Investing in ASX shares can be a truly rewarding experience in every sense of the word. But many investors avoid the stock market due to the perception of it being a risky place to keep their money.

While this is true to a certain extent, the reality is that if you invest prudently, the chances of obtaining a compelling rate of return on your money are a lot higher than you losing your hard-earned dollars.

Today, we’re going to prove this concept out by looking at what kind of return an investor can expect by ploughing $200 a month into ASX shares.

Assigning an absolute rate of return from the share market is a tricky task. Obviously, each stock portfolio is different. If an investor owns Commonwealth Bank of Australia (ASX: CBA), BHP Ltd (ASX: BHP) and CSL Ltd (ASX: CSL) shares, they are going to have a completely different experience than someone who buys Telstra Group Ltd (ASX: TLS), Woolworths Group Ltd (ASX: WOW) and Xero Ltd (ASX: XRO) shares.

To get around this problem, let’s look at the returns one can expect from an ASX index fund. Index funds are popular investments on the Australian stock market. They allow investors to own a vast swathe of ASX shares in one single investment.

Your typical ASX index fund will hold either the largest 200 or 300 shares on the Australian markets, weighted towards market capitalisation (company size).

In this way, an ASX index fund will give you something akin to an average return of the entire ASX. As such, it’s a great investment to analyse if you’re wondering what the average return from the Australian stock market might be.

What kind of returns can one expect from ASX shares?

The Vanguard Australian Shares Index ETF (ASX: VAS) is an exchange-traded fund (ETF) that also happens to be the most popular index fund on the ASX. It tracks the S&P/ASX 300 Index (ASX: XKO), which means it gives its investors diversified exposure to the largest 300 individual stocks on our share market, including the six named above.

So what kind of returns can we expect from this ETF? Well, We should never use past performances as an oracle of future returns. However, this index fund has returned an average of 8.98% per annum (as of 31 May) since its ASX inception in May 2009. That 8.98% consists of both capital gains and dividend returns.

Let’s assume VAS continues to appreciate at this rate for argument’s sake. If one invests $200 every month into this index fund, it will build up to a portfolio worth $15,390 after five years of investing. That would grow to $39.148 after ten years and to $134,486 after 20 years.

If someone kept up this simple habit over a 40-year working lifetime, they would be left with a nest egg of $937,881.

If that investor managed to increase their monthly contribution to $300, they would be looking at a 40-year balance of roughly $1.41 million. That’s more than enough for a comfortable retirement, even if we don’t account for superannuation.

This exercise just goes to show the power of investing consistently in compounding assets.

The post What kind of return could I expect by investing $200 monthly into ASX shares? appeared first on The Motley Fool Australia.

More reading

• What is the average return of the Vanguard Australian Shares Index ETF (VAS)?
• Looking to ‘get rich quick’? Use the Warren Buffett approach instead
• 2 ASX ETFs I would happily buy today for my retirement
• 3 winning tips both Warren Buffett and Peter Lynch recommend
• 4 excellent ASX ETFs to buy this month

Motley Fool contributor Sebastian Bowen has positions in CSL, Telstra Group, and Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and Xero. The Motley Fool Australia has positions in and has recommended Telstra Group and Xero. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

AMP Ltd (ASX: AMP) shares are one of the most interesting investments on the ASX. This storied Australian company has a long and controversial history, making the journey from respected blue chip stock to penny stock (and arguably laughing stock), to middling ASX share.

When it first joined the ASX boards in 1997, AMP quickly established itself as a robust dividend payer. But years of scandals and mismanagement in the 2010s saw AMP shares reduced to a rump of what they once were.

To give you an idea of how much this company fell to earth, consider this. In June 2001, AMP was trading at more than $14.50 a share. But late last year, those same shares hit an all-time low of just 86 cents.

Since that low, AMP shares have recovered a little. At the time of writing, they are going for $1.11 each, up almost 30% from that record low.

At the current share price, AMP is trading on a seemingly solid dividend yield of 4.05%. That yield comes from the company’s last two dividend payments: the interim dividend of 2.5 cents per share, paid out last September, and the final dividend of 2 cents per share, which we saw in April.

That final dividend might have come as something of a disappointment, seeing as 2023’s final dividend was worth 2.5 cents per share. But investors have arguably been lucky to get any income at all, considering AMP shares paid out no dividends whatsoever between March 2019 and April 2023.

Even so, longer-term investors might be thinking wistfully of the past. To illustrate why, remember that in 2018, AMP shares forked out a total of 24.5 cents per share in dividend income.

Do the dividends from AMP shares come with full franking credits?

But let’s get down to the crux of today’s article: do AMP shares come fully franked?

Well, in a word, no. AMP has never consistently paid out fully franked dividends, even back in the its heyday.

Some of its past dividends have been partially franked up to 90%, but we haven’t seen a fully franked AMP dividend for at least two decades.

Over the past year, AMP investors haven’t enjoyed much in the way of franking credits from their dividends. Both the September interim dividend and the April final dividend that AMP paid out over the past 12 months came partially franked at 20%.

Given this company’s franking history, I wouldn’t be holding my breath for a franked dividend anytime soon, either. At least AMP investors still have a decent 4.05% yield to enjoy today. Not to mention the company’s significant share buybacks that investors have been benefitting from in recent months.

The post Do the dividends from AMP shares come fully franked? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Is there any chance of an interest rate cut in Australia next week?
• ASX 200 shares vs. property: AMP reveals predictions for 2024 growth
• AMP shares lower amid industry ‘wave’ of superannuation payouts to baby boomers

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Perpetual Ltd (ASX: PPT) shares could be a bit of a bargain buy right now.

That’s the view of analysts at Bell Potter, which feel that the ASX 200 fund manager stock is being undervalued by the market.

What is the broker saying about this ASX 200 stock?

Bell Potter notes that the company recently announced the sale of its Corporate Trust (CT) and Wealth management (WM) businesses to KKR for $2.175 billion.

It was pleased with the price, highlighting that it was ahead of its expectations of $1.5 billion to $1.9 billion.

The broker assumes a tax liability of $100 million to $400 million and expects the sale to result in a cash payment to shareholders of between $804 million to $1,104 million or $6.95 to $9.55 per share.

Adjusting for the above, the broker believes this leaves the ASX 200 stock trading at a level that makes it undervalued compared to peers. It explains:

Deducting the range of cash payments above, from the current market cap, we estimate the asset management business is being valued at between $1.3-1.6bn including cash and balance sheet assets (seed capital and holdings). Adjusting for these, implies the residual asset management business is being valued at between 3.5x-5.5x EBITDA. We believe this is too low for an international asset manager. Valuing the residual asset management business on 6.3x FY25 would imply a value of $2.1bn or $18.17/per share.

‘Considerable upside’

In light of the above, the broker has reaffirmed its buy rating and $27.60 price target on the ASX 200 stock. Based on its current share price of $21.27, this implies potential upside of 30% for investors over the next 12 months.

In addition, the broker is forecasting dividend yields of 6.4% in FY 2024 and then 7.7% in FY 2025.

Commenting on its valuation, the broker said:

As we draw closer to the demerger, the outcome for shareholders will depend upon the level of tax and deal costs associated with the sale, and current trading. Our unchanged price target of $27.60/sh is at the top of this range of outcomes ($18.17 for AM plus a cash distribution up to $9.55), as we are comfortable with the lower tax estimation, although we have increased our estimate of deal costs (to $200m from $100m). We continue to see considerable upside from the current share price. We have not changed our forecasts in this note, although as the demerger proceeds, we expect to adjust our forecasts for profitability, debt costs and dividends.

The post Guess which ASX 200 stock has ‘considerable upside’ appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Innovation is one of the buzzwords of the international business world and stock markets these days.

Low productivity growth is a significant and persistent challenge across many Western nations.

Innovation is seen as essential to turning this around. Technological advancements like artificial intelligence (AI) are among many innovation measures that companies are exploring today.

Innovation means developing new products and services that deliver new revenue. It also means developing new business methods that increase efficiency and thereby raise productivity.

At the recent ASX Investor Day, Betashares investment strategist Tom Wickenden discussed the importance of innovation in powering shareholders’ returns.

He also provided some tips for investors on how to spot an innovation stock in their research.

Which are the best innovation stocks of our era?

Wickenden points out that seven of the nine listed companies that ever reached a trillion-dollar market capitalisation are United States stocks that achieved this feat through major innovation.

Those stocks are known as the Magnificent Seven. They are Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG), Meta Platforms Inc (NASDAQ: META), Amazon.com, Inc. (NASDAQ: AMZN), Apple Inc (NASDAQ: AAPL), Nvidia Corp (NASDAQ: NVDA), Microsoft Corp (NASDAQ: MSFT), and Tesla Inc (NASDAQ: TSLA).

What makes them so magnificent?

The short answer is incredible revenue growth and, hence, share price growth over the past 10 years.

All seven stocks are listed on the NASDAQ-100 Index (NASDAQ: NDX), which Wickenden describes as “the home of innovation globally”.

The NASDAQ 100 has many technology stocks, but that’s not the only sector represented.

For example, six of the Mag Seven are US tech shares. The outlier is Tesla, a consumer cyclical stock.

Tesla is certainly an innovation leader among car manufacturers. It’s now the second-biggest electric vehicle manufacturer in the world.

Other companies in other sectors are also innovation leaders.

In the healthcare sector, consider the companies producing GLP-1 medicines. Their innovation has led to new medicines with incredible efficacy in treating the worldwide epidemic disease of obesity.

Consider the energy companies pioneering renewables in the era of decarbonisation. And so on.

How do you identify an innovation stock?

Wickenden says innovation requires a serious commitment to research and development (R&D).

So, examining a company’s R&D spending is a good place to start in identifying an innovation stock.

Take a look at the amount of money spent on R&D, the percentage of profits reinvested, and whether R&D investment is rising.

He emphasises that a large R&D spend doesn’t guarantee success, so investors need to conduct further research once they’ve identified stocks that are investing in innovation.

Investors need to find out what products, services or business practices have improved due to R&D, and whether this has translated into revenue growth that is likely to be ongoing.

Wickenden said the NASDAQ 100 is “home to some of the most innovative companies in the world and also some of the biggest R&D spenders in the world”.

Wickenden stated:

We can see … over the past 10 years huge growth of research and development spending has coincided with huge growth of revenue and ultimately earnings growth for that index compared to other companies globally and especially compared to the Australian market.

Innovation often requires companies to “cannibalise” their own market share, Wickenden explains. This means developing products and services that make a company’s existing ones irrelevant.

If they fail to do so, they are likely to “succumb to new players in the market” as technology advances.

Case study: Microsoft

Ten years ago, Microsoft was a leader in locally stored enterprise software.

However, it chose to invest tens of billions in cloud computing — which would eventually make locally stored software redundant — and this has delivered exceptional revenue growth.

Between 2011 and 2014, Microsoft was the second-biggest R&D spender in the world behind Samsung Electronics Co Ltd (LSE: BC94).

Wickenden said:

Interestingly, in 2011 … they spent 90% of their research and development expenses on a cloud computing division. And … that cloud computing division is driving their growth in terms of revenue and earnings and, ultimately, their share price growth.

Today, Microsoft’s cloud computing division alone delivers more revenue than Australia’s Big Four ASX 200 bank shares combined.

The banks’ combined revenue has been nearly stagnant at about $80 billion over many years.

This is partly because the scope for innovation in a mature sector like banking is far lower than in the information technology sector.

Meantime, revenue from Microsoft’s cloud computing division has skyrocketed. Its leapt from nearly AU$30 billion in 2015 to more than AU$120 billion in 2023, Wickenden said.

Since January 2015, the Microsoft share price has risen by about 850% to US$$447.67 today.

But if doing all this research is too much trouble, Wickenden says the exchange-traded fund (ETF) Betashares Nasdaq 100 ETF (ASX: NDQ) provides a simple way to invest in many innovation stocks.

Over the past five years, the NDQ ETF share price has risen 135%, while the ASX 200 has risen 18.5%.

The post How do you spot an innovation stock? appeared first on The Motley Fool Australia.

More reading

• Nvidia is no longer the most valuable company in the world. Here’s what investors need to know
• 5 excellent ASX ETFs to grow your wealth
• Where are we in the share market cycle?
• 4 of the best ASX ETFs to buy and hold for a decade
• Want to buy Nvidia but don’t have a US share account? Buy these ETFs instead

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, BetaShares Nasdaq 100 ETF, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Income investors are a lucky bunch. The Australian share market is home to a large number of dividend shares.

But which two could be among the best to buy right now? Let’s take a look at a couple that analysts are tipping as top buys:

Transurban Group (ASX: TCL)

Bell Potter thinks that Transurban could be one of the best Australian dividend shares to buy. It manages and develops urban toll road networks in Australia and the United States.

The broker likes the company due to its positive exposure to inflation and low risk cashflows. It said:

We believe the current inflationary environment is favourable for Transurban given its inflation-linked revenue stream with annual escalators. Moreover, TCL provides low risk cash flows over the long term, with long concession duration (30+ years), and relative traffic/income resilience. The group’s current pipeline of growth projects is $3.3 billion (TCL’s share of total project cost) and further huge development opportunities are expected over the next few decades, supported by population and economic growth.

Bell Potter is forecasting dividends per share of 63.6 cents in FY 2024 and then 65.1 cents in FY 2025. Based on the current Transurban share price of $12.81, this will mean dividend yields of 5% and 5.1%, respectively.

The broker has a buy rating and $15.50 price target on its shares.

Woodside Energy Group Ltd (ASX: WDS)

Morgans thinks that Woodside Energy could be a top income share to buy right now. It is one of the world’s largest energy producers with high-quality operations across the globe.

The broker likes the company due to its “high-quality earnings” and attractive valuation. It said:

A tier 1 upstream oil and gas operator with high-quality earnings that we see as likely to continue pursuing an opportunistic acquisition strategy. WDS’s share price has been under pressure in recent months from a combination of oil price volatility and approval issues at Scarborough, its key offshore growth project. With both of those factors now having moderated, with the pullback in oil prices moderating and work at Scarborough back underway, we see now as a good time to add to positions. Increasing our conviction in our call is the progress WDS is making through the current capex phase, while maintaining a healthy balance sheet and healthy dividend profile. WDS still has to address long-term issues in its fundamentals (such as declining production from key projects NWS/Pluto), but will still generate substantial high-quality earnings for years to come.

In respect to dividends, Morgans is forecasting Woodside to pay fully franked dividends of $1.25 per share in FY 2024 and then $1.57 per share in FY 2025. Based on its current share price of $27.96, this represents dividend yields of 4.5% and 5.6%, respectively.

The broker has an add rating and $36.00 price target on its shares.

The post 2 of the top dividend shares in Australia appeared first on The Motley Fool Australia.

More reading

• Beat the ASX with these cash-gushing dividend stocks
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today
• Buying ASX 200 energy shares? Here’s what to expect in FY 2025
• Buy Coles and these ASX 200 dividend stocks

Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

There are a lot of options for investors in the mining sector. But one of the best right now could be Bellevue Gold Ltd (ASX: BGL).

That’s the view of analysts at Goldman Sachs, which have just initiated coverage on the gold miner’s shares.

What is the broker saying about this ASX 200 mining stock?

According to the note, Goldman believes that Bellevue Gold’s shares are undervalued at current levels based on its long term gold price assumptions.

The broker also highlights its compelling expansion potential and significant mine optionality. It said:

Compelling expansion potential, where BGL has proven capability to grow processing capacity 20% to 1.2Mtpa (no further capital expected), where we factor in a ramp-up to a ~1.2Mtpa run rate by the end of FY25. A study is in progress for expansion to 1.5Mtpa (expected 1HFY25), where existing oversized equipment (crusher/proposed paste plant) helps mitigate capex requirements, supporting increased gold production of ~250koz (ramp up through FY27E), with a highly compelling IRR under various gold price scenarios.

In respect to its mine optionality, Goldman adds:

Significant mine optionality from investment to-date de-risks ore access/exploration, where recent drilling highlighted assays with significantly higher grades than current resources (from already above peer gold grades), and potential for additional high-grade shoots. On our estimates, a prolonged mine life from resource extension could add ~A$430mn/~20% to our NAV from a 5-year mine extension (excluding the 1.5Mtpa mill expansion), with further upside if LT prices are closer to spot.

Goldman tips big returns

The note reveals that the broker has initiated coverage on the ASX 200 mining stock with a buy rating and $2.20 price target.

Based on its current share price of $1.77, this implies potential upside of 24% for investors over the next 12 months.

And while no dividends are expected in the near term, Goldman sees potential for capital returns in the future. This is based on its strong free cash flow (FCF) yields. It concludes:

Relative to peers, BGL remains undervalued in our view, trading at ~1x NAV or pricing in our LT gold price of US$1,800/oz (peer average ~1.1x NAV and ~US$1,900/oz), and near-term FCF yields of c. 10% in FY25/26 remain attractive vs. peers and support upside to the outlook for possible future capital returns (despite ~25% of medium-term gold sales being hedged at ~A$2,700-2,900/oz).

All in all, this could make Bellevue Gold one to consider if you’re looking for mining sector exposure.

The post Goldman Sachs just slapped a buy rating on this ASX 200 mining stock appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today
• As ASX gold stocks cool off, here are 2 to buy when the price is right
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.