The a2 Milk Company Ltd (ASX: A2M) share price has been a strong performer this year.

Since the start of the year the infant formula and fresh milk company’s shares have generated a staggering return of 38%.

In fact, the performance of the a2 Milk share price has been so strong, the company has grown to a size that saw it added to the illustrious ASX 50 index.

It joined the index during the June quarterly rebalance at the expense of embattled financial services company AMP Limited (ASX: AMP).

A2 Milk’s meteoric rise.

It is incredible to think that just five years ago a2 Milk was a small cap and loss-making company flying largely under the radar. Whereas today it is one of the top 50 companies on the ASX and highly profitable.

This meteoric rise has been driven by the insatiable demand for its infant formula products in the Australia and China markets and its expanding fresh milk footprint.

The good news is that I believe there I still a lot more growth in its tank. This is particularly the case in China for its infant formula. Despite its incredible sales growth in the lucrative market, it still only has a consumption market share of 6.6%.

In addition to this, it is worth noting that the company is sitting on a hefty cash balance. At the end of the first half the company had NZ$618.4 million in cash. Given how profitable its operations are, this is likely to have increased even further during the second half.

This is a big positive in my opinion. Because I suspect these funds will be used in the near future to fund potential value accretive acquisitions and new product launches.

In respect to the latter, earlier this week its smaller rival Bubs Australia Ltd (ASX: BUB) demonstrated how an infant formula company can expand into new markets with relative ease. It is launching a range of children’s vitamin products later this year and has secured ranging in hundreds of Chemist Warehouse stores.

Should you invest?

While the a2 Milk share price has been a very strong performer this year, I don’t believe it is too late to invest.

I think a2 Milk remains one of the best growth shares to buy on the Australian share market and believe it is well-positioned to deliver above-average earnings growth throughout the 2020s.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia owns shares of A2 Milk. 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 WhiteHawk Ltd (ASX: WHK) share price soared 70.21% higher to 16 cents on Tuesday after the company announced that it had secured a United States government contract.

What are the details of the contract?

The contract between WhiteHawk and the US government has an annual base of US$580,000 per year with a contract option for an additional $600,000 in services each year. The contract will run for 5 years with the option for additional services included each year. It is the first time WhiteHawk has won a primary US federal government contract, previously providing services as a subcontractor.

WhiteHawk will operate a cyber risk radar which will monitor cyber risks and business risks for the supply chain vendors of a key US federal government IT team. The company will provide cyber risk score cards for over 150 vendors, via an integrated risk management dashboard.

WhiteHawk stated that its software-as-a-service (Saas) approach will allow for rapid implementation and scaling across over 150 vendors virtually and remotely, it also stated that this was the optimal approach due to the current coronavirus pandemic.

The company suggested that supply chain vendor cyber risks remained at high levels globally and that cyber risk solutions are currently in high demand.

 Executive chair of WhiteHawk, Terry Roberts commented on the contract, stating;

“After a very successful proof of value early last year, now we are putting in place our first 5-year cyber risk radar contract with a sophisticated U.S. government CIO,  who will work with us to take the capabilities of our platform and virtual services to the next level.”

About the WhiteHawk share price

WhiteHawk is a Saas company that was founded in 2016. WhiteHawk helps its clients to identify cyber security risks and to choose solutions providers that can meet client needs.

In the first quarter of 2020, Whitehawk collected US$561,000 in sales receipts from customers. Of the funds received, US$263,000 were renewable SaaS subscriptions. The company had accrued revenue in the first quarter of 2020 of US$516,000, compared to US$333,000 in the previous quarter. Cash held by the company was reduced from US$1,527,000 in the previous quarter to US$1,471,000 at the end of the first quarter of 2020.

The WhiteHawk share price is up 540% since its 52-week low of 2.5 cents. It is up 78% since the beginning of the year. The WhiteHawk share price has returned 60% since this time last year.

More reading

• Analysts back archTIS share price to outperform
• Should you buy a2 Milk Company shares right now?
• Is Bubs Australia the next Blackmores?
• 3 ASX dividend shares with yields over 5%
• Are ASX tech shares the only way to protect your portfolio against the coronavirus?

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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Bubs Australia Ltd (ASX: BUB) is looking to follow in the footsteps of Blackmores Limited (ASX: BKL) as the infant formula company expands into the vitamins sector. What could this mean for the Bubs share price?

Expanding into vitamins

In an announcement to the market earlier this week, Bubs informed investors that the company will be entering into the vitamin and mineral supplements (VMS) category. Through an agreement with Chemist Warehouse, the company will be launching a new VitaBubs infant and children’s VMS range.

According to the company’s management, expanding into the lucrative VMS sector will allow Bubs to leverage its unique brand awareness, consumer base and marketing coverage. By tapping into Australia’s $2.3 billion VMS sector, Bubs will be able to maintain its strategy of evolving into high margin categories. In addition, the company’s launch partner, Chemist Warehouse, accounts for more than 50% of the VMS products retailed in Australia.

Bubs will be launching 40 retail products into the VMS sector that will be available in both child-friendly chewable tablets and single-serve powder sachets. The product range will tailor for new-borns through to 12-year-olds and cater for various growth and development matters.

How has Bubs performed?

In addition to its announcement to expand into the VMS sector, Bubs also released its activities report for the fourth quarter of FY20. The report indicated that the core Bubs range of goats milk infant formula products had seen a slowdown with Australian sales falling 15% during the June quarter. The fall in demand was attributed to disruptions in the logistics of the daigou trade into China as well as panic buying in the months prior sapping sales.

Despite the fall in Australian sales, the company reported a 32% increase in gross revenue of $62 million for FY20. In addition, Bubs saw China Direct sales for the fourth quarter increase 26% on the prior corresponding period. Although the company reported a negative operating cash flow of $6.9 million for the quarter, Bubs assured shareholders of its robust balance sheet, boasting $26 million in cash reserves.

Will the Bubs share price become the next Blackmores?

In my opinion, Bubs is still in the early stage of expansion in its core products of goats milk infant formula. This is because revenue is still driven by the company’s expansion into different markets, different sectors and higher margin products. By moving into the VMS sector, the company is following its growth blueprint, however it is yet to produce consistent operating and free cashflow.

Instead of jumping the gun and buying in at today’s Bubs share price, I think a more prudent strategy would be to wait until the company reports its full-year results or perhaps take a longer view and wait for the company to show signs of sustainable cash flows.  

More reading

• 3 coronavirus ASX shares to buy right now
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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited and BUBS AUST FPO. 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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In this article I’m going to talk about three ASX dividend shares with income yields of more than 5%.

I think that ASX dividend shares are the only answer for people looking for income. The RBA interest rate is almost at 0%. That’s not going to generate much interest from a bank account.

These three ASX dividend shares offer yields that are at least 5% better than the RBA rate and I think they’re trading at pretty good value:

Rural Funds Group (ASX: RFF)

Rural Funds is a real estate investment trust (REIT) that owns agricultural land and leases it to high-quality operators. Some of its tenants include Select Harvests Limited (ASX: SHV), Treasury Wine Estates Ltd (ASX: TWE), Olam and JBS. It owns various farm types including cattle, cotton, macadamias, vineyards and almonds.

The resilience of farmland has shown through during this difficult COVID-19 period. We all need to eat, so Rural Funds and its tenants can still expect demand for the produce. Rural Funds was able to stick to its 4% distribution growth guidance in FY20 and FY21. The farmland REIT tries to grow its distribution by 4% every year.

The ASX dividend share has increased its distribution every year since it started paying one several years ago. The distribution can grow because of the built-in rental indexation that is included in Rural Funds’ rental contracts. The rental income increases by either a fixed 2.5% per annum or it’s linked to CPI inflation, plus market reviews.

At the current Rural Funds share price it offers a FY21 yield of 5.6%.

WAM Leaders Ltd (ASX: WLE)

WAM Leaders is a listed investment company (LIC) that invests in large cap ASX shares on behalf of its shareholders.

It’s not just a passive holder of shares. It actively trades, so it’s possible to make good returns even in volatile (mostly negative) periods. FY20 is a great example of WAM Leaders’ capability to outperform. In the year to 30 June 2020 WAM Leaders’ investment portfolio returned 2.7% (before expenses, fees and taxes), outperforming the S&P/ASX 200 Accumulation Index by 10.4% which returned a negative 7.7%.

The ASX dividend share can turn its investment returns into a smoothed dividend for shareholders. That dividend has grown every year since FY17 when it started paying a dividend.

At the end of June 2020 some of its largest positions included shares like Newcrest Mining Limited (ASX: NCM), OZ Minerals Limited (ASX: OZL), Wesfarmers Ltd (ASX: WES), Woolworths Group Ltd (ASX: WOW), CSL Limited (ASX: CSL), Goodman Group (ASX: GMG), BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO).

Thankfully it’s trading at a discount to its net tangible assets (NTA) of $1.176 per share at 30 June 2020. At the current WAM Leaders share price of $1.16, the ASX dividend share offers a grossed-up dividend yield of 8%.  

Vitalharvest Freehold Trust (ASX: VTH)

Vitalharvest is another agriculture-related REIT. At the moment it owns some of the largest berry and citrus farms in the country, which are leased to Costa Group Holdings Pty Ltd (ASX: CGC). The ASX dividend share has a profit share agreement with Costa, so it also suffers in bad years and benefits in good years.

I think Costa and Vitalharvest are likely to report improving operating profit numbers over the next 12 months. Despite a difficult period, at the current share price Vitalharvest still offers a distribution yield of 6.1%. A return to 2019’s profitability could mean a distribution of 5.65 cents per unit, equating to a yield of 7.2%.

I think Vitalharvest’s distribution outlook and share price could improve over the next 12 months as the new manager shifts the REIT towards assets that are used in the food supply chain process.

Primewest Group Ltd (ASX: PWG) is looking for assets that are used for food processing and food storage, on top of the usual farmland targets.

At 31 December 2019 it had a net asset value (NAV) of $0.95 per share. That means the Vitalharvest share price is trading at an 18% discount to the NAV, assuming the NAV hasn’t changed since then.

Foolish takeaway

I like all three of these dividend shares for income. Rural Funds has the most reliable distribution in my opinion. WAM Leaders has proven to be a solid performer. Vitalharvest could be the best value buy as it’s trading cheaply compared to its assets. I don’t think the market is appreciating how much value Vitalharvest offers investors at the moment.  

More reading

• 3 quality ASX dividend shares to buy in August
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• Why I would buy Coles and these ASX dividend shares today
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• Where I’d invest $9,000 in ASX shares

Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO, RURALFUNDS STAPLED, and Treasury Wine Estates Limited. 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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