With the coronavirus second wave putting pressure on Australia’s economic recovery, a number of companies may be forced to hold back on dividend payments in the short term

As a result, if you’re looking for dividend payments in the near term, then you might want to take a look at the safe and strong ASX dividend shares listed below.

Here’s why I would buy them for income:

Coles Group Ltd (ASX: COL)

The first safe and strong dividend share to consider buying is Coles. I think the supermarket giant is one of the best options for income investors due to its invaluable defensive qualities. These have been on display for all to see during 2020. At a time when the pandemic is causing many companies to defer or cancel dividends, Coles looks well-positioned to continue growing its dividend.

Beyond the pandemic I believe this positive form can continue thanks to its solid growth prospects, expansion opportunities, and its focus on automation. Coles’ current dividend policy aims to pay out between 80% and 90% of its earnings to shareholders. Based on this and the current Coles share price, I estimate that it currently offers investors a fully franked ~3.3% FY 2021 dividend.

Telstra Corporation Ltd (ASX: TLS)

Another safe and strong ASX dividend share to consider buying is Telstra. As with Coles, I think its defensive qualities are one of the main reasons to invest in its shares. These have also been on display during the pandemic, with Telstra able to reaffirm its guidance for FY 2020. Another reason to invest is its T22 strategy. This strategy is cutting costs materially and making Telstra a simpler and more efficient business. Combined with the easing NBN headwind, I believe a return to growth could be on the horizon in the coming years.

Until then, I’m confident Telstra’s 16 cents per share dividend is sustainable from its current free cash flows. Based on the current Telstra share price, this equates to a fully franked 4.7% yield. Incidentally, we won’t have long to wait to see if Telstra pays a 16 cents per share dividend in FY 2020. It is due to release its results on Thursday morning.

More reading

• Is BetaShares Australia 200 ETF the best ASX ETF?
• 2 ASX dividend shares to buy with $5,000 today
• Top ASX dividend shares to buy in August 2020
• Why the Coles share price just hit a new record high
• ASX dividend investors! Ignore shares in consumer staples at your peril

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 owns shares of COLESGROUP DEF SET. 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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If you’re interested in adding a little small cap exposure to your portfolio, then you might want to look at the shares listed below.

I believe these two ASX small cap shares have the potential to generate strong returns for investors over the next decade if everything goes to plan. Here’s why they are on my watchlist:

ELMO Software Ltd (ASX: ELO)

The first small cap ASX share to watch very closely is ELMO Software. It is a cloud-based human resources and payroll software company which provides businesses with a unified platform. This clever platform streamlines a number of processes such as recruitment, on-boarding, learning, and payroll.

ELMO has been growing at a very strong rate over the last few years, but still has a significant runway for growth in an ANZ market estimated to be worth $2.4 billion a year. It also has its foot in the UK market, which is worth ~$6.8 billion a year. Another positive is the company’s hefty cash balance of ~$140 million. The majority of these funds are going to be deployed for acquisitions in the near future.

MNF Group Ltd (ASX: MNF)

A second small cap ASX share to keep tabs on is MNF Group. Formerly known as MyNetFone, MNF is a leading provider of Voice over Internet Protocol (VoIP) technology. This technology is used to make telephone calls via the internet. Demand for VoIP services has been growing strongly over the last few years thanks to the NBN rollout. This growth was then given a major boost in 2020 because of the pandemic and the work from home initiative.

Looking ahead, given how many businesses appear to be seriously considering remote working as a permanent solution, MNF looks well-placed to benefit from the trend. I suspect this could make the MNF share price a market beater over the next decade.

More reading

• Where to invest $5,000 into ASX shares immediately
• These ASX tech shares could be strong buys right now
• Brokers name 3 ASX shares to buy right now
• Which 3 ASX tech shares are investing in long-term growth?
• Why Advance NanoTek, ELMO Software, ResMed, & Scentre shares are dropping lower

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Elmo Software. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia has recommended Elmo Software. 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 Are these ASX small cap shares heading for big things? appeared first on Motley Fool Australia.

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Magellan Financial Group Ltd (ASX: MFG), as of this morning, has joined the small but growing list of ASX companies that have now disclosed their FY2020 full-year earnings in this August reporting season.

By all indications, it has been well received by investors — judging by the 2.7% the market has added to Magellan shares today (at the time of writing). And fair enough too. The company did deliver a 20% rise in net profit after tax and a 10% bump for its dividend. Not bad for a year containing a pandemic and a share market crash.

So at its current level of $63.34 per share, is the Magellan share price a buy today?

What’s new at Magellan?

Magellan is amongst the largest fund managers in the country. It has exploded in value in recent years as it drew in investors with its globally focused, outperforming funds. For some context, 5 years ago Magellan was only asking around $19 a share. Fund managers are often quite cyclical or volatile companies as investors tend to pile in when markets are booming and pile out again when market’s crash.

We saw this in play earlier in the year, when Magellan went from around $75 a share to roughly $35 in the space of a month back in March and April. However, the share price has quickly rebounded in recent months, helped by massive fund inflows and continued outperformance during the market crash. To illustrate, Magellan’s flagship Global Fund has returned -0.25% over the past 6 months, which compares nicely against the -13.7% that the S&P/ASX 200 Index (ASX: XJO) has delivered over the same period.

Magellan has also announced a few new developments over the past week or 2. It will be restructuring its unlisted Global Fund and its listed equivalents — the Magellan Global Trust (ASX: MGG) and the Magellan Global Equities Fund (ASX: MGE) — into a ~$15 billion consolidated fund that will offer both open- and closed-ended units.

Along with its earnings today, Magellan also announced it will be expanding into offering low-cost, diversified exchange-traded products under a new ‘MFG Core’ brand. According to reporting in the Australian Financial Review (AFR), these new ‘Core’ funds will offer management fees of just 0.5% per annum and will follow an ‘active ETF’ model.

Is the Magellan share price a buy today?

I think Magellan is a great company and one that any ASX investor can consider adding to their portfolios. It’s reasonably priced (in my opinion) right now at nearly 15% off of its 52-week high for one. I also think that the new initiatives that Magellan are pursuing are very positive and will likely lead to strong growth in the months and years ahead. Thus, I would absolutely consider the current Magellan share price a buy today.

More reading

• Earnings season: Magellan share price climbs higher after positive annual report
• Why Aurizon, Cochlear, Magellan, & Westpac shares are pushing higher
• It’s ASX reporting season! Here’s what to watch out for this week
• Got $3,000? Buy these 3 top ASX shares right now
• Magellan share price falls despite strong July inflows

Motley Fool contributor Sebastian Bowen owns shares of Magellan High Conviction Trust. 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.

The post Why the Magellan share price might be a post-earnings buy today appeared first on Motley Fool Australia.

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Could BetaShares Australia 200 ETF (ASX: A200) be the best ASX exchange-traded fund (ETF) to invest in?

What is BetaShares?

BetaShares is one of the biggest ETF providers in Australia. It offers a variety of funds that are focused on different things like industry sectors, geographic regions or a specific index like the BetaShares Australia 200 ETF is.

What index does BetaShares Australia 200 ETF track?

ETFs that aim to follow an index will try to provide a return that is very similar to the index. The ETF I’m covering in this article tracks the ASX 200. That represents 200 of the biggest businesses on the ASX.

The ASX 200 has the largest amount of money allocated to the largest shares like Commonwealth Bank of Australia (ASX: CBA) and a very small amount allocated to the smallest shares in the ASX 200 like Wastern Areas Ltd (ASX: WSA) and Tassal Group Limited (ASX: TGR).

What are the biggest holdings of the ETF?

An ETF’s performance will be dictated by how its underlying holdings perform. If its largest holdings do badly then the ETF itself will inevitably produce disappointing returns.

As at 11 August 2020, BetaShares Australia 200 ETF had 7.9% allocated to CBA, 7.7% allocated to CSL Limited (ASX: CSL), 7.1% allocated to BHP Group Ltd (ASX: BHP), 3.9% allocated to Westpac Banking Corp (ASX: WBC), 3.4% to National Australia Bank Ltd (ASX: NAB), 3.2% to Wesfarmers Ltd (ASX: WES), 3.1% to Australia and New Zealand Banking Group (ASX: ANZ), 3% to Woolworths Group Ltd (ASX: WOW), 2.6% to Macquarie Group Ltd (ASX: MQG) and 2.4% to Telstra Corporation Ltd (ASX: TLS).

These are many of Australia’s most recognisable businesses which are leaders in their respective industries.

Sector diversification

The ASX has a high allocation to financials and materials. At the end of June 2020, 27.7% of the portfolio was invested in financial businesses and another 19.6% was invested in materials.

It’s not surprising those two sectors are so large in the BetaShares Australia 200 ETF’s holdings considering Australia’s large housing market and the huge commodity export industry.

However, the problem is that these two industries don’t have a lot of growth potential. I think it would be unwise to think commodity businesses can just keep generating more and more profit. Banks may also find it difficult to generate solid growth over the long-term.

It would be nicer if there was a higher allocation to tech shares, but that’s just how the ASX 200 is currently structured.

Is it the best ASX ETF?

In many ways it’s similar to Vanguard Australian Shares Index ETF (ASX: VAS), the same kind of weightings to the ASX blue chips and industries.

There is a slight difference in annual management fees between the two ETFs. The Vanguard ETF fee is 0.10% per annum but the BetaShares Australia 200 ETF has an annual management fee of just 0.07%. Every little helps, but both fees are so small that they’re both really good passive options.

The choice between the two comes down to whether you prefer the ASX 200 or ASX 300, and whether you want to go with Vanguard and BetaShares as the provider.

I’d be happy to invest in BetaShares Australia 200 ETF but there are a couple of other ETFs I’d prefer more. One is BetaShares Australian Ex-20 Portfolio Diversifier ETF (ASX: EX20), which excludes the biggest 20 businesses and the allocation to the other 180 shares offers more growth.

The other ETF I’d be more interested in buying is BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC) which is invested in ASX tech shares like Afterpay Ltd (ASX: APT), Xero Limited (ASX: XRO), SEEK Limited (ASX: SEK) and Appen Ltd (ASX: APX). Technology shares have strong growth prospects with great gross profit margins compared to typical ASX shares.

More reading

• 2 safe and strong ASX dividend shares to buy during the COVID-19 crisis
• 4 ASX shares to buy now for a post-coronavirus world
• Whatever happened to WAAAX shares?
• Is the Seek share price a long-term buy?
• 2 ASX dividend shares to buy with $5,000 today

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and Xero. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, and Wesfarmers Limited. The Motley Fool Australia has recommended SEEK 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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The Magellan Financial Group Ltd (ASX: MFG) share price went up more than 2.5% today after the company released its annual report for the year to 30 June 2020.

What was in the annual report?

Magellan had a revenue of $693.95 million in the year to 30 June 2020 – a 12.4% increase on the 2019 financial year.

The company posted a net profit after tax of $396.21 million, up 5% on 2019.

Adjusted net profit after tax was $438.3 million, which excluded the amortisation of intangible assets and after tax transaction costs related to strategic initiatives. This was a 20% increase on adjusted net profit after tax in the 2019 financial year.

Earnings per share were 218.3 cents for the 2020 financial year. Magellan’s average funds under management were up 26% to $95.5 billion in the year to 30 June 2020.

The company declared a dividend for the 6 months to 30 June of 122.0 cents, taking total dividends for the year to 214.9 cents per share.

What does Magellan do?

Magellan Financial Group is a funds management company that operates listed and unlisted managed funds. It was founded in 2006 and has offices in Australia, New Zealand and the USA.

In June 2020, Magellan launched the Airlie Australian Share Fund (ASX: AASF), an ETF that typically invests in between 15 and 35 Australian equities. This is one of several listed funds managed by Magellan.

In a letter to shareholders, Magellan CEO Brett Cairns commented on the group’s results, stating;

“During the year, the group saw a 26% growth in average FUM (funds under management) over the previous corresponding period, to $95.5 billion (average FUM of $75.8 billion for the year ended 30 June 2019).

“We are pleased with this outcome, particularly given the severe market volatility seen around the world driven by the COVID-19 pandemic. This could not have been achieved without the performance of our investment strategies which exhibited the strong downside protection traits that are a key component of our investment objectives.”

About the Magellan share price

The Magellan share price was up 2.7% to $63.35 at the time of writing, more than double its 52-week low of $30.10 in April. The share price is up 5.47% since this time last year.

More reading

• Why the Magellan share price might be a post-earnings buy today
• Why Aurizon, Cochlear, Magellan, & Westpac shares are pushing higher
• It’s ASX reporting season! Here’s what to watch out for this week
• Magellan share price falls despite strong July inflows
• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. 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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It has been a tough year for the airline industry with the grounding of flights and uncertainties in the travel market. Revenue has been hammered and companies are burning through their cash pile.

The Qantas Airways Limited (ASX: QAN) share price has been heavily traded since March, falling 52% from its all-time high of $7.46 reached in December last year. At the time of writing, the Qantas share price is up 0.28% for the day at $3.57.

So, when will Australia’s largest carrier (and its share price) be flying high again?

What happened?

Since early this year, the world has been swept up with the coronavirus pandemic. Entire industries have been shut down and foot traffic has come to a standstill.

Qantas has seen its revenue stripped away, with its aircraft parked at tarmacs around Australia or in the Mojave Desert in California – where its A380 super jumbo jets have been sent for deep storage.

The company has taken a number of measures to reduce its cash burn rate of approximatively $40 million a week. Initiatives such as standing down 6,000 employees, deferring capital spending and revoking its dividend payout to shareholders have been implemented to try and staunch the bleeding.

And whilst management have been diligently working to get the company though this crisis, liquidity may be an issue for the long-run. As of 5 May, Qantas had $2.5 billion in cash, undrawn facilities of $1 billion and an unencumbered fleet value worth $2.7 billion. The recent share purchase plan – which failed to reach its $500 million target – may be a sign of a slow recovery.

What’s next for Qantas?

All eyes will be on the company as it releases its full year results. Analysts at Goldman Sachs expect Qantas to report earnings before interest, taxes, depreciation, amortisation and restructure (EBITDAR) of $2.2 billion. This will be a 37% decline on FY19’s result. Underlying net profit is expected to be around $25 million, a sharp drop from $912 million the year before.

Goldman doesn’t expect Qantas to pay shareholders a final dividend, which could potentially weigh on investor sentiment and send the Qantas share price lower.

Investors will be looking to see how Qantas plans to minimise costs from the coronavirus outbreak and what proactive measures the airline is taking to create a stronger platform for future profitability and growth.

Is the Qantas share price a buy?

In my opinion, I think that while the Qantas share price may be turbulent for now, restrictions will eventually ease and the company will again return to strong profitability. Domestic services are predicted to resume at the end of 2020, and Qantas does have the lion’s share in this market. Given the airline’s strong financial track record and disciplined management team, I would class Qantas shares as a buy for the long term.

More reading

• 3 ASX shares I would buy right now at these prices
• Bank savings rates fall as Buffett racks up record cash pile and analysts tip Qantas share price rebound
• ASX 200 jumps 1.2%: Big four banks rise, Qantas update, Mesoblast surges
• Qantas share price higher despite share purchase plan flop
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. 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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The NEXTDC Ltd (ASX: NXT) share price has been among the best performers on the S&P/ASX 200 Index (ASX: XJO) in 2020.

Since the start of the year the data centre operator’s shares have risen an impressive 77%.

In light of this, expectations are very high ahead of its full year results release at the end of the month.

In order to keep readers informed, I thought I would take a look to see what the market is expecting from NEXTDC in FY 2020.

What is the market expecting from NEXTDC in FY 2020?

According to a note out of Goldman Sachs, its analysts expect NEXTDC to deliver a 14% increase in revenue to $203 million. This sits in the middle of the company’s guidance of $200 million to $206 million given in May.

In respect to its earnings, the broker is forecasting earnings before interest, tax, depreciation, and amortisation (EBITDA) of $103 million. This will be a 21% increase on the prior corresponding period and, once again, sits in the middle of its EBITDA guidance range of $100 million to $105 million.

What else should investors look out for?

In addition to the above, Goldman Sachs has suggested investors look out for enterprise contracts.

It commented: “With +12MW of M2 Hyperscale contracts announced, we will be focused on new Enterprise MW and any Covid-19 related acceleration, noting that NXT also signed a major bank contract during the half.”

The broker also has its eyes on pricing and returns. Goldman explained: “We will focus on the impact of S2 [Sydney 2] contracts on NXT’s blended MW/pricing, along with growth in cross connects, noting Equinix delivered one of its strongest interconnect quarters on record in the Jun qtr.”

Finally, its analysts will be looking for commentary on recent expansions and future plans.

It said: “We look for details on P2’s [Perth 2] opening performance, M3 [Melbourne 3] land acquisition, international expansions, and any updates on potential joint ventures / funding structures for these projects.”

More reading

• Top brokers name 3 ASX 200 shares to buy today
• Where I’d invest $10,000 in ASX shares for the future
• If you invested $10,000 in Afterpay shares last year, you’d have this much today…
• Nextdc share price hits record high – does it have room to grow?
• Why it’s a good time to buy and hold ASX shares

Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. 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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Leisure and entertainment company Ardent Leisure Group Ltd‘s (ASX: ALG) share price topped the leader’s board on the ASX last week. The Ardent Leisure share price gained a whopping 22.7% in the first trading week of August.

Things got off to a rockier start for the company this week, with Ardent’s share price falling 3.6% by this morning’s opening bell. And shareholders looked to be in for more pain in early morning trade today as Ardent Leisure’s share price fell 5% in less than an hour.

Like one of the company’s amusement park rides, though, the share price came shooting back up to recoup all those losses by mid-afternoon trade.

Ardent Leisure’s share price gain of 21.2% for August still puts it at the top of the big gainer’s board.

Of course, it’s got a lot further to climb before regaining all of 2020’s massive losses.

Like most shares on the ASX — particularly companies tied to travel and entertainment — the COVID-19 market rout hit the Ardent share price hard. From 21 February to 25 March, Ardent’s share price cratered by 92%.

Since the 25 March low, the company’s shares have shot up an impressive 264%. Yet it’s still far shy of where it began the year, down nearly 70% since 2 January.

That’s seen its market capitalisation reduced to $189 million.

What does Ardent Leisure do?

Ardent Leisure is an Australian leisure and entertainment group. The company owns and operates premium leisure assets which include Dreamworld, WhiteWater World and SkyPoint theme parks.

Its Main Event portfolio also includes a growing number of family entertainment assets in the United States.

Why is the Ardent Leisure share under pressure after last week’s 23% gain?

Last week, Ardent Leisure’s share price got a boost when the company announced it was reopening Dreamworld and WhiteWater World in mid-September. Continued social distancing measures, however, mean the theme parks will be limited to 50% capacity.

The share price was also buoyed after Ardent announced it was receiving a $66.9 million loan plus a grant of $3 million from the Queensland Government’s COVID-19 industry support package.

Two factors are likely seeing Ardent’s share price falling this week.

First, after a 23% increase, it’s natural to expect that several short-term investors will be selling shares to pocket some gains.

Second, the news out of New Zealand regarding renewed COVID-19 cases, and the subsequent lockdowns in Auckland, is likely scaring investors away from a company that’s so reliant on international and interstate tourism.

More reading

• These were last week’s best performing ASX shares
• Ardent Leisure share price on watch following government assistance
• Village Roadshow locked in a capital raise as it secures new $70m facility
• Ardent Leisure share price surges 10% despite facing $4.5 million fine

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. 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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