase by 39.6% to $126.5 million. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) went up 57.6% to $49.7 million and net profit after tax (NPAT) grew 55.9% to $26.8 million. Its financial numbers have accelerated as customers look to online shopping to find the items they want.

During FY20, Kogan.com acquired Matt Blatt, which the company described as a pioneer in Australian online furniture retail.

In December 2020, the company announced the acquisition of New Zealand-based Mighty Ape. This Kiwi business has a focus on gaming, toys and other entertainment categories. In FY21, Mighty Ape is expected to generate AU$137.7 million of revenue and AU$14.3 million of EBITDA, which would represent growth of 43.7% and 254.1% respectively.

The Kogan.com management said that the combination of two market leaders enables Mighty Ape to build on its strong customer offering, and provides the infrastructure to scale further.

The ASX share has said that in the first half of FY21, gross sales grew by more than 96%, gross profit went up 120%, adjusted EBITDA rose by more than 175% and EBITDA grew 140%.

At the current Kogan.com share price, it’s trading at 24x FY23’s estimated earnings.

Ansell Limited (ASX: ANN)

Ansell is an industrial ASX share that may be best known for its protective gloves that are used for various purposes. There are other products that it sells including chemical protective clothing.

In the latest Ansell trading update, the company reported that it’s still seeing high levels of growth because the COVID-19 pandemic continues to rate across the world, particularly in the northern hemisphere. Items in high demand include examination, life sciences and chemical protective clothing.

The company has been focusing on being more efficient so that it can produce more, it has also invested to achieve higher capacity at its manufacturing plants. The company claimed that it has been able to safely meet higher demand, whilst others in the industry have struggled.

Ansell has been hit by higher raw material costs during these times, but the ASX share has managed to pass on these costs to customers.

There may still be future problems relating to COVID-19 for Ansell, so management are still cautious about the shorter term.

However, Ansell gave an update about its expectation for revenue and profit in the upcoming FY21 half-year result. Ansell is expecting to report organic revenue growth of more than 20%, with earnings per share (EPS) in the range of 81 cents to 84 cents, representing growth 62% to 68%. It’s now expecting its FY21 EPS to be higher than 145 cents per share, beating its previous guidance. Further guidance will be given at the result.

At the current Ansell share price, it’s trading at 19x FY23’s estimated earnings.

More reading

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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 Kogan.com ltd. The Motley Fool Australia has recommended Ansell Ltd. and Kogan.com ltd. 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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