May.24 — Hong Kong protesters battled with riot police in busy downtown areas on Sunday, showing their opposition toward China’s dramatic move to crack down on dissent in the biggest demonstration since the coronavirus swept through the city in January. Stephen Engle reports on “Bloomberg Daybreak: Australia.”
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At the weekend I looked at how $20,000 investments in a number of ASX shares have fared over the last decade.
Given the success of these investments, today I thought I would look at a few shares which I think investors ought to invest $20,000 into today for the next 10 years.
Here why I think these three top ASX shares could provide strong returns for investors:
Bravura Solutions is a fintech company providing software and services to the wealth management and funds administration industries. The key product in its portfolio is the Sonata wealth management platform. Sonata allows users to connect and engage with their clients anytime, anywhere, through computers, tablets or smartphones. It is proving to be very popular with financial institutions due to the way it simplifies legacy client systems into one unified customer-centric solution. Also supporting its growth in the future will be the recent acquisitions of Midwinter and Finocomp. These have strengthened its offering and opened the company up to new and lucrative markets.
Another option for that $20,000 investment is Jumbo. It is an online lottery ticket seller and the operator of the Oz Lotteries website. Its shares have fallen heavily in recent months due to concerns over its slowing growth. However, this has been caused by an increased investment in the future growth of its software-as-a-service (SaaS) business. I think this selling has been overdone and created a buying opportunity for investors. Especially when you consider its massive market opportunity. Last year management noted that approximately 7% of the world’s lottery tickets are sold online. This implies that 93% of a ~US$300 billion global market has yet to transition online. Jumbo is aiming to grow its ticket sales to $1 billion per annum by FY 2022, which is still only scratching at the surface of the overall market.
Another ASX share for investors to consider investing $20,000 into is NEXTDC. I think it is a great way to gain exposure to the rapidly growing cloud computing market. This is because NEXTDC’s world class data centres have been experiencing a material increase in demand for capacity over the last few years. And with more infrastructure expected to shift over to the cloud in the next decade, it looks well-positioned to profit greatly.
And here is a fourth option that could provide investors with very strong long term returns. No wonder this leading analyst is urging investors to go all in with it…
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James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Bravura Solutions Ltd. The Motley Fool Australia has recommended Bravura Solutions Ltd 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 Fortescue Metals Group Limited (ASX: FMG) share price will be on watch today as news broke on Saturday that the company had increased its stake in Cadente Copper to 20%. This cements its right to preserve its stake through future capital raisings and moreover, to participate in debt issues. The company is exploring a copper-gold porphyry in Peru.
Argentina and Ecuador are also part of Fortescue’s exploration program.
I have worked for Andrew Forrest in the past. Like anybody else, I have worked out that when he sees something in the distance in mining, then he is probably correct.
He went against the odds at Murrin-Murrin with the laterite nickel-cobalt mine, which required a massive and highly technological processing operation. In the past 4 years, nickel has been the stand out performer in base metals. He also went against the odds in the Pilbara mining low-grade ore using surface excavation machines. This was unheard of.
Regardless of the current situation, copper is likely to see strong demand in the decade to come on the back of its increase in use for electric vehicles and batteries, as well as continued growth in China and India. As for gold, the precious metal is likely to see sustained high prices. The combination of uncertainty, large volumes of quantitative easing, and low interest rates work in unison to keep gold high.
It is hard to recall a week when Fortescue wasn’t up to something new or visionary over the past decade. At the recent Macquarie Conference, it covered its future plans. The US$1.3 billion Eliwana project. The US$2.6 billion Iron Bridge project. A US$800 million investment in energy infrastructure, including 275 kilometres of transmission lines and 150 megawatts of solar-powered generation. As always, Fortescue supports local suppliers and local contractors.
Over the past decade, Fortescue has achieved some truly impressive compound annual growth rates (CAGR). These include 14.1% for sales, 16.8% for cash flow, 17.6% for earnings per share, and a share price CAGR of 10.8%.
At the time of writing, Fortescue is trading at a very low price-to-earnings ratio of 5.49. This is a level well below its 10-year average of 10. At this low price, you also get a company that has a dividend CAGR of 36.3% and a 12-month trailing dividend yield of 7.36%.
Regardless of any sabre rattling that goes on between the great powers, only Australia can fulfil the iron ore quantities and qualities required by China. Over the medium term, when the current tensions have subsided, I believe Fortescue will still be one of the engines of the Australian economy.
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Motley Fool contributor Daryl Mather owns shares of Fortescue Metals Group 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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May.24 — Governor Andrew Cuomo says he doesn’t “believe this economy just bounces back” even as he marks new steps in reopening New York, and urges the state to rebuild better after the nation’s worst outbreak of Covid-19. He speaks at Jones Beach on Long Island. (Excerpts)
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If you want income then you should replace your term deposit ASX dividend shares.
Term deposits were earning more than 5% not too long ago. But those days are long gone. Term deposits are obviously still a good idea if you’re looking for capital protection. But eating into your capital to pay for your life expenses because the interest rate is so low isn’t a good prospect!
Shares come with risks of course. There are plenty of shares I wouldn’t suggest because of how unstable the dividend may be. I’d only go for ASX dividend shares that may be able to offer very reliable dividends during this coronavirus period:
‘Soul Patts’ is one of the best ASX dividend shares out there, perhaps the best, for dividend reliability. How does the dividend record stack up? It has increased its dividend every year since 2000. It has paid a dividend every year since listing in 1903. That’s a great record!
The investment conglomerate owns shares that are likely to keep paying the dividend (and hopefully growing it) during this period. Shares like TPG Telecom Ltd (ASX: TPM) and Brickworks Limited (ASX: BKW) are two of the biggest sources of investment income for Soul Patts. Both of those shares increased the dividend in the recent results.
I think Soul Patts could be the best ‘set and forget’ individual ASX dividend share because its investments will evolve over time to focus on growing opportunities. It currently offers a grossed-up dividend yield of 4.7%.
Rural Funds is an agricultural real estate investment trust (REIT) that owns a variety of farm types including cattle, cotton, vineyards, almonds and macadamias.
I think it’s a great ASX dividend share for two key reasons. The first is that it aims to increase its distribution by 4% a year. I think this is attractive because it’s comfortably more than inflation. The second reason I like Rural Funds is that its forecast FY21 distribution yield is 5.9%. I think that’s a solid yield in this environment.
The contracted rental indexation and strategy of investing into its farms for productivity improvements are powerful forces for growing the distribution.
Rural Funds’ distribution is funded by the cash net rental profit. Around 20% of that rental profit is currently being re-invested for more growth.
APA Group is another ASX dividend share that has a very strong income growth record for investors. It has increased its distribution every year for a decade and a half.
I’ll tell you what APA Group is. It owns a vast network of 15,000km of natural gas pipelines around Australia with a presence in every mainland state and the Northern Territory. It also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms). APA owns, or manages and operates, a portfolio of assets worth more than $21 billion and delivers half the nation’s natural gas usage.
The infrastructure giant’s distribution is entirely funded by its cashflow. That cashflow is steadily growing over the years as new projects and investments come online. APA Group is looking for new opportunities both in Australia and in the US. It has already reconfirmed the annual distribution guidance for FY20 of 50 cents per unit, translating to a distribution yield of 4.5% today.
I believe each of these income ideas are great picks for long-term dividends. I’d be comfortable owning them for many years and I think they’ll provide growing income compared to a term deposit, with a much better starting yield. At the current share prices I’d definitely choose Soul Patts first.
But there are other top dividend shares on the ASX, just like these wonderful ideas:
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This fully franked “under the radar” company is currently trading more than 24% below its all-time high and paying a 6.7% grossed-up dividend.
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Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of APA Group. 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 S&P/ASX 200 (INDEXASX: XJO) finished the week up 1.8% on Monday’s opening level. This was against a backdrop of continuing trade tensions with our largest trade partner, April figures showing a 17.9% drop in April sales, and Wesfarmers Ltd (ASX: WES) announcing mass closures of Target stores nationally, and the big 3 iron ore miners rising approximately 4% under trade threats.
The ASX is clearly in a bizarre place. Like most of the world we take our lead from the US stock exchanges; which are being driven largely by the large tech shares.
These are some of the bigger news stories in ASX 200 trading last week that went almost totally under the radar.
The Alliance Aviation Services Ltd (ASX: AQZ) share price had a truly phenomenal week, rising 27.96% over the week. On Wednesday the company retracted its suspension of guidance due to Covid-19. It announced it was on target for a profit before tax of over $40 million. The company has been buoyed by its fly-in-fly-out services to resource companies and record charter flights. Alliance was floated as a takeover target for Qantas Airways Limited (ASX: QAN) last year.
Takeovers in general have been sparse since the start of the pandemic. The Village Roadshow Ltd (ASX: VRL) share price leapt a further 16.9% last week on the back of news about a conditional buyout offer by BGH Capital. The offer still represents a premium of 12.5% to Friday’s closing price.
Criticism of the opportunistic and predatory nature of the offer by US investor and 5% stakeholder Mittleman Brothers raised the spectre of a second offer for the embattled entertainer.
The Worley Ltd (ASX: WOR) share price was another ASX 200 winner this week. It jumped by 12.42% over last week. The rising WTI oil price combined with the announcement of two global framework agreements with BP International raised the likelihood of strong near term performance.
The A-REIT sector was among the ASX 200 winners last week across the board. The Stockland Corporation Ltd (ASX: SGP) share price rose 11.64% over the week. A very confident Stockland CEO Mark Steinert was interviewed by the ABC on Wednesday. He discussed rising trends in foot traffic and the progress around difficulties with Premier Investments Limited (ASX: PMV). Steinert also spoke positively about the residential real estate market.
Likewise the Scentre Group (ASX: SCG) share price rose by 10.89%. Scentre announced the successful raising of AUD$2.3 billion from the US bond markets on May 20.
As well as the ASX 200 winners, last week also saw a few share price falls. However, the magnitude of share price slides has been lower than what we have come to expect.
The Austal Limited (ASX: ASB) share price fell by 9.74% over the week. Investors are still reeling from the company’s loss of a competitive tender worth US$5.5 billion to Italy’s Fincantieri (FCT.MI).
Transmission utility Ausnet Services Ltd (ASX: AST) saw its share price drop by 6.84% over the week. The company had recently announced it was looking into equity raising as one of its options to fund growth. The market is treating the share is if this process has commenced.
Regis Resources Limited (ASX: RRL) saw its share price fall by 5.5% despite a wave of good news over the past month.
CSL Limited (ASX: CSL) also saw its share price fall by 5.49% last week. Likely as a result of investors taking profits off the table.
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One is a diversified conglomerate trading 40% off it’s all-time high, all while offering a fully franked dividend yield of over 3%…
Another is a former stock market darling that is one of Australia’s most popular and iconic businesses. Trading at a significant discount to its 52-week high, not only does this stock offer massive upside potential, but it also trades on an attractive fully franked dividend yield of almost 4%.
Plus, this free report highlights 3 more cheap bets that could position you to profit in 2020 and beyond.
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Daryl Mather owns shares of Austal Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited and CSL Ltd. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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I continue to believe that income investors would be better off with ASX dividend shares than term deposits.
Especially given the outlook for interest rates in Australia. According to the latest weekly economic report by Westpac Banking Corp (ASX: WBC), it continues to see the cash rate remaining at 0.25% for a long time to come.
But which ASX dividend shares should you buy? Here are three that I would snap up today:
The first ASX dividend share to consider buying is BWP. It is a real estate investment trust with a focus on warehouses. Most of BWP’s warehouses are leased to hardware giant Bunnings, which is owned by Wesfarmers Ltd (ASX: WES). Interestingly, Wesfarmers is also a major BWP shareholder with a ~23.6% stake. I think this is a big positive as it is unlikely to do anything (vacate properties en masse, etc) that would negatively impact BWP’s performance and share price. At present I estimate that it offers investors a forward 5.2% yield.
Another ASX dividend share to consider buying is Commonwealth Bank. Although the banks are struggling right now because of the pandemic, with the economy now reopening, I’m optimistic that the worst is behind them. Especially after they collectively announced billions of dollars of provisions over the last few weeks. And while Commonwealth Bank will almost certainly be forced to cut its dividend in FY 2021, the pullback in its share price means it is likely to still provide a very generous yield. I estimate that its shares offer a forward fully franked yield of 6.2%.
A final dividend share to consider buying is Rio Tinto. It feel it would be a great option for income investors that are not averse to investing in the resources sector. The mining giant has been a strong performer over the last few years and looks set to continue this trend in FY 2020. Especially given how iron ore prices remain at lofty levels despite the pandemic. I expect this to lead to strong free cash flows and big dividends for shareholders. In fact, last week Morgans suggested that iron ore prices could continue to rise and believes its shares currently offer a fully franked ~9% FY 2021 dividend yield.
And here is another dividend share which looks well-positioned to grow strongly during the pandemic. This could make it a must buy for income investors..
NEW: Expert names top dividend stock for 2020 (free report)
When our resident dividend expert Edward Vesely has a stock tip, it can pay to listen. After all, he’s the investing genius that runs Motley Fool Dividend Investor, the newsletter service that has picked huge winners like Dicker Data (+92%), SDI Limited (+53%) and National Storage (+35%).*
Edward has just named what he believes is the number one ASX dividend stock to buy for 2020.
This fully franked “under the radar” company is currently trading more than 24% below its all-time high and paying a 6.7% grossed-up dividend.
The name of this dividend dynamo and the full investment case is revealed in this brand new free report.
But you will have to hurry — history has shown it can pay dividends to get in early to some of Edward’s stock picks, and this dividend stock is already on the move.
More reading
Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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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