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ASX dividend shares can provide you with a good source of income. There are some options out there with large dividend yields that can pay you a lot of cash each year.

Money in the bank isn’t going to earn much interest these days with the official RBA interest rate at just 0.25%.

Here are three ASX dividend shares with very large income yields:

NAOS Small Cap Opportunities Company Ltd (ASX: NSC)

This is a listed investment company (LIC) which targets small caps in a range of between $100 million to $1 billion.

The ASX dividend share owns a high-conviction portfolio of shares with a weighted average market cap of $182.7 million. Some of its investments include MNF Group Ltd (ASX: MNF), Consolidated Operations Group Ltd (ASX: COG) and BSA Limited (ASX: BSA). At the end of June 2020 it had 12 positions.

FY20 was a strange year, which included the COVID-19 market selloff. Its portfolio delivered a return of 2.59% (before fees), outperforming the S&P/ASX Small Ordinaries Accumulation Index’s decline of 5.67% by 8.26%.

At the current NAOS Small Cap Opportunities share price, it offers a grossed-up dividend yield of 11.7%. That’s great for a ASX dividend share. It’s also trading at a 28% discount to the net tangible assets (NTA) at 30 June 2020.

Pacific Current Group Ltd (ASX: PAC)

Pacific is a global asset management business which partners with other investment managers. It helps those investment managers grow. It has a portfolio of 15 specialist boutiques in Australia, India, Luxembourg, the US and the UK.

The company said in its FY20 third quarter update it’s expecting FY20 underlying net profit to be in the range of $23 million to $25 million. That was before the impressive run of the share market since the start of May 2020.

If the ASX share just maintains its dividend in FY20 it will pay investors an annual dividend of $0.25 cents per share. That would amount to a grossed-up dividend yield of 6.4%.

But there’s a fair chance that the ASX dividend share may pay a larger dividend considering the performance of markets over the past few months.

WAM Microcap Limited (ASX: WMI)

I think WAM Microcap could be a top ASX dividend share for many years to come.

It’s a listed investment company (LIC) which targets ASX shares with market capitalisations under $300 million. These businesses could be some of the best growth share opportunities. Not many investors go searching in the small cap zone, so these shares are usually trading at a more attractive valuation compared to their mid-cap counterparts.

Some of the shares it was invested in at 30 June 2020 were Objective Corporation Limited (ASX: OCL), FINEOS Corporation Holdings PLC (ASX: FCL) and Redbubble Ltd (ASX: RBL).   

The benefit of a LIC is that it can turn investment returns, including capital gains, into a dividend for its own shareholders. That means WAM Microcap can profit from growth shares and then pay its shareholders a dividend.

The ASX dividend share has only been around since June 2017, but it has already been an exciting dividend payer with special dividends in FY18 and FY19. It started paying a dividend in FY18, grew it in FY19 and seems on course to grow it again in FY20.

In FY20 the LIC’s gross portfolio return (before fees, expenses and taxes) was 11.8%, outperforming the S&P/ASX Small Ordinaries Accumulation Index by 17.5%. That’s a very strong outperformance over one year.

At the current WAM Microcap share price, it’s trading with a FY20 grossed-up dividend yield of 6.25%.

Foolish takeaway

I think each of these ASX dividend shares have great income potential. For dividends I think WAM Microcap could be the best option over the long-term, but the Naos LIC does look very good value at the moment and it has a huge yield.

More reading

• 3 ASX dividend shares for every income investor’s portfolio
• 4 top ASX dividend shares you should never sell
• I think WAM Microcap is a retiree’s dream dividend share

Tristan Harrison owns shares of NAO SMLCAP FPO and WAM MICRO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Objective Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends FINEOS Holdings plc. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia has recommended FINEOS Holdings plc and REDBUBBLE 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.

The post Get paid huge amounts of cash to own these ASX dividend shares appeared first on Motley Fool Australia.

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I think you can start a really good portfolio with as little as $10,000. For me, the best ASX shares to buy right now, or anytime, are ones that cover a few important areas. First, your portfolio should include cheap shares in good companies. Second, it needs to dedicate a small percentage to companies likely to see significant share price growth (although, not moonshots). And third, it should contain the beginning of an income stream.

Finding cheap shares is fraught with danger right now. A level of exuberance and optimism seems to be driving share prices. In fact, many companies are now trading at higher levels than they were in February. This is despite the impacts of fires, a pandemic lockdown and Victoria firmly in the grip of a second wave.

On that note, let’s take at look at the following ASX shares. These are all currently on my watchlist and I’m likely to invest in most of them in the near future.

Cheap ASX value shares 

Property

I think DEXUS Property Group (ASX: DXS) is one of the best ASX shares to buy right now. Dexus is trading at a market cap of $10.27 billion, approximately $6 billion less than its property portfolio is worth. The company has a price-to-earnings ratio (P/E) of 6.55, its lowest level for 7 years. At this price, it is paying a trailing 12-month (TTM) dividend yield of 5.3%.

I would commit $4,000 to this company. Why? Three reasons. First, office property is the real estate sector least impacted by the coronavirus pandemic. Most of Dexus Property’s assets are offices with a 97% occupancy rate. Second, the company has a weighted average lease expiry (WALE) or average lease duration, of 4.4 years. Third, it is valued at less than its real estate portfolio and pays a good dividend.

Another option for this position could be Centuria Office REIT (ASX: COF). It is a smaller version of Dexus and is a pure-play office fund. Like Dexus, it is valued at less than its portfolio value, has high occupancy, a long WALE, and has a higher TTM dividend yield than Dexus. Personally, however, I think I’m likely to get better share price growth from Dexus.

Gaming

I would also invest $4,000 in Aristocrat Leisure Limited (ASX: ALL). In the company’s 2019 annual report, it reported record profits on revenue of $4.4 billion. The company’s three main product verticals are electronic gaming machines, casino management systems, and digital social games.

In 2020 the land-based products, electronic gaming and casino management systems have suffered significant economic impact due to coronavirus. Nevertheless, the company has continued to invest in its digital games. Moreover, in the six months to 31 March, digital revenues increased by 27%, making up 46% of overall revenues. 

I believe casino revenues are likely to have already started flowing again across various countries, as well as among a few Australian casinos. The company will continue to see issues from a lack of tourism, but digital gaming will partly offset this. The company is trading at a P/E of 10.10. Less than half of its 10 year average P/E of approximately 23. I think this is a good company at a reasonable price.

My view is that this ASX share will provide an investor with decent share price growth over a 2 – 3 year horizon.

The best ASX shares to buy right now for growth

I have only allowed $2000 from the initial $10,000 to invest in riskier growth shares. My choice of the best growth share to buy right now is definitely Tyro Payments Ltd (ASX: TYR). The company is a very impressive payment processing fintech. It entered a market dominated by the banks and has become Australia’s largest EFTPOS provider of all authorised deposit-taking institutions (ADI) outside of the big 4 banks.

From 25 March, the company has reported its transactions weekly for transparency during the pandemic. In trading update number 17 the company showed a full year increase in transactions of 15% in spite of all of the problems this year. In addition, the company’s FY21 transaction volume is already 22% higher than the previous corresponding period. 

The company only listed on the ASX in December last year and has yet to post full year results. It is likely to either post a small result, producing a very high P/E or post a loss. Growth companies are volatile, however I am a believer in this company and I think it will continue to grow at a good rate for the next 2 – 3 years. 

More reading

• Why I would buy these blue chip ASX 200 shares this week
• Broker warns Afterpay and these ASX stocks are caught in an overcrowded trade
• What moved the Wesfarmers share price in June?
• This could be a problem for the Afterpay share price
• Investor in your 30s? Buy these cheap ASX shares

Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. 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.

The post The best ASX shares to buy right now with $10,000 appeared first on Motley Fool Australia.

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The Telstra Corporation Ltd (ASX: TLS) share price could be heading a lot higher from here according to one leading broker.

Who is bullish on Telstra?

Goldman Sachs has been looking at the impact the second wave could have on the telco giant’s performance and remains very positive on its prospects.

According to the note, the broker has retained its conviction buy rating and lifted its price target slightly to $4.10.

This price target implies potential upside of 18% over the next 12 months excluding dividends. If you include its 16 cents per share dividend, which Goldman Sachs believes is sustainable for the foreseeable future, this potential return stretches to over 22.5%.

What did Goldman Sachs say?

Goldman has revised its earnings estimates for Telstra following the resurgence of COVID-19 infections in Australia and the six-week lock down of Melbourne.

It explained: “We revise lower our Telstra FY21 EBITDA by -3%, reflecting: (1) ongoing international travel restrictions; (2) extended Melbourne support measures; and (3) further delays in redundancies associated with its productivity program.”

It now expects Telstra to post a 4% decline in FY 2021 underlying EBITDA to $7.14 billion, before recovering +6% to $7.55 billion the following year.

This recovery is expected to be driven by cost savings and efficiencies.

It notes: “With digital servicing having materially increased (digital first contacts rising to 70% from 50%, 4mn app downloads in 8 weeks), we believe Telstra has increased scope to improve efficiencies in its retail store network and customer service. We remain constructive on the total quantum of savings (GSe A$2.6bn by FY22), and expect further benefits in FY23.”

The broker is also very positive on the company’s infrastructure and has updated its analysis of Telstra InfraCo.

It wrote: “In an uncertain, low-rate environment, we see telco infrastructure as highly attractive. We update our Telstra InfraCo analysis, which suggests a potential valuation of A$38bn, or 14.9x FY23 EBITDA. This would imply that Telstra’s retail business is trading on an EV/EBITDA of just 3.4x.”

Should you invest?

I think Goldman Sachs is spot on and I would be a buyer of Telstra’s shares right now. Especially if I were an income investor, given its attractive fully franked 4.6% dividend yield.

Overall, I feel it is the best option in the space and would choose it ahead of rival TPG Telecom Ltd (ASX: TPG).

More reading

• 5 things to watch on the ASX 200 on Thursday
• Buy Telstra and this ASX dividend share for income
• 3 safe and strong ASX dividend shares to buy during the pandemic
• Why I would buy Telstra and these ASX dividend shares
• a2 Milk and 1 other quality ASX share to buy right now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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 This leading broker thinks the Telstra share price can storm notably higher appeared first on Motley Fool Australia.

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The Coles Group Ltd (ASX: COL) share price continued its positive run and pushed higher again on Wednesday.

The supermarket giant’s shares climbed 1.5% to reach a record high of $18.23.

When the Coles share price hit this level, it meant it was up an impressive 21% since the start of the year.

This compares very favourably to the 10% decline by the S&P/ASX 200 Index (ASX: XJO) in 2020.

Why is the Coles share price at a record high?

Investors have been buying Coles shares due to its defensive qualities and its positive performance during the pandemic.

The latter was driven by pandemic-induced panic buying and led to Coles reporting stellar sales growth during the second half.

For example, during the third quarter of FY 2020, Coles delivered a 12.4% increase in total sales to $9,226 million. This was driven by a 13.1% lift in Supermarket sales to $8,230 million, a 7.2% increase in Liquor sales to $740 million, and a 4.3% rise in Express sales to $256 million.

Management also revealed that the first four weeks of the fourth quarter had been positive. It notes that there is early evidence of customers changing their habits by purchasing less convenience and impulse products and moving towards more cooking and baking from scratch.

All in all, this appear to have set Coles up to deliver a very strong sales result in FY 2020.

What about its profits?

Although Coles’ sales have been growing very strongly, it remains unclear whether its profits have followed suit. Increased staffing and investments in security, cleaning, and safety glass are all expected to weigh on its margins this year.

Nevertheless, I’m quietly confident it will deliver a solid profit result. I estimate a full year net profit after tax in the region of $984 million, which will be an increase of 5% on FY 2019’s result.

From this I expect a fully franked full year dividend of 60 cents per share to be declared. This equates to a 3.3% dividend yield based on the current Coles share price.

Should you invest?

Although its shares are at a record high, I would still be a buyer of them if you plan to invest for the long term.

This is because I believe the company is well-positioned to grow its earnings and dividends at a solid rate over the next decade.

And while there are a number of options in the space, I would choose Coles just ahead of rival Woolworths Group Ltd (ASX: WOW).

More reading

• Is the Coles share price still attractive after it surged to a record high today?
• Which ASX shares will benefit from the second lockdown?
• 3 ASX shares to buy before earnings season
• 3 safe and strong ASX dividend shares to buy during the pandemic
• These ASX dividend shares will help you beat low interest rates

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and 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.

The post Coles share price hits record high: Is it too late to invest? appeared first on Motley Fool Australia.

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Fortescue Metals Group Limited (ASX: FMG) shares rocketed to a new record high on Wednesday. Shares in the Aussie iron ore miner closed 3.4% higher at $16.03 per share after reaching an all-time high of $16.10 in early trade.

There’s no doubt Fortescue has been a success story in 2020 and is strongly outperforming the S&P/ASX 200 Index (ASX: XJO) this year. But as with all ASX gainers, the question is how long the growth can last. 

Let’s see what’s driving the Fortescue share price to new highs and whether or not it’s still in the buy zone.

Why the Fortescue share price is rocketing

One big factor behind Fortescue’s recent gains is a strong iron ore price recovery. The key commodity price hit a new 12-month high on Wednesday as China’s economic recovery continues to fuel demand for iron ore. There’s also ongoing supply disruptions from Brazil which is good news for Fortescue as one of the ‘Big Four’ iron ore miners around the world.

Strong commodity prices are clearly a good thing for Fortescue and its earnings. Investors have been piling into the Aussie iron ore miner this year, sparking a 48.7% share price gain. On top of that, a strong quarterly report in April has been an important factor. Fortescue reported record third-quarter iron ore shipments (42.3 million tonnes) and strong free cash flow. That led the Aussie miner to upgrade its FY20 shipments guidance to 175 to 177 million tonnes which has helped boost Fortescue’s value.

It’s interesting to note that while Fortescue shares are up 48.7% this year, rival iron ore shares are not. For instance, the BHP Group Ltd (ASX: BHP) share price is actually down 2.4% in 2020. It’s worth remembering that Fortescue is more of a pure iron ore miner while BHP has more diversified operations. For example, BHP has a number of segments including Petroleum, Copper, Iron Ore and Coal. That could be a big factor at the moment given some of the struggles in other commodity sectors.

Should you buy at an all-time high?

Normally, I’d be pretty wary of buying in to ASX shares at all-time highs. However, there are good signs for the Fortescue share price in 2020. The first one is obviously Chinese demand outperforming even bullish expectations. It also looks like supply disruptions could persist in Brazil, especially given the current impact of coronavirus on the country.

I also think governments could turn to infrastructure to kickstart their economies. That would further consolidate demand and push iron ore prices higher. On top of that, Fortescue’s price to earnings (P/E) ratio is still a lowly 6.9 despite strong recent gains.

If you’re after exposure to iron ore in 2020, I think Fortescue would be my pick ahead of BHP right now.

More reading

• Up 31% in 1 month: is the Saracen share price a buy?
• Why I would buy BHP and CBA shares for dividends
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 jumps almost 2% today, Afterpay rises
• The dangers of investing in managed funds

Motley Fool contributor Ken Hall 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.

The post Should you buy Fortescue shares at an all-time high? appeared first on Motley Fool Australia.

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The Saracen Mineral Holdings Limited (ASX: SAR) share price has been rocketing higher in the last month or so. In fact, the Aussie gold miner’s shares have surged 31.3% in value since 16 June. Let’s take a look at what’s driving the ASX gold share higher and whether or not it should be on your buy list.

Why the Saracen share price has surged higher

The simple answer is that investors are scared. Over the same period, the S&P/ASX 200 Index (ASX: XJO) has climbed 1.9% higher but that doesn’t tell the whole story. We’ve seen a lot of volatility across nearly all ASX sectors in the last month or so as investors try to work out what’s going on with valuations.

Despite the coronavirus pandemic constraining economic growth, shares continue to climb. The market looks to be moving broadly sideways at the moment. I think that’s the competing forces of government stimulus and monetary policy against the clear negative hit to corporate earnings.

However, market volatility is when ASX gold shares thrive. The Saracen share price has been on the move, marching 83.4% higher in 2020 alone. Gold is usually seen as a ‘safe haven’ asset which means demand surges when investors are spooked. That looks to be the case in 2020 with the gold price rocketing towards new decade-highs this year.

Is Saracen on the buy list?

Any ASX share that climbs 80% in the space of 6-7 months is worth watching. However, Saracen isn’t on my buy list right now. Fundamentally, I’m a long-term investor. While I think gold (or gold shares) can have a place in portfolio diversification, I’m not looking to hold Saracen shares for decades ahead.

However, there is certainly a lot to like about Saracen for gold investors. It’s now a seriously heavy hitter in terms of gold production after its Kalgoorlie Super Pit mine acquisition. With the value of gold higher this year, Saracen’s earnings and profitability could rise with it. As a result, I’d be watching Saracen’s August earnings result very closely this year.

With a price-to-earnings (P/E) ratio of 45.4, the Saracen share price is a little on the expensive side. If you’re after good value ASX gold shares, St Barbara Ltd (ASX: SBM) could be a cheaper buy right now.

More reading

• 5 things to watch on the ASX 200 on Thursday
• ASX 200 jumps almost 2% today, Afterpay rises
• The dangers of investing in managed funds
• Why I would buy these blue chip ASX 200 shares this week
• Broker warns Afterpay and these ASX stocks are caught in an overcrowded trade

Motley Fool contributor Ken Hall 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.

The post Up 31% in 1 month: is the Saracen share price a buy? appeared first on Motley Fool Australia.

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The Openpay Group Ltd (ASX: OPY) share price plunged 11.4% lower in Wednesday’s trade. That’s a big drop for an ASX share that surged 35% higher on Monday and a further 10.3% on Tuesday.

So, despite all the craziness in the market right now, here are 3 factors that are good for the Openpay share price.

1. There’s strong momentum behind buy now, pay later shares

It’s not just the Openpay share price rocketing higher right now. The Afterpay Ltd (ASX: APT) share price has slumped 5.5% this week but is still up 132% for the year.

It’s been a similar story for fellow BNPL rival Zip Co Ltd (ASX: Z1P). The Zip Co share price has fallen 16.2% from its record high at the start of the week but is still up 85.6% in 2020.

Clearly, investors have been piling into the Aussie BNPL shares lately. I think that means there could be a strong momentum factor at play right now. Given this week’s downwards moves for its rivals, that could be good news for the Openpay share price.

2. Afterpay’s share price multiples are astronomical

While Afterpay remains the largest ASX BNPL company by market capitalisation, it’s also very expensive.

It’s important to note that Afterpay hasn’t actually turned a profit. That means investors are speculating on future growth rather than relying on current dividends.

As a result, it’s better to use a price to sales (P/S) ratio to evaluate the Afterpay share price. Yahoo Finance has Afterpay trading at a P/S ratio of 57.1 right now compared to 25.2 for Openpay.

According to a recent article in the AFR, Afterpay’s P/S ratio is even higher than other global tech stocks like Netflix, Telsa, Uber, Spotify, and Snapchat. 

3. The Openpay share price is underpinned by strong growth

Clearly investors have been keen to snap up BNPL shares this year. However, Openpay has continued to thrive despite the coronavirus pandemic hitting the economy hard.

The Openpay share price surged in early trade yesterday before plummeting 11.4% lower at $3.88 per share. That’s despite a quarterly business update headlined by record growth in a number of headline growth metrics. 

Some of the key numbers from the update are listed below:

• Active plan numbers up 229% relative to prior corresponding period (pcp)
• Active customer numbers up 141% relative to pcp
• Active merchants up 52% relative to pcp
• Total transaction value up 98.2% to $192.8 million for FY20
• Net bad debts down to 2.9% compared to 4.7% in Q3 FY20
• Cash on hand of $70.1 million as at quarter-end

Will I be buying Openpay shares?

These are just a few reasons why the Openpay share price could be a better relative buy compared to Afterpay right now.

Investors are starting to call BNPL shares a ‘bubble’. I agree that there are plenty of reasons to be wary of investing in the industry right now.

The reaction to yesterday’s record growth numbers gives an indication of just how much is expected from the BNPL shares. I personally want to see more positive cash flow before buying in in the current market.

More reading

• ASX 200 jumps almost 2% today, Afterpay rises
• 3 things millennial investors should do in this ASX bull market
• Broker warns Afterpay and these ASX stocks are caught in an overcrowded trade
• Why these are the top performing ASX 200 shares over the past year
• Why Afterpay, ELMO, Oil Search, & Paradigm shares are racing higher

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T 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.

The post 3 reasons the Openpay share price is better than Afterpay appeared first on Motley Fool Australia.

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Unfortunately for savers and income investors, interest rates look set to stay at these ultra-low levels for some time to come.

The good news is that there are plenty of ASX dividend shares which will help you overcome these low rates.

But which ones should you buy? Two top ASX dividend shares I would buy today are listed below. Here’s why I like them:

BHP Group Ltd (ASX: BHP)

If you don’t mind investing in the resources sector, then I think this mining giant would be a great dividend share to buy. I’m a big fan of the Big Australian and believe it is well-positioned to generate strong free cash flows in FY 2020 and FY 2021. This is thanks to its low cost operations and favourable commodity prices. The latter is particularly the case for iron ore, which is currently trading above ~US$110 a tonne. As a comparison, BHP’s full year cost guidance is just US$13-14 per tonne at its Western Australia Iron Ore operation.

Looking ahead, I think the future is very positive as well. This is due to BHP having a number of growth opportunities which could create a lot of value for shareholders down the line. Based on the current BHP share price, I estimate that its shares offer investors a forward fully franked ~5% dividend yield.

Commonwealth Bank of Australia (ASX: CBA)

Investors that don’t have exposure to the banking sector might want to consider an investment in Commonwealth Bank. The shares of Australia’s largest bank are down 20% from their high and are trading at an attractive level for patient investors. And while times are certainly hard right now, I’m optimistic the worst is now behind the bank and the coronavirus provisions it has made are more than sufficient.

Furthermore, while I still expect a dividend cut in FY 2021, I don’t believe the cut will be as bad as some expect. I continue to forecast a fully franked dividend in the region of ~$3.70 per share next year. This would be a generous 5.1% dividend yield based on the latest Commonwealth Bank share price.

More reading

• Broker warns Afterpay and these ASX stocks are caught in an overcrowded trade
• Could Fortescue and BHP shares climb higher in 2020?
• Is the BHP share price about to surge?
• Biggest dividend cuts in 10 years to hit ASX investors next month
• This could be a problem for the Afterpay share price

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.

The post Why I would buy BHP and CBA shares for dividends appeared first on Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) was well and truly on form on Wednesday and stormed notably higher. The benchmark index jumped 1.9% to 6,052.9 points.

Will the market be able to build on this on Thursday? Here are five things to watch:

ASX 200 expected to rise again.

The ASX 200 index looks set to continue its positive run on Thursday. According to the latest SPI futures, the ASX 200 is poised to open the day 22 points or 0.35% higher this morning. This follows another solid night of trade on Wall Street which saw the Dow Jones rise 0.9%, the S&P 500 jump 0.9%, and the Nasdaq climb 0.6%. Promising coronavirus vaccine news helped drive markets higher.

Moderna vaccine update.

U.S. markets charged higher overnight after biotech company Moderna provided an update on its coronavirus vaccine. According to CNBC, peer reviewed data published by the New England Journal of Medicine showed Moderna’s coronavirus vaccine produced a robust immune response in all 45 patients in its early stage human trial. This gave stocks directly tied to an economic reopening a real boost.

Oil prices jump.

It could be a good day for energy producers Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) after oil prices jumped higher. According to Bloomberg, the WTI crude oil price is up 1.8% to US$41.00 a barrel and the Brent crude oil price has risen 1.7% to US$43.64 a barrel. A combination of the vaccine news and a stronger than expected inventory draw in the United States helped drive oil prices higher.

Gold price flat.

It looks set to be a mixed day for gold miners such as Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) after another flat night of trade for the precious metal. According to CNBC, the spot gold price is unchanged at US$1,813.40 an ounce. The aforementioned vaccine news appears to have offset rising tensions between the U.S. and China.

Telstra rated as a buy.

Analysts at Goldman Sachs have been busy looking at how the second wave might impact Telstra Corporation Ltd (ASX: TLS). While it notes that its productivity plans may be delayed, it sees upside risk to medium term earnings. In light of this, the broker has held firm with its conviction buy rating and lifted its price target on the Telstra share price slightly to $4.10.

More reading

• ASX 200 jumps almost 2% today, Afterpay rises
• The dangers of investing in managed funds
• Why I would buy these blue chip ASX 200 shares this week
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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 Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The A2 Milk Company Ltd (ASX: A2M) share price is synonymous with growth investing. It has gained a remarkable 3436% since listing in early 2015. A2 Milk’s share price has been largely unaffected by the COVID-19 pandemic this year, with the New Zealand based company benefitting from some serious tailwinds.

As the All Ordinaries (INDEXASX: XAO) has lost ground, dropping over 9% since the start of the year, the A2 Milk share price gain of 38% can be seen as all the more impressive.

What tailwinds have caused A2 Milk to rise?

The A2 Milk share price has seen consistent growth over the year, pushing aside worries surrounding COVID-19 and embracing the tailwinds resulting from the pandemic.

With the fear of impending lockdown restrictions in early March, consumers rushed to supermarkets to strip shelves bare and stockpile necessities. As a result of this rapidly changing consumer purchase behaviour, A2 Milk saw revenue soar for Q3. 

Furthermore, the company’s China segment delivered some strong revenue figures in Q3. Transacting in US dollars, this segment benefitted from a sharply depreciating New Zealand dollar through March which saw revenue favourably impacted. 

The coronavirus crisis also helped reduce A2 Milk’s overhead costs. These tracked lower than expected due to travel restrictions and planned recruitment, particularly in China, being delayed. Despite the uncertainty surrounding the pandemic, the company still managed to announce further, upcoming expansion into the Canadian market.

A2 Milk share price rising on strong financial results

In February, A2 Milk’s share price posted gains of more than 6% with the company announcing strong, half year results. Some of the highlights of this release were as follows:

• Total revenue increased to NZD$806.7 million which was an increase of 32%
• EBITDA also increased up 21%

These results showed the company had made substantial gains in both revenue and earnings. Strong performances were reported in the key product segments of infant nutrition and liquid milk across core markets.

Later in April, the company provided the market with another positive trading update in which it noted continued strong revenue growth across all key regions, particularly with respect to infant nutrition products sold in China and Australia. The company also increased its predicted full year EBITDA margins up to 31-32%. 

What now for A2 Milk?

Despite its recent strong, share price growth, I believe investors in A2 Milk still have cause for optimism. Short term, a level of panic buying has returned, thanks to the recent COVID-19 outbreaks in Melbourne, which is likely to benefit the company’s revenue and share price. Longer term, there is growing, global demand for premium dairy products, particularly infant formula in Asia, and A2 Milk is continuing to cement its international presence. Since the end of June, the A2 Milk share price has continued its impressive run to currently trade at $19.80.

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Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. 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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