If you have some funds to invest into the Australian share market in October, then I think it could be worth splitting them across the two ASX shares listed below.

Here’s why I think they would be great options this month:

CSL Limited (ASX: CSL)

I think this biotherapeutics giant’s shares are trading at a very attractive level following a 17% pullback from their 52-week high. This pullback has been caused by concerns over its performance in FY 2021 due to difficulties collecting plasma during the pandemic. These collections are vital for CSL because plasma is used to create some of its leading therapies. A shortage could drive prices higher and lead to margin compression.

While I suspect that this will weigh on its performance slightly, I’m optimistic that increasing demand for seasonal flu vaccines will help offset this. Furthermore, it is worth remembering that this headwind is only temporary and trading conditions will return to normal once the pandemic passes. In light of this, I feel investors should be focusing on its future, which is looking very positive. This is thanks to its leading therapies, recent acquisitions, and its high level of investment in research and development.

Xero Limited (ASX: XRO)

Another ASX 200 share I would buy is Xero. It is a leading global provider of cloud-based business and accounting software. I believe Xero would be a great option for investors due to its exceptionally positive long term outlook thanks to the ongoing shift to cloud-based solutions.

This shift is underpinning strong demand for its high quality and sticky platform, which is generating growing recurring revenues. Positively, while the pandemic has hit small and medium sized businesses hard, it hasn’t prevented Xero from continuing its growth in FY 2021. From between April and through to 31 July, Xero added 96,000 net subscribers to its platform. This lifted its subscribers to a total of 2.38 million at the end of the period. While this is a large number, it is still only a fraction of its global addressable market.

More reading

• 5 things to watch on the ASX 200 next week
• Where to invest $10,000 into ASX shares next week
• I would buy CSL (ASX:CSL) and this outstanding ASX blue chip share
• ASX 200 down 0.95%: Mesoblast crashes lower on FDA update, Afterpay surges higher
• Why WAAAX shares like Afterpay (ASX:APT) and Xero (ASX:XRO) are surging

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 CSL Ltd. and Xero. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX tech shares offer a lot of potential growth over the long-term. I think there are at least three tech ideas I’d be interested in buying for the next decade:

Kogan.com Ltd (ASX: KGN)

The e-commerce business has been a very strong performer during COVID-19 and it seems as though the difficult conditions have brought forward the adoption of online shopping.

I think the increase in online customers is going to stay and that makes Kogan.com a stronger long-term buy.

The latest update the market has seen from Kogan.com was the August 2020 numbers, following on from a big FY20. Over the month Kogan.com grew its active customers by 152,000 to 2.46 million. Gross sales went up 117% year on year, gross profit increased 165% and adjusted earnings before interest, tax and depreciation (EBITDA) surged 466% higher.

At the moment it’s the ASX tech share’s retail sales that are benefiting, but the longer-term opportunity is Kogan.com’s other services like insurance, telecommunications and money services. If the e-commerce business can convince customers to use more services then the profit margin on each customer will increase, significantly helping organic revenue. Network effects can be very powerful.

Over the years I think more of the population will shift to digital, which makes this ASX tech share an appealing idea. The Kogan.com share price is currently trading at 45x FY21’s estimated earnings.

Redbubble Ltd (ASX: RBL)

Redbubble is another ASX tech share that’s benefiting from the shift to online shopping. It’s one of the world’s biggest artist marketplace businesses. It also operates TeePublic, which is another marketplace.

This is the type of situation where having the most popular platform can be really beneficial because it means more buyers and sellers will want to go to Redbubble’s platform, continuing the cycle.

Over the long-term the ASX tech share is aiming for $1 billion of revenue, which would help it become a much larger business. Redbubble seems like a very scalable business. In FY20 it grew marketplace revenue by 36%, gross profit increased 42% and operating earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 141%. 

FY21 started off strongly with July marketplace revenue growth of 132%, which says that this financial year could be another strong year.

Over the long-term, Redbubble could become a much more profitable business thanks to more product lines and growing economies of scale.

Pushpay Holdings Ltd (ASX: PPH)

The ASX tech share is one of the fastest growing businesses on the ASX right now. In FY21 it’s expecting to at least double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to US$50 million. Management have predicted that EBITDAF could reach as high as US$54 million.

COVID-19 has brought forward the adoption by large and medium US churches of Pushpay’s digital giving software. Pushpay is providing a very useful service in this period of social distancing and uncertainty. Livestreaming is one of the services that Pushpay provides it clients through its platform.

In FY20 Pushpay achieved revenue of US$129.8 million, but it’s actually aiming for US$1 billion of revenue over the long-term. Management think the US church opportunity is that large.

I think Pushpay is a great ASX tech share to own for the long-term because its profit margins seems as though they can go much higher. In FY20 its gross profit margin increased from 60% to 65% and the EBITDAF margin rose from 17% to 22%. Over the next five years the company could become much more profitable. This should really help the Pushpay share price to grow strongly. 

Over the next decade the ASX tech share’s margins could rise substantially and its earnings could diversify if it materially expands into different additional markets.

At the current Pushpay share price it’s valued at 38x FY21’s estimated earnings.

More reading

• The smartest ASX shares to buy if you have $2,000
• Meet the ASX 200 stock with a dividend yield that’ll hit ~14% in FY22
• Where to invest $10,000 into ASX shares immediately
• Top ASX Stock Picks for October 2020
• 3 ASX growth shares to buy with $3,000 in October

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 and PUSHPAY FPO NZX. The Motley Fool Australia has recommended Kogan.com ltd and PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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News that the US President caught COVID-19 roiled global markets, but the shakeup is likely to be good thing for ASX stock investors.

That might sound somewhat contradictory when Donald Trump’s infection sent the S&P/ASX 200 Index (Index:^AXJO) tumbling 1.4% on Friday. The S&P 500 Index subsequently lost 1% of its value too.

The sell-off is understandable. Markets hate uncertainty and with Trump being taken to hospital, questions about how the world’s most powerful economy will operate and the impact on the upcoming election are up in the air.

Buy stocks when US president’s health is at risk

But history shows us that any market weakness from US presidents’ health issues are fleeting and relatively shallow.

Even when Ronald Raegan was shot in an attempted assassination on 30 March 1981, the S&P 500 only caught a hiccup.

Moreover, Trump’s coronavirus misadventure may actually be a positive for share markets.

How Trump catching COVID can help stocks

For one, the medical emergency may put more pressure on the Democrats and Republicans to strike a new stimulus deal.

Markets have been anxiously waiting for a fresh round of government support but both parties have so far failed to reach a compromise.

This might now change as the severity of the situation is brought to the forefront, reported Bloomberg.

The other side-effect from Trump’s COVID run in is that it might be enough to give presidential contender Joe Biden a clear lead.

Why a clean Biden win will trigger a market rally

Some think Republican presidents are better for equity markets than a Democrat leader, but that’s a myth.

What will hurt investors is a close election where the outcome isn’t known for days, if not weeks. The stakes are increased this time as Trump said he won’t leave the Oval Office willingly. The only way to get him out with little fuss is if the ballots are undeniably in Biden’s favour.

However, the next few weeks are likely to be a volatile period for investors due to disinformation – and this isn’t because of Trump’s tenuous relationship with the truth.

Expect more market volatility and disinformation

US Presidents have a tradition of hiding their medical condition from the public, lawmakers and even their own administration.

A few examples include Grover Cleveland, Franklin D. Roosevelt and Dwight D. Eisenhower, according to the Washington Post.

The White House says that Trump only has minor symptoms, like a mild fever, and that his admission to hospital is only a “precaution”.

How safe is Trump?

But I doubt Trump would allow himself to be taken to hospital for only a mild fever. That doesn’t gel with the strongman image he likes to portray.

Also, you don’t use an experimental (read unproven) drug on a sitting president unless you really needed to.

I suspect Trump may be in worse shape than what his administration is saying. But don’t expect any clarity on this till well after the November election.

More reading

• 5 things to watch on the ASX 200 next week
• These were the best performing shares on the ASX 200 last week
• ASX 200 drops, Trump has COVID-19, Mesoblast (ASX:MSB) share price sinks
• ASX 200 crashes lower after President Trump tests positive for COVID-19
• Will ASX media stocks get a $1.4 bn Google boost?

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Last week saw a large number of broker notes hitting the wires once again. Three buy ratings that caught my eye are summarised below.

Here’s why brokers think investors ought to buy them next week:

Fortescue Metals Group Limited (ASX: FMG)

According to a note out of UBS, its analysts have retained their buy rating and lifted the price target on this iron producer’s shares to $19.00. The broker notes that iron ore prices were strong during the third quarter of 2020. This has put Fortescue in a position to generate high levels of free cash flow and reward shareholders handsomely with dividends in FY 2021. I agree with UBS and would be a buyer of Fortescue’s shares.

Jumbo Interactive Ltd (ASX: JIN)

Analysts at Morgan Stanley have retained their overweight rating and $14.30 price target on this online lottery ticket seller’s shares. This follows the announcement of a deal with Western Australia’s Lotterywest for its Powered by Jumbo software-as-a-service (SaaS) platform. Although it sees a few headwinds for Jumbo in the near term, over the long term the broker believes its SaaS business can be a key driver of growth. I think Morgan Stanley is spot on and Jumbo would be a good long term option.

Treasury Wine Estates Ltd (ASX: TWE)

Another note out of Morgan Stanley reveals that its analysts have retained their overweight rating but cut the price target on this wine company’s shares to $11.00. Although there are concerns over possible tariffs being placed on Australian winemakers in China because of alleged wine dumping, the broker appears to believe this is more than priced into the Treasury Wine share price. In light of this, it believes the risk/reward on offer with its shares is favourable for investors. While I’m not a huge fan of the company at present, I do agree that its valuation looks reasonable.

More reading

• Insiders have been buying Jumbo (ASX:JIN) and this ASX share
• Why Beach, Fortescue, Mesoblast, & SeaLink shares are tumbling lower
• These ASX dividend shares could be stars of the future
• Brokers name 3 ASX shares to buy right now
• Why EOS, Jumbo, Nearmap, & OceanaGold shares are dropping lower today

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive Limited and Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I’ve got my eyes on some ASX shares that I’d buy if the share market crashes again.

COVID-19 is still affecting the world, the US election is getting closer and President Trump has just gone to hospital with COVID-19. I think next week and even next month could be volatile.

There are some ASX shares that I’d be very happy to buy for the long-term if there’s another sizeable decline:

Altium Limited (ASX: ALU)

Altium is a leading electronic PCB software business. The ASX share has been growing strongly over the past decade, but COVID-19 has harmed short-term growth. The company was focused on growing its subscriber numbers so that it can continue to aim for clear market leadership by 2025.

In FY20 the ASX share grew its subscription base by 17% to 51,006 with the number of new Altium Designer seats sold rising by 15% to 9,251. FY20 revenue only increased by 10% and normalised earnings per share (EPS) only grew by 5% (which ignores a one-off tax change).

The Altium share price has risen 42% since the 23 March 2020 low. It’s looking fairly pricey at 61x FY21’s estimated earnings. So I’d be much more inclined to buy Altium shares if it was at least 10% lower and closer to $30. 

Over the long-term I think Altium can continue to grow with its strong balance sheet, quality client list and growing subscriber numbers. I’m just waiting for a better price. 

Pro Medicus Ltd (ASX: PME)

Pro Medicus is another of the ASX’s best businesses in my opinion. It provides a number of services in healthcare imaging IT. The ASX share is a provider of radiology information systems (RIS), picture archiving and communication systems.

The company is steadily winning more big clients, with the latest one being NYU Langone Health. More revenue is really beneficial for Pro Medicus because it has one of the highest earnings before interest and tax (EBIT) margins on the ASX. In FY20 it had an EBIT margin of 52.5%. It’s also debt free with a growing cash balance – which was up 34.3% to $43.4 million in FY20.

A lot of the new revenue simply falls to the bottom line. I like that the company is looking to expand into new markets, which increases its addressable market.

The Pro Medicus share price fell to $13.86 in the COVID-19 crash, but it has soared 77% since then.

COVID-19 isn’t really hurting Pro Medicus and it still has a very high price/earnings ratio. It’s trading at 95x FY21’s estimated earnings.

If the ASX share was trading close to $22 (or under) then I’d be more interested in buying Pro Medicus shares.

WAM Microcap Limited (ASX: WMI)

Small cap shares are usually hit harder during a market crash, so I think they can be better buying opportunities.

WAM Microcap has been a strong performer since it listed with a gross portfolio return of 21.7% per annum before fees, expenses and taxes.

The listed investment company (LIC) owns dozens of very promising small cap ASX shares. Some of the names in its portfolio at 31 August 2020 included Marley Spoon AG (ASX: MMM), People Infrastructure Ltd (ASX: PPE), Redbubble Ltd (ASX: RBL) and Temple & Webster Group Ltd (ASX: TPW).

During March 2020 the WAM Microcap share price plunged to $0.85 and it has surged 88% since then.

If WAM Microcap shares were to drop heavily, it would be one of the first ASX shares that I’d be looking at to buy for my portfolio.

Foolish takeaway

Pro Medicus is the ASX share that I’d like to buy the most, it’s the only one not in my portfolio at the moment. But of the three, I think I’d pick WAM Microcap today because of its diversification to many different businesses and it’s probably trading fairly closely to its net tangible assets (NTA).

More reading

• Is the Altium (ASX:ALU) share price a buy after slumping?
• ASX 200 up 1.6%: CBA higher on COVID-19 loan deferrals update, Reliance rockets
• 3 ASX growth shares to buy with $3,000 in October
• Where to invest your CBA dividends
• Buying these 3 ASX shares could change your life

Tristan Harrison owns shares of Altium and WAM MICRO FPO. 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. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Last week was one to forget for the S&P/ASX 200 Index (ASX: XJO). The benchmark index was well and truly out of form and lost 2.9% over the week to end at 5,791.5 points.

Another busy five days is expected next week. Here are five things to watch:

ASX 200 to start the week strongly.

The ASX 200 index looks set to start the week with a decent gain after a better than expected night of trade on Wall Street on Friday. According to the latest SPI futures, the ASX 200 is expected to rise 67 points at the open. In the United States, the Dow Jones fell 0.5%, the S&P 500 dropped 0.95%, and the Nasdaq fell 2.2%. Futures contracts were pointing to more severe declines during afternoon trade on Friday.

Reserve Bank meeting.

On Tuesday the Reserve Bank will hold its October meeting and make a decision on the cash rate. According to the latest cash rate futures, the market is currently pricing in a 67% probability of a rate cut at the meeting. While I’m not convinced rates will go to zero, I suspect a cut from 0.25% to 0.1% could be possible based on recent comments out of the central bank.

Dividends, dividends, dividends.

Next week is another busy one for dividends. Plumbing parts company Reece Ltd (ASX: REH) and fuel retailer Viva Energy Group Ltd (ASX: VEA) are due to go ex-dividend on Monday and Tuesday, respectively. Companies paying dividends next week include the likes of Atlas Arteria Group (ASX: ALX), Carsales.Com Ltd (ASX: CAR), CSL Limited (ASX: CSL), InvoCare Limited (ASX: IVC), NIB Holdings Limited (ASX: NHF), and Woolworths Group Ltd (ASX: WOW).

Federal Budget.

On Tuesday night Scott Morrison and Josh Frydenberg will be handing down the Federal Budget. The government intends to make this a budget focused on creating jobs and driving Australia out of its recession. There is speculation the government may bring forward personal tax cuts and extend the HomeBuilder package. In total, it is expected to announce $140 billion worth of stimulus over the next four years.

Annual general meetings.

Annual general meeting season continues next week. On Wednesday, both logistics solutions company Brambles Limited (ASX: BXB) and toll road operator Transurban Group (ASX: TCL) will hold their annual general meeting. Trading updates could potentially be released at the meetings.

More reading

• Where to invest $10,000 into ASX shares next week
• These were the best performing shares on the ASX 200 last week
• ASX 200 drops, Trump has COVID-19, Mesoblast (ASX:MSB) share price sinks
• ASX 200 crashes lower after President Trump tests positive for COVID-19
• Will ASX media stocks get a $1.4 bn Google boost?

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 CSL Ltd. The Motley Fool Australia owns shares of Transurban Group and Woolworths Limited. The Motley Fool Australia has recommended InvoCare Limited and NIB Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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With many economists predicting that interest rates will remain at rock bottom levels for some time to come, I think investors should skip savings accounts and put their money to work in the share market.

If I had $10,000 in a bank account and no immediate use for it, I would consider investing it into one of these three ASX shares:

CSL Limited (ASX: CSL)

Investors interested in gaining exposure to the healthcare sector might want to consider CSL. Over the last decade this biotherapeutics company’s shares have provided shareholders with a stunning average annual total return of 24.9%. While the level of return may not be quite as strong over the next decade, I believe its robust core business, pipeline of products under development, and growing Seqirus influenza business could allow it to generate market-beating returns.

Domino’s Pizza Enterprises Ltd. (ASX: DMP)

Although this pizza chain operator’s shares have been in sizzling form in 2020, I still think that in the long-term they could provide above-average returns for investors. After all, the company plans to more than double its store footprint to 5,500 stores by 2033. Thanks to this expansion, its focus on technology and efficiencies, and its long track record of same store sales growth, I believe Domino’s is well-placed for solid earnings growth over the next decade.

NEXTDC Ltd (ASX: NXT)

Due to the unstoppable rise of cloud computing and the ever-increasing consumption of data, I believe demand for data centre capacity will grow at a rapid rate over the long term. As a market-leader with some of the highest quality centres in the world, I think NEXTDC will be a big winner from the trend. And while its shares look expensive on paper, I believe its positive long term growth outlook more than justifies the premium.

More reading

• How to generate a passive income of $50,000 with ASX shares
• I would buy CSL (ASX:CSL) and this outstanding ASX blue chip share
• Potential ASX winners from government’s $1.5bn manufacturing blueprint
• Top ASX Stock Picks for October 2020
• Forget day trading and buy and hold these fantastic ASX shares

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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You might have heard an investor describe themselves as a contrarian, or perhaps an ASX share they’re looking to buy as a ‘contrarian play’. It’s more common than you’d think. What is meant by this rather strange phrase is that the investor either views themselves or the investment idea they have come up with as running ‘against the heard’ or against the popular opinion of the time.

As an example, buying Afterpay Ltd (ASX: APT) shares today is certainly not a contrarian play. That’s because we can confidently say, given the Afterpay share price has appreciated 160% year to date, ‘the heard’ had regarded this share as a buy in 2020. But if you were bullish on Afterpay back when it was $12 per share or less in 2018, this would have been a ‘contrarian’ position to make, as most other investors were giving Afterpay a wide berth at the time.

So does being a contrarian pay off? Well, sometimes. Going against the opinions of most other investors can be highly lucrative. But then again, if most investors aren’t bullish on a particular share, it’s probably for a reason. If the Afterpay growth story didn’t work out, that contrarian position wouldn’t have looked so prescient, for example.

So, after that long-winded introduction to contrarian shares, what’s my favourite contrarian play today? It’s MFF Capital Investments Ltd (ASX: MFF).

MFF – a contrarian bet today

MFF is a listed investment company (LIC) that normally invests in United States-listed growth shares. I say normally because, at the present time, MFF’s largest position is actually cash. According to its most recent market update, MFF told investors that its two largest stock positions were in the US payments giants Visa Inc (NYSE: V) and Mastercard Inc (NYSE: MA). But those positions were only worth 18.1% and 17.3% of the entire portfolio respectively. That pales in comparison with MFF’s cash position, currently sitting at close to 50% of the portfolio.

That in turn, means that MFF is taking a highly ‘contrarian’ position in today’s market by sitting out of the recent gains the market has been making. By extension, this also means that anyone holding MFF shares (like yours truly) is also holding a contrarian position. I’m very comfortable with this right now, as I view holding MFF shares as partly a cash position in itself. I know that MFF’s portfolio managers won’t hesitate to deploy this cash if there’s a market crash in the near future, which in turn gives me confidence in this position. It also balances nicely with my other share positions, which will (hopefully) thrive if the market doesn’t crash.

I wouldn’t call myself a fully contrarian investor, but I certainly like hedging my bets against ‘the crowd’ from time to time, and my position in MFF upholds this today, in my view.

More reading

• The smartest ASX shares to buy if you have $2,000
• 3 ASX shares that I’d invest $1,000 into EVERY month
• These ASX growth shares could be strong buys in October
• Meet the ASX 200 stock with a dividend yield that’ll hit ~14% in FY22
• ASX 200 down 0.95%: Mesoblast crashes lower on FDA update, Afterpay surges higher

Sebastian Bowen owns shares of Magellan Flagship Fund Ltd, Mastercard, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard and Visa. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Mastercard. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post This ASX share is my top contrarian play right now appeared first on Motley Fool Australia.

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If you’re wanting to generate an income of $50,000 per year from dividends, you’ll need either time or a large amount of money.

If you have the latter, you could buy the shares of companies such as Sydney Airport Holdings Pty Ltd (ASX: SYD) or Telstra Corporation Ltd (ASX: TLS).

In respect to Telstra, I’m optimistic that a shift to a free cash flow-based dividend policy will allow the telco giant to maintain its 16 cents per share fully franked dividend in FY 2021.

This is a view that I share with Credit Suisse, which late last month put an outperform rating and $3.85 price target on the Telstra share price.

It expects Telstra to continue paying 16 cents per share over the near term, which will yield 5.8% for investors that buy in now.

This means that an investment of $862,000 into Telstra’s shares would generate $50,000 of dividends each year.

Though, it is worth noting that investing such a large sum into a single share wouldn’t be wise – don’t put all your eggs in one basket springs to mind here. So, investors ought to look to build a diversified portfolio with shares offering similar yields to generate an income of this level through this method.

If you have time on your side.

If you have time on your side, then you might want to start thinking about investing for the future.

By investing in companies with solid long term growth potential that pay dividends, investors can build up a significant income portfolio over the long term.

A great example of this is pizza chain operator Domino’s Pizza Enterprises Ltd (ASX: DMP).

In May of 2005, Domino’s undertook its IPO and raised $75 million through the offer of approximately 34 million shares at $2.20 each.

Just over 15 years later the Domino’s share price is changing hands for $80.60 and is tipped to pay a dividend of ~$1.43 in FY 2021.

This means that investors that bought Domino’s shares at its IPO, and held onto them until today, will receive a yield on cost of 65%. To put that into context, for every dollar you invested in 2005, Domino’s will be giving you 65 cents back in dividends over the next 12 months.

In light of this, an investment of ~$76,900 at its IPO would now be generating $50,000 in dividends this year.

But it doesn’t stop there. Investing $76,900 into the Domino’s IPO would have got you 34,954 shares. Today, those shares would have a market value of approximately $2.82 million.

So, not only are you receiving $50,000 (and growing) of dividends each year, you have a significant little nest egg that you could cash in later in life.

Overall, I think this demonstrates just how rewarding it can be to invest in ASX shares with a long term view.

More reading

• Beat the RBA rate cuts with these ASX dividend shares
• Meet the ASX 200 stock with a dividend yield that’ll hit ~14% in FY22
• The Telstra (ASX:TLS) share price is at a new 52-week low
• 2 high yield ASX dividend shares to solve your income needs
• 3 ASX shares for growth, income, and value investors to buy in October

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 Australia has recommended Domino’s Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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There are a few ASX shares out there that could make very smart buys with $2,000.

Here are my two top long-term ideas:

MFF Capital Investments Ltd (ASX: MFF)

I think that MFF Capital is one of the most promising ASX shares. I think it’s a very promising listed investment company (LIC) which is operated by Chris Mackay, one of the best Australian fund managers in my opinion.

MFF Capital invests in global shares. I believe MFF Capital is a good way to diversify your portfolio and hopefully get strong returns. According to CMC, it has delivered average total shareholder returns per annum of 17.4%.

The strong return has been down to good picks by MFF Capital, namely Visa and Mastercard which are the biggest positions and have been long-term positions. These two payment giants are benefiting from very powerful tailwinds as more transactions go cashless and there’s more online shopping.

Visa and Mastercard are still the biggest positions for MFF Capital – combined, they amount to just over 35% of the portfolio at the end of September 2020.

The ASX share has a really good portfolio in my opinion, it’s more than just Visa and Mastercard. Its other portfolio holdings include: Home Depot, CVS Health, Facebook, Berkshire Hathaway, Microsoft, CK Hutchison, Flutter Entertainment, L’Oreal, JP Morgan Chase, Prosus, Itochu, Mitsubishi, Asahi, Intercontinental Exchange, Lloyds Banking, Lowe’s, US Bancorp, Mitsui & Co, Sumitomo and Schroders.

MFF Capital has been steadily investing its large cash pile into shares over the past few months. It still has a fairly high cash position of 28.9% at the end of September 2020 which could be useful for buying opportunities over the coming weeks.

The ASX share is looking to grow its half-yearly dividend to 5 cents per share over the next few years. At the current MFF Capital share price that would be a future grossed-up dividend yield of 5.5%. It’s priced at a 9% discount to the net tangible assets (NTA) at 30 September 2020.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is one of my highest-conviction ASX share ideas at the moment.

The electronic donation business has done very well to try to help US churches during this difficult COVID-19 period. It is helping large and medium US churches to receive digital donations – in FY20 it grew total processing volume by 39% to US$5 billion.

One of the attractive features about Pushpay’s technology is that it allows the church to livestream the service to its congregation and stay connected.

Total revenue increased by 32% to US$129.8 million, which helped grow the gross profit margin by five percentage points from 60% to 65%. It’s the rapid increase in the gross margin that is one of the main reasons I’m interested in Pushpay. More gross profit should mean fast growth of the net profit as well.

Over the long-term, the ASX share is aiming for US$1 billion of annual revenue. Pushpay should be able to materially increase its margins as it gets closer to that target.

I like the optionality that Pushpay has in the future. At the moment it’s aiming for large and medium US churches. Other religions in the US could be a future target. There are other churches in other countries it could aim for. There are plenty of non-religious donation sectors that Pushpay could try to expand into in the future.

The ASX share’s core product has a long growth runway and it seems it has very strong economies of scale. In FY21 alone it’s looking to at least double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to between US$50 million to US$54 million.

At the current Pushpay share price it’s trading at 38x FY21’s estimated earnings.

Foolish takeaway

I really like both of these ASX shares at the current prices. MFF Capital offers a lot of global diversification, low fees and a promising future dividend yield. However, Pushpay would be my first pick because of how much profit margin improvement it could achieve in the coming years.

More reading

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• 2 top ASX shares I’d buy with $2,000 for October and beyond
• 3 ASX shares for growth, income, and value investors to buy in October
• Buying these 3 ASX shares could change your life

Tristan Harrison owns shares of Magellan Flagship Fund Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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