I think that WAM Microcap Limited (ASX: WMI) is a retiree’s dream dividend share.

Plenty of retirees just have a portfolio stuffed full of ASX blue chips that (normally) provide a high level of dividend income.

Popular names include Westpac Banking Corp (ASX: WBC), BHP Group Ltd (ASX: BHP), Telstra Corporation Ltd (ASX: TLS), National Australia Bank Ltd (ASX: NAB), Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ), Wesfarmers Ltd (ASX: WES) and Woodside Petroleum Limited (ASX: WPL).

If someone is just going to go for high yield blue chip ASX dividend shares then they may as well just pick Vanguard Australian Shares High Yield ETF (ASX: VHY) and save on a lot of paperwork.

But I think WAM Microcap could be one of the best picks for dividend income for retirees.

About WAM Microcap

It’s a listed investment company (LIC) which is operated by the high-performing team at Wilson Asset Management (WAM).

WAM operate plenty of LICs like WAM Capital Limited (ASX: WAM), WAM Research Limited (ASX: WAX) and WAM Leaders Ltd (ASX: WLE).

All of the WAM LICs have a reputation for being good dividend shares. As a retiree, it’s attractive to receive a high level of franked dividend income. Obviously you’re getting more income from your capital, but it’s also useful because retirees are usually in a low income tax bracket – so they get the best benefit from franking credits.

WAM Microcap targets small caps on the ASX, typically ones with market capitalisations under $300 million at the time of purchase.

Why I think it makes sense for retirees to own this LIC

Every LIC works the same way. They generate investment returns, which enables them to pay out a smoothed dividend over time.

LICs are very useful because it means we don’t have to make the investment decisions ourselves. There are high quality investment managers working for us.

The most important thing that matters with LICs is how strong the total (net) returns are and how good the dividend is. You can’t pay a good dividend if the investment returns are rubbish.

WAM Microcap has already been a strong performing ASX dividend share. I think it can continue to generate very good returns. The small cap hunting ground can be very prosperous because there aren’t many investors looking at those small shares. It also helps that many small businesses have a long growth runway ahead of them. Every large business was a small business at some point.

Returns

Despite the COVID-19 market selloff, at 31 May 2020 WAM Microcap’s portfolio had generated a gross return of 14.3% per annum since inception. That meant, before fees, expenses and taxes, WAM Microcap had outperformed the S&P/ASX Small Ordinaries Accumulation by 7.5% per annum since June 2017.

WAM Microcap is active with its investment picks. The investment team is always looking for the next best performer. They also have regular meetings with the management of lots of different businesses. 

The strong investment returns have powered the dividend in the first few years of its existence.

Dividend 

In FY18 it paid an ordinary annual dividend of 4 cents per share, plus a 2 cents per share special dividend. In FY19 it paid an ordinary annual dividend of 4.5 cents per share, plus a 2.25 cents per share special dividend.

The ASX dividend share is on track to pay an ordinary annual dividend of 6 cents per share in FY20.

That means at the current share price of $1.23, it offers a grossed-up dividend yield of 7% for FY20.

Current share portfolio

You may be interested to know some of the shares that WAM Microcap owned at 31 May 2020.

Some of the biggest positions at the end of last month were: AMA Group Ltd (ASX: AMA), Baby Bunting Group Ltd (ASX: BBN), City Chic Collective Ltd (ASX: CCX), Objective Corporation Limited (ASX: OCL), Superloop Ltd (ASX: SLC) and Temple & Webster Group Ltd (ASX: TPW). I like this group. It’s diversified with very good growth potential. 

Foolish takeaway

WAM Microcap could be one of the best ASX dividend shares for income over the next decade. I believe that good dividends will only be paid by those businesses generating strong profit in the coming years. I think WAM Microcap is one of those good dividend opportunities.

More reading

• Have $1,000? You should pick one of these 8 ASX shares
• How to replace your entire wage with dividends
• Why I’m not afraid to invest in shares during this recession
• Got $50,000 to invest for income? Pick these 5 ASX dividend shares
• 10 top ASX growth shares to buy in June for strong returns

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 Objective Limited, SUPERLOOP FPO, and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Temple & Webster Group Ltd. 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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Globally equity markets have seen a return to volatility as COVID-19 takes centre stage again. Lately, equity markets had seemed to factor in that the worst of the pandemic was behind us. The possibility of a second wave was always discussed by both health professionals and governments, but was evidently not priced into the equity market valuations.

With a resurgence in infection numbers in locations like Beijing and the United States (US), talk of a second wave has intensified and spooked equity markets. This comes at a time when the World Health Organization has stated that the first wave is yet to peak in certain regions like South America. So, it increasingly looks like that, until a vaccine comes out, the world will have to live with the active infections for longer than anticipated. The great influenza of 1917 that started in the US saw multiple waves – many health professionals and historians believe that COVID-19 could also unfold in a similar pattern.

For investors like us, this means share markets will likely rise and fall in line with the COVID-19 waves. Smart investors should be looking for resilient shares that can outperform the broader market – even during times of global uncertainty. In my opinion, one such share is Woolworths Group Ltd (ASX: WOW).

How has Woolworths performed recently?

Over the last year, Woolworths shares have generated a return of 9.10% while the S&P/ASX 200 Index (ASX: XJO) has seen a negative return of 11.50%. An outperformance of more than 20% in a year during turbulent times like this can add a lot of resilience to your ASX investment portfolio. And considering its industry and business model, Woolworths shares have the potential to continue to outperform, in my view.

Even as other industries suffer because of a slowdown in the economy and lower disposable incomes, Woolworths should continue to see largely stable revenues as much of its operations are in sectors that cater to consumers’ daily necessities. It is largely discretionary items like holidays that suffer the most when disposable incomes decline. Woolworths does have exposure to this segment through its hotels business, but overall its other consumer retail sectors should keep the ship stable and sailing ahead.

This optimism is also reflected in the company’s plans to invest in supply chain transformation. On 23 June, Woolworths announced it will be developing an automated regional distribution centre and a semi-automated national distribution centre at Moorebank Logistics Park in Sydney. The company expects construction to be completed by the end of 2023, and expects to realise initial benefits from the new distribution centres in financial year 2025.

The 2 sites are expected to materially increase Woolworths’ supply chain capacity and improve its efficiency. The company plans to invest around $700–$780 million in setting up these facilities – an investment it expects will result in a significant reduction in its supply chain costs over time.

During the first half of FY2020, Woolworths’ Australian food business saw a growth of 6.4% over the corresponding period last year. Its New Zealand food business growth stood at 4.8% for the same period, while its BIG W and Endeavour drinks business grew by 2.8% and 4.7%, respectively.

When most companies are showing sharp declines in absolute revenue numbers during the same period, it’s pleasing to see that Woolworths has delivered positive growth numbers. However, given the steady demand for its products, there could be a potential concern around how fast Woolworths can replenish its inventory, in the light of global supply chain disruptions. This is something to watch out for in the near future.

In its most recent trading update, Woolworths also reported that hotels have begun to reopen as lockdown restrictions ease, but noted that around two-thirds of its venues are in Victoria and Queensland where operating conditions remain restricted, particularly for gaming. The company stated that, as a result, “sales remain materially below prior year levels and the Hotels business is expected to continue to be loss-making until more venues operate with a full-service offer.”

Are Woolworths shares a good long-term investment?

I believe Woolworths is very well positioned to weather the COVID-19 storm, even if the pandemic unfolds in multiple waves. Its business operations (except for hotels) should be able to remain stable and even grow their revenues. With Woolworths investing in improving its supply chain efficiencies, more of those revenues would flow to the bottom line.

With a price-to-earnings ratio of 18.13 times and dividend yield of 2.83%, I believe Woolworths shares are an attractive investment opportunity. The Woolworths share price currently sitting at $36.43 per share, putting its market cap at $46.01 billion.

More reading

• The latest ASX shares to be upgraded by top brokers to “buy”
• Why Qantas and this other ASX 200 stock were just downgraded by top brokers
• Brokers name 3 ASX 200 shares to buy today
• ASX 200 rebounds 1.1%: Big four banks charge higher, Qantas sinks after raising $1.4bn
• REA Group share price has charged 60% since the market bottomed

Motley Fool contributor Arpan Ranka has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths 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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Private health insurance is big business in Australia. Depending on your income, the government has various tax advantages and penalties in place that encourage a private health insurance membership. But how does this translate into a good investment?

Most ASX companies would bend over backwards to enjoy the same kind of governmental encouragement that private health companies enjoy. And that’s why (despite some significant headwinds for the sector), I think it’s a great place to find a quality, long-term investment.

But which one to choose?

Of the dozens of private health providers out there, there are only 2 that are listed on the ASX in their own right: Medibank Private Ltd (ASX: MPL) and NIB Holdings Limited (ASX: NHF).

So let’s put these 2 companies under the microscope.

Private health market share

According to a 2019 government ombudsman report, Medibank commands the largest share of the private health market of any provider with a 26.9% share. In comparison, NIB is a minnow, with just an 8.6% share. Looking at both Medibank and NIB’s market capitalisation, we can see this reflected. Current share prices tell us that (at the time of writing) Medibank is valued at ~$8.28 billion, while NIB is valued at $2.14 billion. I always prefer a company that commands the lion’s share of its market, so I’m going to give this one to Medibank.

Winner: Medibank

Growth

Despite its smaller size, NIB looks to be the fund that offers the best growth performance. Between the 2018–2019 financial years, NIB grew its gross revenue from $2.27 billion to $2.46 billion (roughly 8.4%). In contrast, over the same period, Medibank lost revenue, which fell from $7.01 billion in FY18 to $6.75 billion in FY19 (a rough 3.7% decline).

Winner: NIB

Dividend

Private health insurers have historically been strong dividend shares to own for income. So let’s have a look at each company’s dividend offerings today. On current prices, Medibank shares are offering a trailing yield of 4.36%. Meanwhile, NIB shares are treating investors to a trailing yield of 4.9%. Since both shares come with full franking credits, I’ll have to give the edge here to NIB.

Winner: NIB

Valuation

It’s always nice comparing 2 companies in the same industry on valuation grounds, as we can accurately get a feel for how the market is valuing each company. So on current share prices, Medibank going for $3 a share, which gives the share a price-to-earnings (P/E) ratio of 19.39. In contrast, NIB shares are today asking $4.70, which gives them a P/E ratio of 16.14. This tells us that the market is viewing a dollar of earnings from Medibank as more valuable than a dollar of earnings from NIB. There are many factors that influence a P/E ratio, including future growth prospects, dividend yields and branding. But since NIB shares are cheaper by the P/E ratio metric, I’ll have to give this one to NIB as well.

Winner: NIB

Foolish takeaway

Well, the results are in and it appears NIB has pipped Medibank to the post for this rudimentary comparison. I think both companies are top-notch Australian businesses that would both make good investments. But NIB appears to be growing faster than Medibank, has a higher dividend yield and a cheaper valuation. I do like that Medibank is the industry leader, but I think this is more of a function of its history of government ownership than anything else. If I were to choose between Medibank and NIB, I would probably have to go with NIB.

More reading

• What are the best ASX shares for dividends?
• Can these 5 FY20 dogs of ASX 200 bounce back in the new financial year?
• Fund managers have been buying these ASX shares
• 3 high yield ASX dividend shares for income
• NIB Holdings and 1 other ASX share which I would consider buying for growth and income

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has recommended NIB Holdings 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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I like to keep an eye on substantial shareholder notices. This is because these notices give you an idea of which shares large investors, asset managers, and investment funds are buying or selling.

Two notices that have caught my eye today are summarised below. Here’s what these fund managers have been buying:

Estia Health Ltd (ASX: EHE)

A notice of change of interests of substantial holder shows that Perpetual Limited (ASX: PPT) has been topping up its position in this aged care operator during the pandemic. The fund manager has been buying shares over the last three months, but particularly at the height of the pandemic. Perpetual bought as low as 91 cents in March and has been buying as recently as last week for $1.59 per share.

In total the fund manager picked up almost 3.5 million shares, increasing its holding to 35,259,135 shares. This equates to a 13.49% stake in the company. It appears to see value in Estia Health’s shares after a 40% pullback over the last 12 months.

Viva Leisure Ltd (ASX: VVA)

A notice of initial substantial holder reveals that WAM Capital Limited (ASX: WAM) has been buying this health club operator’s shares since the middle of May. This follows a significant sale of shares during March and April when Viva Leisure’s future looked bleak because of the pandemic.

But with gyms now reopening and social distancing restrictions easing rapidly, the fund manager appears confident in the future. The notice reveals that WAM owns a total of 3,764,233 shares across its funds, which represents a 5.25% stake in the company. Earlier this month Viva Leisure raised $25 million to strengthen its balance sheet and pursue future acquisitions. Judging by its shareholding, WAM appears to believe this is a good strategy for the company to take.

More reading

• My 3 high-yield ASX dividend shares to buy now
• These are the 10 most shorted ASX shares
• Short-sellers are stepping up their attack against these popular ASX shares
• ASX 200 up 0.9%: Big four banks rebound, Appen hits record high
• Fund managers have been buying these ASX shares

Motley Fool contributor James Mickleboro 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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Finding quality ASX dividend shares in 2020 is a difficult task. And finding such shares offering a sustainable dividend yield above 8% is even harder. Dividend streams from former ASX dividend heavyweights like Ramsay Health Care Limited (ASX: RHC), Westpac Banking Corp (ASX: WBC), Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD) have all but dried up in 2020. In my view, we will probably see more dividend deferrals, suspensions and cancellations over the remaining course of the year.

But don’t despair, income investors! I’ve found 2 ASX dividend shares currently offering trailing, grossed-up dividend yields above 8% today. What’s more, I think that these 2 shares will be able to sustain and grow their payouts going forward.

An iron-fuelled, ASX dividend giant

Fortescue Metals Group Limited (ASX: FMG) is my first ASX dividend share to consider today. Unlike most other ASX companies, Fortescue’s earnings in 2020 have been turbocharged by a pricing boom in its primary commodity of iron ore. According to its last annual report (2019), Fortescue’s average cost of extracting one tonne of iron ore was between US$12-13. Considering iron ore is today selling for around US$101 per tonne, there’s a lot of cash flowing into Fortescue’s coffers right now. Today, Fortescue shares are offering a trailing yield of 7.14%, or 10.2% grossed-up with franking. I also fully expect this yield to increase going forward if iron ore prices remain near their current levels.

An ASX energy stalwart

AGL Energy Limited (ASX: AGL) is my second ASX dividend share to consider today. AGL is the largest generator and supplier of electricity and gas in the country. Utility shares like AGL aren’t normally known for their growth prospects, but then that’s not why we’re here today!

AGL’s last interim dividend, which was paid in March this year, came in at 47 cents per share. Its last final dividend, paid in September 2019, was 64 cents per share. Putting these two together, we get a trailing dividend of $1.11 per share. That, in turn, gives us a yield on today’s share price of 6.63% or 8.9% grossed-up with AGL’s 80% franking. Electricity and gas are highly inelastic goods that don’t tend to see dips in demand during economically tough times. This leads me to conclude that AGL’s dividend payments should continue around their current levels in 2020 and beyond. The company has also been buying back its own shares in recent weeks, which I think is a further indication that AGL’s dividend will be safe in 2020.

Foolish takeaway

Both AGL and Fortescue are strong companies that I think will continue to provide investors with robust dividends throughout 2020 and beyond. With the carnage that coronavirus has wreaked on the ASX dividend scene, I think having strong companies like these in one’s portfolio today would deliver massive benefits for an income investor.

More reading

• Here are 5 rebound shares to buy with $5,000
• These top ASX dividend shares could be great option for income investors
• Transurban Group and 1 other ASX share I’d buy in another share market crash
• Where to invest $10,000 in ASX 200 shares for 2030
• Is a Fortescue Metals mega-merger on the cards?

Motley Fool contributor Sebastian Bowen owns shares of Ramsay Health Care Limited. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Ramsay Health Care 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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ASX dividend shares are a great place to generate income from your money.

Cash in the bank just isn’t making enough money these days. Savings accounts are still the best place to protect your capital from harm in the short-term, but a return of 2% isn’t going to cut it for the long-term.

But I wouldn’t just go for any ASX dividend share that has a decent dividend yield. There are positives and negatives to high dividend yields.

I’d only want to go for shares that look like they can sustainably maintain and increase the dividend:

Share 1: WAM Leaders Ltd (ASX: WLE)

WAM Leaders is a listed investment company (LIC) which invests in the larger businesses on the ASX.

However, it doesn’t behave like a passive exchange-traded fund (ETF). It actively changes its holdings so that it can try to outperform the market. At the end of May 2020 it had outperformed the S&P/ASX 200 Accumulation Index since inception by 3.8% per annum before fees, expenses and taxes.

The ASX dividend share is able to turn that strong performance into smoothed dividends for shareholders. WAM Leaders has grown its dividend every year since FY17. It was only launched in May 2016.

Some of the shares that it owned in its portfolio at 31 May 2020 were: Amcor Plc (ASX: AMC), CSL Limited (ASX: CSL), Downer EDI Limited (ASX: DOW), Fortescue Metals Group Limited (ASX: FMG) and Wesfarmers Ltd (ASX: WES).  

It currently has an annualised grossed-up dividend yield of 8.8%.

Share 2: Rural Funds Group (ASX: RFF)

Rural Funds is an agricultural real estate investment trust (REIT). It owns a variety of farm types including cotton, cattle, almonds, macadamias and vineyards.

The REIT has rental indexation built into all of its rent contracts. The rent is contracted to grow by a fixed 2.5% per annum or by CPI inflation, plus market reviews.

It’s largely this built-in rental growth that allows management to forecast that the distribution can grow by 4% per annum.

Another factor for the growth is that Rural Funds invests in productivity improvements at its farms to help the tenant, whilst also boosting the rental income potential and value of the farm. The ASX dividend share only pays out about 80% of its net rental profit each year, allowing the other 20% to be utilised for the farm improvements.

Rural Funds has forecast that the FY21 distribution will be 11.28 cents per unit, which equates to a forward yield of 5.5%.

Share 3: Brickworks Limited (ASX: BKW)

Brickworks has paid a dividend every year that it has been listed on the ASX. It also hasn’t cut its dividend for 40 years. I think that’s a great wonderful record.

The diversified property business has a number of interesting elements which should support the current dividend and enable future dividend growth.

It owns a large chunk of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares. The investment conglomerate itself provides Brickworks with a consistently-growing dividend.

Brickworks also owns a 50% stake of an industrial property trust along with Goodman Group (ASX: GMG). Amazon may soon be a tenant at the Oakdale West Estate in Kemps Creek with one of the largest online fulfilment warehouses in the country.

The ASX dividend share is probably best known for being the market-leading brickmaker in Australia. It also sells plenty of other products including roofing, precast, paving and masonry. I think this division will continue to perform well once the economy returns to normal.

Finally, Brickworks recently expanded into the US by making three targeted acquisitions. It’s now the market leader in the north east of America.

Brickworks currently has a grossed-up dividend yield of 5.4%.

Foolish takeaway

Each of these ASX dividend shares have very attractive dividend yields. They also have a history of dividend growth. At the current prices I think it makes sense to go for WAM Leaders and Brickworks the most because they are trading at very good value compared to their pre-tax net tangible assets (NTA).

More reading

• Why I think Telstra and these ASX dividend shares are strong buys
• ASX 200 down 1.8%: CSL announces new acquisition, Qantas to raise $1.9bn
• 3 safe and strong ASX dividend shares for retirees to buy
• 2 ASX shares I plan to hold til I’m 100
• 3 dividend shares I’d buy to boost my income

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended Brickworks and RURALFUNDS STAPLED. 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 market may be bouncing back from yesterday’s steep losses. But not all stocks have been invited to the rally as brokers downgraded their recommendations on a handful of ASX shares.

The S&P/ASX 200 Index (Index:^AXJO) jumped by more than 1.5% in after lunch trade as every sector bar healthcare made gains.

Clipped wings

However, there are two notable ASX stocks that’s left behind and one of them is the Qantas Airways Limited (ASX: QAN) share price.

The flying kangaroo dived 7.8% to $3.86 at the time of writing and it isn’t only it’s discounted $1.9 billion capital raising that’s dragging on the stock.

Citigroup cut its rating on Qantas to “hold/high risk” from “buy/high risk” in the wake of the new share sale to pad its balance sheet during the unpredictable COVID-19 storm.

“We model a ramp-up in earnings and capacity from FY21e as the Australian Domestic market opens-up (2Q21e) and cost benefits are realized,” said the broker.

“However, the longer-term outlook remains considerably uncertain and extremely difficult to forecast.”

Uncertain flight path

Despite the downgrade and the dilution from the new share offer, the broker’s price target on Qantas jumps to $4.60 from $3.70 a share.

What’s interesting is that the new price target represents a near 20% upside from Qantas’ current share price.

But Citigroup warned that its forecasts (and by extension, its valuation) is subject to change as predicting when international travel will return is difficult in the current environment.

Running ahead of fundamentals

Another laggard today is the Western Areas Ltd (ASX: WSA) share price after UBS cut its recommendation on the stock to “neutral” from “buy”.

This is despite the broker’s favourable outlook for nickel – a key commodity produced by the miner.

But there may be too much good news already priced in. The Western Areas share price bounce by 62% since the market hit its bear market low point in March.

Waiting for new catalyst

The rebound is partly driven by an encouraging drilling result at the Western Gawler project, which was announced to the market this week.

“In response, we have chosen to lift our estimate of the value of exploration assets by $100m to $150m,” said the broker.

“This exploration result while encouraging is 1 drill hole and does not yet show results from assays with nickel grades. We would look for further detail before assigning more value here.”

UBS’s price target on Western Areas is $2.85 a share.

More reading

• Brokers name 3 ASX 200 shares to buy today
• Why Kogan, Myer, Orocobre, & Qantas shares are dropping lower
• ASX 200 rebounds 1.1%: Big four banks charge higher, Qantas sinks after raising $1.4bn
• REA Group share price has charged 60% since the market bottomed
• Share price winners and losers of the pandemic

Motley Fool contributor Brendon Lau 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 AMP Limited (ASX: AMP) share price is up 5.37% on Friday following an article published by The Australian last night. The article suggests that AMP, which has recently been flagged as a potential takeover target for Macquarie Group Ltd (ASX: MQG) and other financial services giants, is being watched by private equity. This comes as the AMP share price has seen dismal performance over the last few years.

What will a private equity takeover mean for AMP shareholders?

If a private equity takeover goes ahead, it will most likely mean that AMP shareholders will receive a cash payment for their shares. This would usually come at a premium to the market price, which currently sits at $1.87. Given that there is currently more than one suitor, this could suggest that potential buyers may need to bid higher in order to gain approval from AMP shareholders.

Currently, AMP appears to be preparing a defence. It has used an exemption to the Corporations Act 2001 to buy up AMP shares through a subsidiary. Previously, it had been disposing shares. If a takeover offer is mounted, this subsidiary’s voting power could reduce the likelihood of success. 

How has AMP performed lately?

In March, AMP withdrew its guidance for the 2020 financial year. However, it did announce that its liquidity and capital position remained strong. In 2019, AMP experienced a net loss of $2.5 billion as it wrote down the value of  assets and some of its investments. Underlying profit in 2019 was $464 million. 

AMP is soon to sell its life insurance business. As reported at the company’s annual general meeting last month, the proceeds from this will be used to fund the company’s strategy with surplus funds potentially being distributed to shareholders if conditions are favourable. Currently, AMP appears to be focused on its current strategy of creating a leaner business while improving its wealth management and AMP Capital businesses.

About the AMP share price

The AMP share price has recovered 73% from its 52 week low of $1.08, however, year to date it is still down by around 3%. AMP shares are down 10% since this time in 2019, reflecting the tough economic conditions as a result of the coronavirus pandemic. Longer-term, its share price has dropped 70% since 2015.

However, as takeover speculation mounts there is likely to be upward pressure on the share price. If media reports are correct, AMP is becoming the latest takeover target for 2020. 

More reading

• Why AMP, IOOF, Redbubble, & Westpac shares are charging higher
• Why AMP, Qantas, Qube, & Transurban shares are dropping lower
• ASX 200 finishes higher, Woolworths gives update
• Why the AMP share price is up 9% today
• Why AMP, FlexiGroup, Harvey Norman, & Qube shares are charging higher

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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The Kogan.com Ltd (ASX: KGN) share price is having a rare off day on Friday and is trading lower this afternoon.

At the time of writing the ecommerce company’s shares are down 3% to $14.51.

Why is the Kogan share price tumbling lower?

With no news out of Kogan or any relevant broker notes that I’m aware of, I suspect that today’s decline is likely to be down to profit taking.

After all, there have been very few shares performing as strongly on the ASX this year as Kogan.

Prior to today, the Kogan share price was up a whopping 100% since the start of the year and 334% from its March low.

Why is the Kogan share price on fire in 2020?

Investors have been scrambling to buy the company’s shares after the pandemic accelerated the shift to online shopping and put a rocket up its sales and profit growth.

During the third quarter Kogan reported a 30% lift in sales and a 23% lift in gross profit. This was driven largely by a 50% jump in sales and gross profit in March following the closure of retail stores nationally.

While this was strong, it soon turned out that Kogan’s growth was just warming up.

Its strong form continued into April, with the company growing its sales by more than 100% and its gross profit by more than 150%. The latter was despite the company investing heavily in building its brand and growing its active customers.

Those investments definitely paid off. Kogan grew its active customers by 139,000 during April to 1,948,000 customers.

But it doesn’t stop there. Even though retail stores have now opened again, Kogan has continued to deliver rapid sales growth.

At the start of June, quarter to date, the company’s sales were up over 100% and its gross profit was up over 130%. In addition to this, its adjusted EBITDA had increased by more than 200% quarter to date and its customer numbers had climbed by a further 126,000 to 2,074,000.

What else has been happening?

The company has taken advantage of its strong share price performance to undertake a $115 million capital raising.

Kogan decided to raise the funds to provide it with the financial flexibility to act quickly on future value accretive opportunities.

These opportunities are ones that it feels broaden its offering, expand its customer base, or enhance its operating model. Much like its acquisition of replica furniture and homewares retailer Matt Blatt for $4.4 million in May.

Is it too late to invest?

While I think the short term gains are gone now, I believe there is still an opportunity to invest with a long term view.

I think Kogan has the potential to grow materially in the future thanks to the shift to online, its strong market position, and expansion/acquisition opportunities.

Overall, I would class it as one of the best buy and hold options on the ASX today.

More reading

• Why Kogan, Myer, Orocobre, & Qantas shares are dropping lower
• Share price winners and losers of the pandemic
• Why Accent, CSL, Kogan, & Redbubble shares are pushing higher
• 3 high quality ASX shares I would buy if there were another market crash
• Coronavirus second wave potential could drive investment portfolio changes

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 has recommended Kogan.com ltd. 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 The Kogan share price has quadrupled in value since March: Is it too late to invest? appeared first on Motley Fool Australia.

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A spike in coronavirus cases in Victoria has triggered fears of a potential ‘second wave’ of infections. As a result, some supermarkets have re-introduced purchase limits on certain items as panic buyers swoop in. The fear has not only been restricted to shoppers, with global financial markets also seeing an increase in volatility.

Here are 2 ASX shares that could help your portfolio ride out a second wave of coronavirus infections.

Sonic Healthcare Limited (ASX: SHL)

Sonic Healthcare is the 3rd largest provide of clinical laboratory services in the world, with pathology and radiology services in Australia and 7 other countries. The coronavirus pandemic saw a drastic fall in pathology testing volumes as a result of reduced referrals from doctors and government-imposed restrictions.  

The Sonic share price has surged more than 48% from its low in late March and could be poised to go higher following a recent announcement from the company. Earlier this week, Sonic released a better than expected trading update with the company now expecting full-year 2020 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be in-line with last year.

With fears of a second wave growing, Sonic could see a further recovery in volumes and revenue as the company continues coronavirus testing. Sonic currently plays a crucial front-line role in Australia, the US and Europe by testing thousands of patients each day for COVID-19.  

ResMed Inc (ASX: RMD)

The ResMed share price is currently trading at all-time highs following a surge in demand for the company’s ventilators. In the 3 months to 31 March 31, ResMed tripled its ventilator production, producing more than 52,000 units in order to fulfil an urgent contract from the Australian Government.

ResMed went on to provide around 5500 invasive and non-invasive ventilators to Australia’s national stockpile. In addition, ResMed was one of the 6 companies named to help facilitate the production and supply of ventilators as the US after the country initiated its Defence Production Act.

With fears of a second wave of coronavirus infections emerging, the ResMed share price could see further upside as demand for ventilation treatments and respiratory humidifiers increase.

Should you buy?

In my opinion, Australia has managed the coronavirus pandemic well thanks to its lockdown procedures and effective testing capabilities. However, with restrictions easing, there is a possibility of a second wave of infections. As a result, I think that both Sonic Healthcare and ResMed would be 2 ASX shares that could provide your portfolio with resilience if volatility picks up.

More reading

• Top brokers recommending you buy these ASX shares in this market sell-off
• Top brokers name 3 ASX shares to sell right now
• 5 things to watch on the ASX 200 on Thursday
• Consider these 3 quality ASX healthcare shares to buy now
• ASX 200 down 0.2%: Afterpay hits record high, TPG Telecom merger vote

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ResMed Inc. and Sonic Healthcare 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.

The post 2 ASX shares to ride out a second wave of coronavirus appeared first on Motley Fool Australia.

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