Warren Buffett has long been an advocate of buying back his own stock rather than paying a dividend to shareholders. The reason why? He believes that he can invest the funds better than individual shareholders and, thus, compound their wealth quicker.

That is Buffett and predominantly US shareholders though. He has an amazing track record of allocating capital and creating outperformance for shareholders. Australian investors are much hungrier for and more used to dividends making up a significant portion of their share market investment returns versus their US counterparts.

The argument for dividends

What do Malta, New Zealand and Australia have in common? A full imputation credit system, i.e. franking credits. We are lucky enough to receive a tax credit for income taxes paid by the companies we own shares in. This is a significant benefit and under current law can even lead to a tax refund, depending upon your circumstances.

Dividends also allow investors the choice of where to invest their new capital. This can help with increasing diversification or improving investment returns by redeploying capital into your best idea at the time. Many companies offer dividend reinvestment plans (DRIP) giving you the option (without brokerage) to buy more of the company’s shares, if that’s your best idea.

Dividends are a great way to increase your cash flow. Many retirees hold a diversified portfolio of dividend-paying shares, the income of which they live off.

Another reason dividends may be preferred over buybacks is that management teams often mistime buybacks, buying at high share prices and conserving cash at depressed share prices.

Some great dividend shares include Jumbo Interactive Ltd (ASX: JIN) and Macquarie Group (ASX: MQG).

The arguments for buybacks

Buybacks reduce the number of outstanding shares on the market, meaning that all future earnings are greater on a per-share basis. Theoretically, investors should see greater share price appreciation if everything else was consistent.

Cash is a drag on your investment returns. The same can be said for companies. Buying back shares is a way of reducing cash drag and improving returns. A perfect example of this is Apple Inc. (NASDAQ: AAPL) which has a mountain of cash.

So why didn’t Buffett buy Berkshire during the bear market?

When Berkshire Hathaway Inc. (NYSE: BRK.B) reported its March quarter activity, many investors were shocked to see that Warren Buffett had not put more of his massive cash pile to work. Buffett didn’t make any meaningful buys, including buying back Berkshire’s own stock. This is despite Berkshire trading at a price-to-book value below Buffett’s previously touted buy zone of 1.2 times.

A couple of potential reasons for Buffett not buying back more of his own shares are:

1. Berkshire’s investment portfolio includes a number of wholly-owned businesses, as well as a number of consumer-facing share investments. Buffett has more information about these businesses than anyone else. This would suggest he knows the true economic impacts on these businesses and thinks that the share price is out of line with the business fundamentals.
2. The buy-back program is at the full discretion of Buffett and Munger, vice chairman of Berkshire. A price-to-book valuation isn’t ideal and so in recent times, they have looked more to earnings multiples to value Berkshire.

Foolish bottom line

Both buybacks and dividends can be great for investors when implemented well by management. ASX investors should buy shares in companies with great management teams.

More reading

• ASX 200 Weekly Wrap: ASX rallies on mining highs
• Where to invest $20,000 into ASX shares right now
• How I would build a $130,000 ASX dividend portfolio right now
• 3 ASX dividend shares I would buy to beat low rates
• How to reduce your work to part-time using ASX shares

Lloyd Prout 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 Apple, Berkshire Hathaway (B shares), and Jumbo Interactive Limited and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares). The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Apple, Berkshire Hathaway (B shares), and Jumbo Interactive 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 potential for a vaccine for coronavirus has flooded news headlines recently, causing some ASX shares to rally. The rush to find a ‘silver bullet’ cure for the pandemic has resulted in a slew of listed companies announcing their intentions to undertake research around a possible cure. 

Despite the optimism and enthusiasm for a vaccine, many scientists have indicated that a well-trialled and tested vaccine for COVID-19 could take much longer than 18 months to develop. The vast majority of vaccines fail somewhere between Phase 1 and Phase 2 trials.

Given the nature of COVID-19 and the trial processes involved in vaccine development, companies that have joined the race to find a cure could face a long and costly journey. As a result, the focus has also turned to alternative methods of treating and testing for COVID-19.

Here are 2 ASX biotechnology companies that have joined the fight against COVID-19.   

2 ASX shares involved the fight against coronavirus

Mesoblast limited (ASX: MSB)

Mesoblast is a world leader in developing regenerative medicines for inflammatory diseases and prides itself on innovation surrounding stem cell research. The company made headlines late last month after announcing promising results for its remestemcel-L treatment for COVID-19. In a US trial, Mesoblast recorded an 83% survival rate in ventilator-dependent COVID-19 patients, while 75% of patients had successfully come off ventilator support within 10 days.

Mesoblast’s remestemcel-L product acts by counteracting the inflammatory processes caused by COVID-19. The company is currently undertaking a $46 million Phase 2/3 trial in the US in order to attain approval from the US Food and Drug Administration.

The promising results from its US trials has seen the Mesoblast share price surge more than 250% from its lows in mid-March.  The company recently completed a $138 million capital raising in order to scale-up manufacturing of its products and is also in the process of conducting clinical trials in Australia.

CSL Limited (ASX: CSL)

CSL is not actively participating in the race to develop a vaccine for COVID-19. The biotechnology giant is, however, working hard to develop a plasma product that may assist in the recovery of patients battling the disease. In collaboration with the Australian Red Cross Lifeblood Service, CSL is collecting plasma from patients who have recovered from COVID-19. The collected plasma, which contains antibodies, will then be used to support a clinical trial aimed at improving the condition of COVID-19 patients and reducing their need for ventilation.  

Should you buy these ASX shares?

Despite the optimism surrounding a coronavirus vaccine, the reality is that a successful solution will not happen overnight. Biotech companies have to undergo arduous and costly approval processes and clinical trails before actually getting a product to market.

As a result, I think investors should exercise caution when companies announce their intentions to fight COVID-19. In my opinion, if you’re keen on investing in the sector, tried and tested performers like CSL would be the best, long-term option as they offer greater risk protection.

More reading

• ASX 200 Weekly Wrap: ASX rallies on mining highs
• 3 ASX 200 shares to watch this week
• 5 ASX 200 winners and 4 losers of last week
• Got $2,000? Here are 2 ASX 200 healthcare shares to buy today
• Have $500 to invest? Then buy these 5 ASX 200 shares immediately

Nikhil Gangaram 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 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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If you’re looking to make a long term investment in a collection of ASX growth shares, then the three listed below could be worth considering.

I believe all three have the potential to deliver returns that smash the market over the next decade. Here’s why I would invest $3,000 into them:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

The first option for growth investors to consider buying is the BetaShares Asia Technology Tigers ETF. This exchange traded fund provides investors with exposure to a number of exciting tech shares in the Asian market. These include the likes of ecommerce giants Alibaba and JD.com, search engine company Baidu, and new Afterpay Ltd (ASX: APT) shareholder and WeChat owner, Tencent. Given how these companies are revolutionising the lives of billions of people in the region, I believe they are well-positioned for strong growth over the next decade.

Cochlear Limited (ASX: COH)

Another ASX growth share to consider buying is Cochlear. I like this hearing solutions company due to its exposure to the ageing populations tailwind. As people age, their hearing will often fade and require some form of assistance. I expect this to lead to increasing demand for hearing solutions products over the next couple of decades. Given Cochlear has industry-leading products and a wide distribution network, I expect it to benefit greatly from this.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Another top ASX growth share to buy could be Domino’s Pizza. I believe the pizza chain operator is well positioned to deliver more than just pizzas over the next decade. I expect a helping of strong returns as well. Especially given its same store sales and store expansion goals. Over the next five years the company is aiming to deliver annual same store sales growth of 3% to 6% and annual organic new store additions of 7% to 9%. If it can maintain its margins, this should support strong earnings growth over the next decade.

More reading

• 3 ETFs perfect for an ASX growth investor
• ASX retail stocks facing new billion-dollar earnings scare during COVID-19 recovery
• How to become a millionaire with a $5,000 investment in ASX 200 shares each year
• 2 top ETFs for high growth
• $3,000 invested in these 3 ASX industries could make you a fortune in the future

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 Cochlear Ltd. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended Cochlear Ltd. and 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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With so many shares to choose from on the S&P/ASX 200 Index (ASX: XJO), it can be hard to decide which ones to buy.

The good news is that brokers across the country are doing a lot of the hard work for you.

Three top shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Sydney Airport Holdings Pty Ltd (ASX: SYD) 

According to a note out of Goldman Sachs, its analysts have reiterated their buy rating and $7.00 price target on this airport operator’s shares following its annual general meeting. The broker believes that management’s commentary fits with its expectations for a staged recovery in passenger volumes over the medium term. In light of this, it believes Sydney Airport’s shares are cheap at the current level. I agree with Goldman Sachs and would be a buyer of its shares today.

TPG Telecom Ltd (ASX: TPM)

Analysts at Morgans have upgraded this telecommunication company’s shares to an add rating with an improved price target of $9.14. The broker sees a lot of positives in its merger with Vodafone Australia. It expects it to benefit from cost savings and their combined cash flows which can be used for capital expenditure activities. While it isn’t my top pick in the industry, I do think Morgans makes some great points and TPG Telecom could be worth a closer look.

Wesfarmers Ltd (ASX: WES)

A note out of the Macquarie equities desk reveals that its analysts have retained their outperform rating but cut the price target on this conglomerate’s shares slightly to $39.40. According to the note, the broker believes the conversion of Target stores into Kmart stores is a good move and could give its earnings a big boost in the future. It also believes the Catch business is well-positioned for growth after adding Kmart and Target goods to its marketplace. While Wesfarmers’ shares have now pushed beyond this price target, I would still be a buyer with a long term view.

More reading

• ASX 200 up 1.7%: Flight Centre and Webjet rocket, Afterpay hits record high
• Telstra share price down 21% since February. Is it now in the buy zone?
• Should you invest $1,000 in Altium shares today?
• 3 commodity trends to watch this week
• Why Afterpay, Flight Centre, TPG Telecom, & Western Areas are charging higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers 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 City Chic Collective Ltd (ASX: CCX) share price has taken off in early trade this morning on the back of a COVID-19 update. The ASX retail share announced strong online sales growth, profitability through the pandemic, and the staged re-opening of stores across Australia and New Zealand.

City Chic is a global, omnichannel retailer that specialises in plus-size women’s apparel, footwear and accessories. It is a collective of customer-led brands, including City Chic, Hips & Curves, and Avenue, the latter of which was acquired towards the end of last year.

The company’s omnichannel model comprises a network of more than 100 stores across Australia and New Zealand, multiple websites operating in Australasia and the US, and wholesale partnerships with major retailers, including Nordstrom, ASOS, and Macy’s.

What did City Chic announce?

One of the key takeaways from this morning’s announcement is that City Chic has managed to trade profitably through the period of COVID-19-related restrictions.

On 27 March, City Chic made the move to temporarily close its brick-and-mortar stores. However, being an omnichannel retailer with online contributing two-thirds of its global sales, most of City Chic’s business has continued to operate. 

Notably, the company revealed 57% online sales growth during the store closures compared to the same period last year.

City Chic has been adjusting its product mix to suit a change in customer behaviour, with strong buying of intimates, casual and streetwear offsetting weaker demand for ‘better-end dressing’. However, the retailer flagged it has been “more promotional” in order to manage cash flows and inventories, which has led to lower online gross margins.

How has City Chic responded to COVID-19?

Over the past 8 weeks, City Chic has implemented a number of measures to minimise the impact of the closure of its store network. With this, the retailer has driven working capital efficiencies, reduced head office costs, and deferred non-essential capital expenditure.

Additionally, City Chic has negotiated reduced rents with a large majority of landlords, along with “market appropriate go-forward rents” while uncertainty relating to COVID-19 remains.

The retailer notes it is in a strong financial position with minimal debt and significant headroom in its $40 million debt facility.

Over the past 2 weeks, City Chic has trialled a number of stores to ensure it is able to open its store network with the appropriate safety and hygiene measures in place.

After closing on Friday at a price of $2.44, City Chic shares jumped as much as 13.52% this morning to an intra-day high (so far) of $2.77. Pulling back somewhat to sit at $2.65 at the time of writing, the City Chic share price is back in positive territory for the year with a 4.74% gain year-to-date.

More reading

• 3 industries that may never recover from COVID-19
• Here’s how Goldman Sachs rates these mid cap ASX shares
• Who said ASX retail shares were dead?

Motley Fool contributor Cathryn Goh 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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At lunch on Monday the S&P/ASX 200 Index (ASX: XJO) is on course to record a very strong gain. The benchmark index is currently up 1.7% to 5,589.3 points.

Here’s what has been happening on the market today:

Bank shares storm higher.

The big four banks have started the week very strongly and are helping drive the ASX 200 higher. All four banks are in the black at lunch, but the standout performer has been the National Australia Bank Ltd. (ASX: NAB) share price. Its shares are up by a solid 2.75% at the time of writing as investors pile back into the sector.

Travel shares charge higher.

One of the best performing areas of the market on Monday has been the travel sector. The prospect of New Zealand opening its borders to Australian tourists appears to have given the sector a boost. The likes of Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) are up 12.5% and 10%, respectively, at the time of writing.

Afterpay hits a record high.

The Afterpay Ltd (ASX: APT) share price has stormed to a record high of $47.48 on Monday. This appears to have been driven by positive investor sentiment and news that it has appointed a permanent Chair. Elana Rubin will has become the payments company’s Chair with immediate effect. She will retire from the ME Bank board in June, but remain as a Non-Executive Director for Telstra Corporation Ltd (ASX: TLS) and Slater & Gordon Limited (ASX: SGH).

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Monday has been the Flight Centre share price with its 12.5% gain. Going the other way, the worst performer on the index on Monday has been the TechnologyOne Ltd (ASX: TNE) share price with a 3.5% decline. The enterprise software company’s shares have come under pressure since the release of its half year update last week.

More reading

• Leading brokers name 3 ASX 200 shares to buy right now
• Telstra share price down 21% since February. Is it now in the buy zone?
• Why Leigh Creek, Lynas, Monadelphous, & TechnologyOne are dropping lower
• Should you invest $1,000 in Altium shares today?
• 3 commodity trends to watch this week

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 and Webjet Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Flight Centre Travel Group 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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Telstra Corporation Ltd (ASX: TLS) has seen a significant correction to its share price over the past few months, declining by around 21% since early February. Does this now place Australia’s largest telecommunications provider in the buy zone?

Strong continued demand for telco services

Although Telstra’s share price fall has been in line with many other S&P/ASX 200 Index (ASX: XJO) listed shares, I don’t believe the sharp sell-off was fully justified.

While many ASX listed companies have seen a decline in demand for their products or services, over the past few months, Telstra’s broadband and mobile services are proving to be essential to both businesses and consumers throughout the coronavirus crisis. This has helped with strong continued demand. There has been a sharp increase in fixed broadband bandwidth with more Aussies working from home, people keeping in touch with family and friends online and staying entertained through streaming media services like Netflix.

T22 strategy still on track

In a market update in March, Telstra revealed that it still appears to be on track to achieve most of the goals it had put in place as part of its T22 strategy, which includes reducing underlying fixed costs by $2.5 billion annually by the end of FY22. Telstra also announced that it would move forward capital expenditure initiatives, from the second half of FY 2021 into the calendar year 2020, to increase its overall network capacity and to accelerate the rollout of its 5G network.

In fact, Telstra was actually part of a small group of ASX 200 companies which were recently able to reaffirm their guidance in light of the coronavirus impact. However, the telco provider did acknowledge in its March update, that it expects both free cash flow and EBITDA for FY2020 to be at the bottom end of its guidance range.

In addition, the defensive nature of Telstra’s telecommunications business model, the continued demand for its services throughout the crisis and its strong free cash flow positions it well to maintain its current dividend of 16 cents per share. On current prices, Telstra pays a trailing fully franked dividend yield of 3.24%.

Foolish takeaway

I believe that Telstra was, to some degree, unfairly caught up in the wider market sell-off triggered by the coronavirus crisis. I feel that long-term, focused investors are presented with a fairly good buying opportunity after its recent market correction. Telstra’s fundamentals remain solid and Australia’s largest telecommunications provider appears reasonably placed for long-term growth over the next five to 10 years, driven by its market-leading position in the rollout of 5G services. I currently prefer it over its other rivals such as Optus, Vodafone-TPG and Vocus Group Ltd (ASX: VOC).

More reading

• Leading brokers name 3 ASX 200 shares to buy right now
• ASX 200 up 1.7%: Flight Centre and Webjet rocket, Afterpay hits record high
• Should you invest $1,000 in Altium shares today?
• 3 commodity trends to watch this week
• ASX 200 Weekly Wrap: ASX rallies on mining highs

Motley Fool contributor Phil Harpur owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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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