Although the market tumbled lower on New Year’s Eve, that didn’t stop some shares from pushing higher.

A few even managed to climb to new 52-week highs or better. Here’s why these ASX shares are on fire right now:

City Chic Collective Ltd (ASX: CCX)

The City Chic share price hit a multi-year high of $4.08 at the end of last week. Investors have been fighting to get hold of the retailer’s shares since it announced a major new acquisition. Last month City Chic revealed an agreement to acquire UK-based women’s plus-size clothing retailer Evans for 23.1 million pounds (A$41 million). The acquisition, which has since completed, is expected to be highly accretive to earnings in the future.

Dusk Group Ltd (ASX: DSK)

The Dusk share price jumped to a record high of $2.09. The catalyst for this was a recent trading update by the home fragrance product retailer. According to the release, management expects sales for the first half of FY 2021 to be in the range of $90 million to $90.5 million. This compares to its sales of $58.7 million for the first half of FY 2020. In respect to earnings, Dusk is expecting earnings before interest and tax (EBIT) to be between $26 million and $27 million. This is more than double FY 2020’s first half EBIT of $9.7 million.

Galaxy Resources Limited (ASX: GXY)

The Galaxy Resources share price continued its positive run and hit a two-year high of $2.33. Investors have been buying Galaxy and other lithium miners amid optimism over demand for the battery making ingredient. This is due to the growing adoption of electric vehicles and US President-elect Joe Biden’s plan to lead a transition to renewable energy. This latest gain meant the Galaxy share price rose over 120% during 2020.

More reading

• 3 small cap ASX shares to buy for 2021
• Why Costa, Galaxy, Oil Search, & Ramelius shares are pushing higher
• ASX 200 rises 0.5%
• Why a2 Milk, Adacel, Dusk, & Nuheara shares are charging higher
• Why the Dusk Group (ASX:DSK) share price is rocketing 14% higher

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

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The share market has defied the real life gloom and doom to take investors upwards since March this year.

But eventually government stimulus will end, interest rates will rise, and the party will wind up.

So who will be left with a massive hangover afterwards?

Evans & Partners head of international equities Bob Desmond warned that there’s always a serious risk some investors could see their capital “permanently impaired”. 

Even in a bull market, some shares have certain hints that make it more likely that a devastating loss could come.

Desmond pointed out the 5 biggest warning signs to look out for:

Big debt

Borrowing money is a perfectly legitimate way to grow a business. 

But Desmond suggests keeping an eye on how much is borrowed and how the money is used.

He uses American Airlines Group Inc (NASDAQ: AAL) as an example to demonstrate how foolish some companies can be.

“In the five years to 2019, the company ‘returned’ US$13 billion in buybacks. This was despite the fact there was no capital to return, as free cash flow over the period was a NEGATIVE US$3.2 billion!” he said on Livewire.

“The ratio of debt to earnings before income, taxes, depreciation and amortisation (EBITDA) was 4.2 times in 2019 at the peak of the cycle.”

Share buybacks are a common way for US companies to return capital to shareholders, similar to how dividends are regularly used in Australia.

Desmond was scathing of an airline borrowing this much money only to give it away.

“In our opinion this is highly irresponsible, given the industry already has a high degree of operational gearing, has a large amount of off-balance sheet debt in the form of leases and is vulnerable to rising oil prices,” he said.

“And then when tough times hit, these companies go cap-in-hand to the government and/or shareholders to repair balance sheets at very depressed equity prices, resulting in severe value destruction.”

Relying on accurate forecasts of something that’s hard to forecast

There is always some risk when a stock is hyped up on a future assumption.

It’s fair enough if the forecast is reasonable, but it could spell disaster if it’s something that’s hard to predict.

“We deliberately avoid businesses that rely on us correctly forecasting commodity prices, interest rates, elections, drug discoveries, economic growth or political outcomes,” said Desmond.

“Experience has taught us that very few people are able to do this on a consistent basis.”

For example, he recalled back in 2016 very few investors expected Donald Trump to win the US presidential election.

“And for those who did, how many predicted that markets would rally?” Desmond said.

“Or in March of this year, who would have thought the market would be at an all-time high in December, when the global economic contraction has been the largest since the Great Depression?”

No moat

A proper competitive advantage is a basic investment axiom. But it can get lost in the fervour of a bull market.

“Superior returns on capital normally arise from some form of competitive advantage – be it a brand, network effect, scale, reputation, data, client relationships, IP or technology,” Desmond said.

“Over time, competition does a pretty good job of taking away excess returns for most businesses. And over time, it is very hard for an investor to earn a return much different than the underlying economics of the business one owns.”

Poor management burning through cash

Terrible business decisions can cost even the biggest of companies dearly.

Desmond takes the example of General Electric Company (NYSE: GE). It was for many decades an industrial giant, but then started diversifying into finance, real estate, insurance and media.

“The end result was to take a AAA rated balance sheet and turn it into one that is now barely above junk status.”

GE shares sold for about US$57 in the year 2000, but now trades for US$10.56.

In Australia, Desmond cites Woolworths Group Ltd (ASX: WOW) and Wesfarmers Ltd (ASX: WES)’s very expensive diversification attempts a few years ago.

“Who can forget Woolworths’ ill-timed home improvement venture against the toughest of competitors, or even Bunnings themselves and their venture into the UK?” he said.

“Would it not have made sense to focus capital on the competitive advantage that made the company a market leader in the first place and then return excess capital to shareholders?”

Expensive share price

Buying shares cheaply sounds obvious. But again, in a mad ‘fear of missing out’ scramble, human nature can easily ignore ‘fair value’.

“Even the most disciplined can be lured into paying inflated prices, especially in the upper reaches of a bull market,” Desmond said.

“The narrative always follows a similar pattern that excess growth will last forever, interest rates will never rise, the company has changed (very few do), the company deserves a lower beta and the list goes on.”

More reading

• 2020 ASX recap of the year we’ll never forget
• How does fiscal stimulus impact ASX share prices?
• Why the Wesfarmers (ASX:WES) share price is up 24% in 2020
• 3 ASX shares that were unlikely winners in 2020
• 2 quality ASX dividend shares to buy

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of 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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On Thursday the S&P/ASX 200 Index (ASX: XJO) finished the year on a disappointing note. The benchmark index tumbled 1.4% to 6,587.1 points.

Will the market be able to bounce back from this on Monday? Here are five things to watch:

ASX 200 expected to tumble.

The Australian share market looks set to start the year in a disappointing fashion. According to the latest SPI futures, the ASX 200 is poised to open the week 80 points or 1.2% lower this morning. This is despite a positive finish to the year on Wall Street, which saw the Dow Jones rise 0.65%, the S&P 500 climb 0.65%, and the Nasdaq push 0.15% higher. This led to the Dow Jones finishing the year at a record high.

Travel shares on watch.

Australian travel shares will be on watch on Monday after more COVID-19 cases were reported across New South Wales and Victoria. There are concerns that this could delay the recovery of travel-related companies such as Flight Centre Travel Group Ltd (ASX: FLT) and Qantas Airways Limited (ASX: QAN).

Oil prices rise.

Energy producers including Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could start the week positively after oil prices pushed higher. According to Bloomberg, the WTI crude oil price rose slightly to US$48.42 a barrel and the Brent crude oil price climbed 0.3% to US$51.80 a barrel. Despite their recent recovery, oil prices fell ~20% during 2020.

Gold price flat.

Gold miners such as Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) will be on watch today after the spot gold price traded flat. According to CNBC, the spot gold price closed the year at US$1,898.67 an ounce.

Iron ore rises.

BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) shares will be on watch after the iron ore price finished the year strongly. The steel making ingredient rose 0.4% in the final session of the year to end it at US$160.47 a tonne.

More reading

• 2 ASX dividend shares with generous yields
• Disappointments from the ASX 200’s best ever December quarter
• Highlights from the ASX 200’s best ever December quarter
• These were the worst performing ASX 200 shares last week
• 2 important investment lessons from 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel 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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While the pandemic has stifled the growth of a number of companies such as A2 Milk Company Ltd (ASX: A2M) and Appen Ltd (ASX: APX) this year, not all companies have been impacted.

In fact, the two companies listed below continue to go from strength to strength and are on course to deliver very strong results in FY 2021. Here’s what you need to know:

Kogan.com Ltd (ASX: KGN)

This ecommerce company has been a very strong performer in FY 2021 thanks to the shift to online shopping.

At its annual general meeting in November, Kogan revealed that its gross sales for the first four months of FY 2021 are up 99.8% on the prior corresponding period. Pleasingly, its margins have been expanding, leading to gross profit growth of 131.7% and earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 268.8%.

Also growing in FY 2021 has been its customer numbers. At the end of October, Kogan had 2,682,000 active customers. This is up 9% since the end of August.

Temple & Webster Group Ltd (ASX: TPW)

Fellow ecommerce company Temple & Webster has also been growing strongly.

The online homewares and furniture retailer delivered a very strong result in FY 2020 and has followed this up with stellar growth so far in the new financial year.

As of 19 October, Temple & Webster’s revenue was up 138% on the prior corresponding period.  Furthermore, this strong top line growth led to its EBITDA coming in at $8.6 million for the first quarter. This is more than the entire EBITDA it generated in FY 2020.

All in all, this appears to have positioned the company to deliver another impressive result in FY 2021. In light of this, it won’t come as a surprise to learn that the Temple & Webster share price is up over 300% since this time last year.

More reading

• Got money to invest? Here are 3 ASX shares to buy
• The 5 best performing ASX 200 shares of 2020
• Here are the best All Ordinaries performers of 2020
• 3 small cap ASX shares to buy for 2021
• 2020 ASX recap of the year we’ll never forget

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 Appen Ltd, Kogan.com ltd, and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group 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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While we all know that the shares of Afterpay Ltd (ASX: APT) and Kogan.com Ltd (ASX: KGN) were extremely strong performers in 2020, a few lesser-known companies impressed.

Two surprisingly strong performing ASX shares in 2020 are listed below. Here’s why they smashed the market:

Codan Limited (ASX: CDA)

The Codan share price jumped 50% higher over the 12 months. Investors were buying the electronic products company’s shares thanks to an impressive full year result in FY 2020 and further strong growth in the new financial year.

In respect to FY 2020, Codan delivered record sales of $348 million thanks largely to strong metal detector demand. And on the bottom line, the company reported a record statutory net profit after tax of $64 million. This was an increase of 40% year on year. The strong gold price has been supporting demand for its metal detectors.

Pleasingly, in the middle of December the company released a trading update which revealed that management expects a record half year profit after metal detector sales continued to grow in both the recreational and commercial markets.

It has provided guidance for a net profit after tax of $40 million for the half. This is up by 33% from $30 million a year earlier.

Dicker Data Ltd (ASX: DDR)

The Dicker Data share price also surged 50% higher during 2020. The catalyst for this was the leading computer hardware and software distributor’s strong performance during the pandemic.

During the first half of FY 2020, Dicker Data achieved a total revenue of $1,006.1 million, up 18.1% compared to the prior corresponding period. This was driven partly by the working from home initiative, which led to a surge in demand for remote work and cloud-based solutions.

And thanks to widening margins, the company’s profits (and dividends) grew even quicker. Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $47.1 million for the half, up 27.6% from the same period last year.

Pleasingly, this strong form continued in the third quarter, with Dicker Data reporting a net profit before tax for the nine months to 30 September of $60.8 million. This represents an increase of 28.3% over the prior corresponding period.

More reading

• Here’s how the S&P/ASX All Technology Index fared in 2020
• Can these ASX IT shares carry their momentum into 2021?
• 4 ASX shares with sturdy balance sheets
• Here’s why the Codan (ASX:CDA) share price rocketed 12% higher today
• Why Codan, Pro Medicus, Uniti, & Zip shares are storming higher

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 Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended 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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Clime Capital Ltd (ASX: CAM) is a listed investment company (LIC) that runs a portfolio that targets both large ASX shares and small ASX shares.

Some of the largest positions in Clime’s portfolio at the end of November 2020 were: APN Property Group Ltd. (ASX: APD), Austal Limited (ASX: ASB), City Chic Collective Ltd (ASX: CCX), Macquarie Telecom Group Ltd. (ASX: MAQ) and Nick Scali Limited (ASX: NCK).

Clime explained what happened with its portfolio about some of its November movements, and the current thinking behind each idea:

National Australia Bank Ltd (ASX: NAB)

The fund manager said that the approximately 25% return of NAB shares in November reflected both the earnings result and positive developments on the economic front.

The increasing certainty of effective vaccines in 2021 has improved the economic prospects according to the fund manager. This may mean that businesses and consumers are likely to be better placed to meet their debt obligations and consequently impairment charges for the major banks will be lower than earlier feared. This was confirmed in the earnings result, with a lower charge in the second half and commentary that portfolios are performing better than expected. The banks also did better than expected with capital adequacy, which is partly tied to loan performance.

Banks could emerge from COVID-19 with excess capital, though lack of credit growth and net interest margin pressure could be key challenges.

Mach7 Technologies Ltd (ASX: M7T)

This ASX share develops data management solutions for healthcare providers to own, access and share patient data.

Clime pointed out that Mach7 won a $5.3 million, 7-year contract with Trinity Health to provide its eUnity Enterprise Viewer software at multiple facilities within Trinity’s 92 hospitals across the US.

The fund manager believes Mach7 is well positioned to provide the full suite of software to Trinity. In the event the ASX share wins the remaining tenders, Clime believes it will be of significant financial and strategic value. Trinity is the fifth largest hospital system in the US and would represent Mach7’s first major reference site for its end-to-end medical imaging software solution.

Jumbo Interactive Ltd (ASX: JIN)

The lottery reseller was a strong performer in November after the announcement of a 10-year agreement signed with Lotterywest in WA to provide a white label version of its lottery management software as a service solution. Clime said that this deal, whilst important, will help Jumbo win other government contracts, particularly in the $22 billion US state government lottery market.

Jumbo also announced recently that the UK gambling commission had issued a remote gambling software license to enable Jumbo to help UK operators. Its SaaS offering could be a potential future growth driver.

RPMGlobal Holdings Ltd (ASX: RUL)

RPMGlobal describes itself as a leader in mining industry software, consulting and training. The ASX share’s mining software integrates the planning, design and scheduling, with maintenance and execution, and simulation and costings.

Clime said that its pipeline is growing due to its mining operations software. The near-term outlook has vastly improved on the positive vaccine news. RPMGlobal’s managing director Richard Matthews recently said his views are more upbeat than when the company released its annual report in late August.

Electro Optic Systems Hldg Ltd (ASX: EOS)

This ASX share offers remotely controlled weapon systems and ancillary products comprised of gimbal mounts, fire control systems and sensor units. It also has high capacity, secure and reliable terrestrial and space communications combining high availability microwave and free space optics technologies.

It was a strong performer in November giving further details about its new space communications division. But the 2020 year was a year of delays to offshore customers, delaying cash receipts.

EOS is aiming to launch its SpaceLink constellation by mid-2024 which is initially targeting defence and government customers. SpaceLink will initially provide an increase of 10 times of bandwidth compared to prevailing microwave-based technology. The increase will rise to 100 times after including EOS optical laser technology in later constellations.

However, the company recently withdrew its earnings before interest and tax guidance of $20 million to $30 million for 2020 financial year to 30 December 2020 because of delays to December deliveries due to air freight bottlenecks.

More reading

• Highlights from the ASX 200’s best ever December quarter
• ASX 200 down 0.6%: Flight Centre sinks, big four banks lower, Ramelius jumps
• Why the Electro Optic (ASX:EOS) share price has faltered in 2020
• Wilson Asset Management thinks these 2 small cap ASX shares are a buy
• 2 growing small cap ASX shares to watch in 2021

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 and recommends MACH7 FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited, Electro Optic Systems Holdings Limited, and RPMGlobal Holdings. 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. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited, MACH7 FPO, and RPMGlobal Holdings. 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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One investment strategy that is very popular with investors is buy and hold investing.

Given the enormous success that legendary investor Warren Buffett has had with this strategy over several decades, it isn’t hard to see why it is so popular.

The good news is that it isn’t hard to replicate on the Australian share market. 

With that in mind, listed below are two shares which could be top buy and hold options:

Appen Ltd (ASX: APX)

Appen is a company that many believe could be a great buy and hold option. This is because artificial intelligence (AI) is revolutionising our lives. But in order for AI models to work successfully, they need to be trained. This is where Appen comes in.

Through its team of over one million skilled contractors across the globe, the company provides or prepares the training data for AI models. A testament to the quality of its service is its customer base. This includes Amazon, Facebook, Google, and Microsoft.

While COVID-19 headwinds have slowed its growth this year, management expects the company to bounce back strongly in FY 2021. Analysts at UBS expect this to be the case too. Last month they retained their buy rating and $44.00 price target on its shares following its trading update.

Pushpay Holdings Ltd (ASX: PPH)

Another buy and hold option to look at is Pushpay. It is a donor management and community engagement provider to the church market.

It has been a very strong performer over the last 12 months and released a stellar half year result in November. Pushpay delivered a 53% increase in operating revenue to US$85.6 million and a 177% jump in EBITDAF to US$26.7 million. This was driven by the quality of its platform, its leadership position in the market, and the shift to a cashless society.

The good news is that management appears confident this strong growth can continue and has set itself bold long term targets. This includes winning a 50% share of the U.S. medium to large church market, which is estimated to be worth US$1 billion a year.

It is hoping the recent launch of ChurchStaq will help it achieve these goals. Churchstaq is the combination of its Pushpay and Church Community Builder software. It brings together digital giving, donor development, church apps, and church management software (ChMS) to deliver a fully integrated engagement platform.

Goldman Sachs is a big fan of Pushpay. The broker has a conviction buy rating and ~$2.59 price target on its shares.

More reading

• 3 exciting ASX payment shares to buy in January
• Got money to invest? Here are 3 ASX shares to buy
• Top ASX shares to buy in January 2021
• 3 ASX shares to buy for 2021
• How does fiscal stimulus impact ASX share prices?

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 PUSHPAY FPO NZX. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited and 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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

The NASDAQ-100 Technology Sector index has more than doubled the return of the S&P 500 index over both the last one- and five-year periods, but Apple (NASDAQ: AAPL) has remained among the cream of the crop, surging roughly 84% so far in 2020 and about 405% over the last five years. 

Those heady gains put Apple’s stock price at a premium valuation of 34 times forward earnings estimates, which looks expensive compared with a forward price-to-earnings multiple of 24 for the S&P 500. 

However, Apple is currently entering one of its strongest product cycles in years, which could keep the business humming along and justify the stock’s premium. Here are three growth catalysts to watch in 2021.

1. Product sales could hit records in 2021

Apple enters the new year after delivering a strong earnings report for the fiscal fourth quarter. While iPhone revenue was slightly down in fiscal 2020, sales of non-iPhone products grew 30% year over year despite supply constraints on iPad, Mac, and Apple Watch. That momentum should continue into the first half of calendar 2021 with recent product releases.  

The new AirPods Max headphones have been sold out since their initial release in December. Other recent launches should provide sales momentum in the short term, including the HomePod mini, Apple Watch Series 6 and Watch SE, two new iPad models, and new MacBooks featuring Apple’s internally developed M1 processor.

Early signs are pointing to strong sales of iPhone 12. Even though 5G network coverage is spotty, customers seem to be scooping up the new iPhone at a record clip, which is great news since the iPhone generates half of Apple’s total revenue. 

Apple is planning to increase its production of the iPhone 12 by 30% in the first half of 2021, according to a report from Nikkei Asia that cited a source from a key Apple supplier. This would put Apple on pace to have its biggest year for iPhone sales since the record-breaking shipments of the iPhone 6 in 2015. 

2. Apple’s M1 chip is a game-changer

Apple made a bold move earlier this year by announcing a two-year transition to use internally developed processors for its line of Macs, dropping Intel chips in the process. The M1 chip offers several features that will significantly enhance the user experience on Mac and could lead to further market share gains in the PC market for Apple. 

For years, Apple has been working to bridge the user experience across its operating system for Mac and iOS. The M1 chip will take this a step further by allowing Mac users to run iPhone and iPad apps. This could be huge for Mac sales over the long term. 

By taking control over the development of its own chips, Apple can better plan its product road map and tailor future versions of the M1 for specific user experiences, such as enhanced image processing, security, and other cutting-edge features and technologies. 

Apple will likely unveil more benefits of the M1 chip over time, but for 2021, the significant boost to battery life and ability to run iOS apps directly on Mac should be enough to encourage more sales of MacBooks.

3. Services growth

Despite double-digit percentage growth from subscription services, sales of hardware products still make up nearly 80% of Apple’s total revenue. But with services growing 16% year over year in the last quarter, this $53 billion annual business could reach $100 billion in the next five years. 

After reaching an installed base of 1.5 billion active devices earlier this year, Apple reported that its installed base hit another record high in the fiscal fourth quarter. New services — including Apple TV+, Arcade, News+, and Apple Card — are attracting more users, and Apple is still adding new services and content to drive further growth.

Apple TV+ continues to add new streaming content, which will be crucial to persuade users coming off their free trials that it’s worth paying the relatively low monthly fee of $4.99. 

The recent launch of Apple Fitness+ is yet another service with a lot of potential. Interactive fitness was already a fast-growing market before 2020, but it got an extra kick during the pandemic with more people looking for alternative workout solutions at home. Nike and Peloton Interactive have reported high engagement levels with their respective training apps lately. Apple’s massive installed base of users should win a decent share of this booming market. 

Plenty of tailwinds heading into 2021 

Apple is on the verge of a major upgrade cycle across all its products. Moreover, this upgrade cycle could intensify as COVID-19 vaccines become available, encouraging more people to visit Apple stores as the year progresses.

With these growth catalysts on the horizon for this top tech stock, Apple is well-positioned to outperform in 2021.

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

More reading

• If you thought 2020’s tech share rally was impressive, hold on for 2021!
• FAANG stocks make their case to lead the Nasdaq in 2021
• Tesla asked Apple to buy it
• Is Apple (NASDAQ:AAPL) about to launch an electric car?
• In a record-breaking year, here are some of the world’s most popular shares

John Ballard owns shares of Apple, Nike, and Peloton Interactive. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia has recommended Apple. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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With interest rates at record lows and unlikely to improve any time soon, dividend shares look likely to remain the best way to generate a passive income in 2021.

The good news is that there are a large number of dividend shares offering generous yields. Two ASX dividend shares to look are listed below:

BHP Group Ltd (ASX: BHP)

BHP is one of the world’s largest mining companies and the owner of many of the highest quality and lowest cost operations across the globe.

It looks well-placed to deliver a strong result in FY 2021 thanks to favourable copper and iron ore prices and a recovery in oil prices. Pleasingly, with its balance sheet looking extremely robust, the majority of its free cash flow looks set to end up in shareholders’ hands.

One broker that is positive on its prospects is Macquarie. Its analysts have forecast a fully franked ~$3.85 per share dividend in FY 2021. Based on the current BHP share price, this represents a whopping 9% dividend yield.

Rural Funds Group (ASX: RFF)

A second dividend share to look at is Rural Funds. It is an agriculture-focused property group that owns a total of 61 properties across five agricultural sectors. These quality properties are leased to some of the biggest operators in the industry. This includes almond producer Select Harvests Limited (ASX: SHV) and global wine company Treasury Wine Estates Ltd (ASX: TWE). 

One of the key attractions to the company for income investors is its long term leases, which have periodic rental increases built in. At the end of FY 2020, Rural Funds’ weighted average lease expiry (WALE) stood at 10.9 years.

This gives management great visibility on its future earnings and has allowed it to provide guidance even during the pandemic. In FY 2021, Rural Funds intends to increase its distribution by 4% to 11.28 cents per share. Based on the latest Rural Funds share price, this equates to a 4.4% yield.

More reading

• Highlights from the ASX 200’s best ever December quarter
• Top brokers name 3 ASX shares to buy today
• The BHP (ASX:BHP) share price has smashed the market in 2020
• ASX 200 shares hardest hit by COVID-19 in 2020
• Will ASX iron ore shares continue running in 2021? 

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 and Treasury Wine Estates 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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It’s now the first month of 2021. Some of the ASX shares that could be worth looking at are from the payments sector.

Here are three quality businesses to consider:

EML Payments Ltd (ASX: EML)

This ASX payments share has a number of different payment services for clients to use. EML Payments has general purpose reloadable offerings such as gaming payouts with white label gaming cards, salary packaging cards, commission payouts and rewards programs. EML Payments also offers physical gift cards, shopping centre gift cards and digital gift cards. Finally, it offers virtual account numbers.

EML Payments is regularly adding services and business segments to its overall portfolio. Management have previously explained that new programs take years to scale. Programs will be typically material to financials in three to four years.

The ASX payment share boasts of very high retention rates with strong barriers to entry. EML operates in a heavily regulated industry and is responsible for moving and reconciling billions of dollars a month. Systems, infrastructure, regulation and compliance are important and can’t be ignored by potential competitors.  

Dominic Rose from Montgomery Lucent Investment Management said at the start of December that the company was bouncing back well from COVID-19 impacts. Much of its profit was from shopping centre gift cards before the pandemic came along.

Mr Rose said: “the recent encouraging vaccine news materially increases confidence in a solid earnings recovery in FY22. Market estimates are for earnings before interest, tax, depreciation and amortisation to rebound 40 per cent in FY22 to $74 million, still well below pre-COVID expectations of $95-100 million.

Looking back, one positive arising from the pandemic was EML’s ability to reprice and restructure the Prepaid Financial Services (PFS) deal in late March, allowing the company to retain a strong balance sheet ($118 million net cash as at the end of June) which offers optionality for further acquisitions. Valuation remains attractive for the growth potential of the business, in our view, with the stock trading on 12x recovered EBITDA (FY23 EBITDA $93 million).”

Sezzle Inc (ASX: SZL)

Sezzle is one of the larger buy now, pay later businesses on the ASX which is focused in the US. It is not as large as Afterpay Ltd (ASX: APT) or Zip Co Ltd (ASX: Z1P), but its growth rate is even stronger at the moment.

In the most recent update, which was November 2020, the ASX payment share said that underlying merchant sales (UMS) grew by 188.5% to $153.9 million and annualised UMS rose by 188.5% to $1.85 billion.

Consumer and merchant numbers are also growing quickly. Active consumers grew by 151.5% to 2.07 million and active merchants went up 164.5% to 24,846.

Sezzle CEO and executive Chair Charlie Youakim said: “In addition to our record setting performance in November and over the Black Friday Cyber Monday weekend, we are extremely excited about the direction of our business, as we recently partnered with GameStop and eCommerce platform Wix…Our integration on Wix is available to all Wix merchants in the US, Canada, India and in the future will be available in other regions as Sezzle expands internationally.”

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an ASX payment share that’s aiming for clear market leadership in the large and medium US church donation sector.

As a payments business, it has high (and growing) profit margins. In the FY21 interim report, Pushpay’s earnings before interest, tax, depreciation, amortisation and foreign currency (EBTIDAF) margin improved by 14 percentage points from 17% to 31%.

Pushpay expects “significant operating leverage to accrue as operating revenue continues to increase, while growth in total operating expenses remains low.”

Over the longer-term Pushpay is aiming for US$1 billion of revenue. Using the closing Pushpay share price from Friday, it’s valued at 47x FY21’s estimated earnings.

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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 and recommends EML Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended EML Payments, PUSHPAY FPO NZX, and Sezzle 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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