Tag: Motley Fool Australia

We might be in a new financial year, but unfortunately for income investors, the outlook for interest rates hasn’t changed.

Current cash rate futures continue to point to the cash rate being between zero and 0.25% until at least the end of 2021.

In light of this, I continue to believe dividend shares are the best way to earn a passive income. But which dividend shares should you buy? Here are three that I would buy:

Commonwealth Bank of Australia (ASX: CBA)

If you don’t already have exposure to the banking sector, then I think Commonwealth Bank could be the one to buy. I believe it is the best option in the sector due to its high quality operations. And while dividend cuts are highly likely to be made in FY 2021, I’m not convinced the cuts will be as bad as some fear. I expect Commonwealth Bank to pay a fully franked dividend of $3.70 per share in FY 2020. This would be a generous 5.3% dividend yield, based on its last close price.

Transurban Group (ASX: TCL)

Another dividend share to consider buying is Transurban. It is a leading toll road operator with a portfolio of key roads in North America and Australia. The pandemic has hit the company hard and led to a sharp reduction in traffic volumes over the last few months. The good news is that with restrictions now easing, traffic volumes are starting to recover. And while it may take time for its roads to be back to their former glory, I’m optimistic it will be generating enough toll revenue to pay a decent distribution in FY 2021. At this point, I’m forecasting a 49 cents per unit distribution in FY 2021. This works out to be a forward 3.5% distribution yield.

VanEck Vectors Australian Banks ETF (ASX: MVB)

Finally, if you’re not sure whether Commonwealth Bank is the best bank to buy, but you’re wanting exposure to the banking sector, then the VanEck Vectors Australian Banks ETF could be a great option. This exchange traded fund gives investors exposure to Commonwealth Bank and the rest of the big four banks through just a single investment. It also provides investors with access to the regional banks and investment bank Macquarie Group Ltd (ASX: MQG). I estimate that its units currently provide a forward dividend yield in the region of 5%.

More reading

• Top ASX Stock Picks for July 2020
• Top brokers name the latest ASX shares to buy today
• Morgans picks the best FY21 ASX buys for the COVID-19 world
• ASX bank shares have experienced a horrible financial year
• Is CommBank still the best ASX dividend share to buy?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I think more than ever before, earnings season is going to represent a volatile time on the ASX. Investors are looking everywhere for good shares to buy in what has become a very unpredictable market. As such, often companies that deliver decent earnings reports see a rise in their share prices.

Earnings season begins in August. I think the following are solid shares to consider picking up before the end of July. I believe these companies are likely to report strong earnings, which may see them deliver reasonable increases in their share prices. 

Mining shares

In the mining space, there are two sectors that have done remarkably well during H2 FY20. These are iron ore and gold. Having said that, I feel most of the ASX gold miners are currently priced far too high to consider buying.

Instead, in the iron ore space, I believe Fortescue Metals Group Limited (ASX: FMG) is a solid share to consider buying in July. This is because Fortescue is presently a pure play iron ore producer. BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO), on the other hand, both produce commodities in addition to iron ore that I feel will be a drag on their overall earnings.

During coronavirus lockdowns, the iron ore price actually rose. Today it is at a higher spot price than it was at the start of the pandemic. In Fortescue’s Q3 FY20 report, it declared record third quarter iron ore shipments which were up 10% on Q3 FY19 as well as record tonnages for the year to date. In addition, the company also reported a reduction in costs of 2% for the quarter.

Fortescue and the other large iron ore producers were also aided by continuing production troubles with Brazil-based iron ore leader, Vale.

Medical supplies

In the medical supplies space, I believe Ansell Limited (ASX: ANN) are great shares to buy ahead of earnings season. We have not heard a lot from this company since the release of its H1 FY20 report in February. The company produces a wide range of personal protective equipment (PPE) that has seen unprecedented demand during the coronavirus pandemic. Global demand for the company’s protective gloves and surgical masks has been particularly strong. 

Ansell’s H1 report highlighted the important role the company is playing during the pandemic in supplying PPE around the world. Particularly in China where Ansell is working with authorities to fast track its regulatory and import process in order to expedite supply.

Ansell improved its earnings before interest and taxes in H1 by 4.3%. However, this relatively modest increase was affected by one-off costs relating to restructuring; including asset impairment and costs of the company’s transformation program totalling USD$26.9m.

Foolish takeaway

Both of the companies highlighted above have been able to prosper during the pandemic. I believe they represent solid shares to buy prior to earnings season as they are likely to surprise the market. Fortescue is currently selling at a price to earnings (P/E) ratio of 5.89. This is less than half the P/E ratios of BHP (13.29) and Rio Tinto (13.83).

Ansell, on the other hand, already has a high P/E ratio. However, I expect the company to report truly stellar earnings come August. Moreover, this time its reporting won’t include the once-off costs of the transformation program and will reflect the unprecedented demand for its PPE.

More reading

• Top ASX Stock Picks for July 2020
• Morgans picks the best FY21 ASX buys for the COVID-19 world
• Searching for decent dividends? These 4 ASX shares are paying 6% or more
• The top 10 performing ASX shares over the past year
• Why I would buy these high yield ASX dividend shares

Motley Fool contributor Daryl Mather owns shares of Fortescue Metals Group Limited. The Motley Fool Australia has recommended Ansell 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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The S&P/ASX 200 Index (ASX: XJO) was on form last month and recorded a decent 2.5% gain to end the period at 5,897.9 points.

While a good number of shares on the index pushed higher, some climbed more than most. Here’s why these were the best performing ASX 200 shares in June:

The Afterpay Ltd (ASX: APT) share price was the best performer on the index last month with a 28.6% gain. Investors continued to buy the payments company’s shares in June following a series of very positive industry updates. One that was released late in the month was related to its UK operations. That update revealed that Afterpay’s UK-based Clearpay business has reached 1 million active customers just one year after launching. Management also advised that the frequency of use in the UK has been stronger than at the same point after launch in the United States.

The Healius Ltd (ASX: HLS) share price wasn’t far behind with a 25.5% gain in June. Investors were buying the healthcare company’s shares after it announced the sale of its medical centres business. Healius is selling the assets to private equity firm BGH Capital for an enterprise value of $500 million. The proceeds will be used to reduce net debt and free up capital for investments.

The Boral Limited (ASX: BLD) share price jumped a sizeable 21.9% in June. The catalyst for this gain appears to have been speculation that the building materials company could be a takeover target. This follows news that Seven Group Holdings Ltd (ASX: SVW) has been increasing its stake in the company considerably. At the end of the month, Seven Group revealed that it now owns a 12.19% stake in the company.

The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price was on form again in June and rose 18.5%. This strong gain appears to have been driven by the increasing number of COVID-19 infections globally. Investors appear to believe this could lead to strong demand for its ventilators over the coming months. Also supporting its share price was the release of a stronger than expected full year result at the end of the month.

More reading

• Up nearly 33% in 12 months. Can the CSL share price climb higher?
• Webjet and these shares were the worst performers on the ASX 200 in June
• 5 things to watch on the ASX 200 on Wednesday
• Top ASX Stock Picks for July 2020
• ASX 200 rises 1.4%, Collins Foods delivers tasty returns

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.

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Despite an increase in volatility last month, the S&P/ASX 200 Index (ASX: XJO) still managed to record a solid 2.5% gain to end the period at 5,897.9 points.

Unfortunately, not all shares were able to follow the market higher. Here’s why these were the worst performing ASX 200 shares in June:

The Southern Cross Media Group Ltd (ASX: SXL) share price was the worst performer on the ASX 200 with a 25.5% decline. This media company’s shares have been incredibly volatile this year and regularly feature among the best and worst performers’ lists. Investors appear undecided on how much of a negative impact weak advertising markets will have on its business.

The Nufarm Limited (ASX: NUF) share price wasn’t far behind with a decline of 24.3% in June. The catalysts for this decline appear to have been a trading update and a broker note out of Macquarie at the start of the month. According to the note, the broker downgraded Nufarm’s shares to an underperform rating with a $4.85 price target. Its analysts were disappointed with the agricultural chemicals company’s trading update and appear concerned over its prospects in the important fourth quarter.

The Whitehaven Coal Ltd (ASX: WHC) share price was out of form in June and fell 21%. Investors may have been selling the coal miner’s shares due to concerns that it could be impacted negatively by the Australia-China trade spat. This follows reports that some Chinese power plant operators have been instructed to not buy Australian coal. Also adding to the selling pressure was news that its shares have been removed from the S&P/ASX 100 Index at the quarterly rebalance.

The Webjet Limited (ASX: WEB) share price was a poor performer in June and fell 19.8%. Investors were quick to sell travel shares after a spike in coronavirus cases in Victoria threatened to delay the recovery of the domestic travel market. It wasn’t just Webjet falling heavily. The Corporate Travel Management Ltd (ASX: CTD) share price fell 19.2% and the Flight Centre Travel Group Ltd (ASX: FLT) share price tumbled 15% last month.

More reading

• Up nearly 33% in 12 months. Can the CSL share price climb higher?
• Afterpay and these shares were the best performers on the ASX 200 in June
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises 1.4%, Collins Foods delivers tasty returns
• Why the Telstra share price lost 18% in FY20

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group 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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On Tuesday the S&P/ASX 200 Index (ASX: XJO) rebounded from its Monday selloff with a strong gain. The benchmark index climbed a sizeable 1.4% to 5,897.9 points.

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

ASX 200 expected to open lower.

The ASX 200 looks set to edge lower on Wednesday despite solid gains on Wall Street. According to the latest SPI futures, the benchmark index is poised to fall 6 points or 0.1% at the open. Over in the United States the Dow Jones is up 0.85%, the S&P 500 rose 1.5%, and the Nasdaq index pushed a sizeable 1.9% higher.

Oil prices drop.

Energy producers such as Oil Search Limited (ASX: OSH) and Santos Ltd (ASX: STO) could start the new financial year in the red. According to Bloomberg, the WTI crude oil price is down slightly to US$39.68 a barrel and the Brent crude oil price has fallen 1.4% to US$41.14 a barrel. Demand concerns weighed on oil prices.

Gold price jumps.

Rising coronavirus cases could mean gold miners such as Evolution Mining Ltd (ASX: NCM) and Newcrest Mining Limited (ASX: NCM) start the month in a positive fashion. According to CNBC, the spot gold price jumped 0.95% to US$1,798.20 an ounce after a spike in cases led to increasing demand for safe haven assets.

Nufarm announces changes to its manufacturing footprint.

The Nufarm Limited (ASX: NUF) share price will be on watch today after a late announcement on Tuesday. The chemicals company revealed that it will cease the manufacture of insecticides and fungicides at its Raymond Road site in Laverton, Australia. It will also curtail herbicide manufacturing at its operations in Linz, Austria. CEO Greg Hunt advised that the changes are part of a company-wide program launched in March to improve financial returns.

Westpac upgraded.

The Westpac Banking Corp (ASX: WBC) share price is in the buy zone according to analysts at Goldman Sachs. This morning the broker upgraded the banking giant’s shares to a buy rating with a $20.13 price target. Goldman believes Westpac is relatively well-placed to deal with the end of the loan deferral period.

More reading

• ASX 200 rises 1.4%, Collins Foods delivers tasty returns
• Why the Telstra share price lost 18% in FY20
• Why the TPG share price is up 38% in FY20
• Top brokers name the latest ASX shares to buy today
• What to expect from ASX 200 shares in FY2021

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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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We asked our Foolish writers to pick their favourite ASX stocks to buy in July. 

Here is what the team have come up with…

Nikhil Gangaram: CSL Limited (ASX: CSL)

With fears of a second wave of coronavirus infections dominating headlines, I think investors could flock back into biotech giant CSL in July. The CSL share price has been sold-off recently however, if volatility increases, investors could opt to rotate their portfolios by taking profits out of riskier investments and buying stable, blue-chip stocks like CSL.

CSL has long been a preferred option in the health sector and recently reinforced its resilience by acquiring a gene therapy candidate from uniQure for US$450 million. 

Motley Fool contributor Nikhil Gangaram does not own shares in CSL Limited.   

Sebastian Bowen: Telstra Corporation Ltd (ASX: TLS)

My top stock pick for the depths of winter is this ASX telco giant. Telstra shares have been steadily trending lower over the past month or so and are currently far closer to their 52-week low than high.

I think this is a great time to buy Telstra shares, particularly if you’re interested in a strong dividend. I consider the 16 cents per share dividend (which includes a ‘special’ NBN payout) that Telstra has been paying annually for a couple of years now to be well-covered by the company’s cash flows. On recent prices, Telstra shares would provide new investors with roughly a 5% yield.

Motley Fool contributor Sebastian Bowen owns shares of Telstra Corporation Ltd

Michael Tonon: Volpara Health Technologies Ltd (ASX: VHT)

Volpara Health is a software as a service (SaaS) company using artificial intelligence to improve the early detection of breast cancer. It has a strong, first-mover advantage with customers spanning 38 countries.

Within its latest investor update, Volpara noted a 172% increase in annual recurring revenue. It also reported increasing gross margins and a growing average revenue per user (ARPU). The company’s current ARPU is $1.04, however, it is targeting an ARPU of around $10. Volpara believes this growth is achievable through its growing product suite as well as the continued wider uptake of the SaaS model. 

Volpara is also in a strong financial position after recently completing a capital raise. This gives the company the opportunity to pursue acquisitions which should help to boost its ARPU and/or its US market share.

Motley Fool contributor Michael Tonon owns shares of Volpara Health Technologies Ltd

Toby Thomas: Kogan.com Ltd (ASX: KGN)

Kogan.com has been absolutely killing it of late. I also expect the online retailer to have a stellar July as consumers look to take advantage of the company’s huge EOFY campaign.

Earlier this month, Kogan announced it had added 126,000 new customers in the month of May, growing its total active customers to over 2 million. This saw sales soar by over 103% in April and May 2020, compared to 2019 levels.

If Aussie consumers love one thing, it’s a tax-deductible bargain. I fully expect customers to gobble up the widespread FY20 discounts offered across Kogan’s website and, as such, for the company’s share price to continue surging accordingly throughout July.

Motley Fool contributor Toby Thomas does not own shares in Kogan.com

Phil Harpur: NEXTDC Ltd (ASX: NXT)

When NEXTDC first hit the market nearly 10 years ago, the local data centre scene was dominated by a few large, global providers. Most of these were US-based companies such as Equinix and Global Switch. However, NEXTDC has successfully grown in size and scale to now rival these global giants in the local market. The company is now home to one of Australia’s largest cloud centre partner ecosystems.

The data centre game is highly capital intensive however, once the infrastructure is in place, operators are well positioned to reap future rewards. I believe that the rising demand for cloud computing services will drive considerable growth for NEXTDC well into the next decade.

Motley Fool contributor Phil Harpur doesn’t own shares of NEXTDC Ltd

Chris Chitty: Ansell Limited (ASX: ANN)

As a significant producer of the personal protective equipment (PPE) that’s been in high demand due to COVID-19, Ansell has gone from strength to strength over the last few months. Ansell distributes its PPE products worldwide and expects global demand for these items to remain high over the near to medium term.

Given we are now seeing many signs of a second wave of coronavirus, and therefore the need for PPE will remain high for some time, Ansell is likely to continue growing its earnings. The company’s share price has increased by nearly 35% since this time last year and, at the time of writing, trades on a trailing dividend yield of 2% unfranked.

Motley Fool contributor Chris Chitty does not own shares of Ansell Limited.

Tristan Harrison: Bubs Australia Ltd (ASX: BUB)

Having selected Bubs for my monthly stock pick in June, I’m nominating it again for July. In my opinion, this business still has very exciting prospects, yet the Bubs share price is heading lower, making it great value.

Only a small number of shares are able to deliver strong outperformance over time and I think Bubs is one to watch, particularly for its international growth prospects. Last quarter, Bubs grew its Chinese revenue by 104%. The company also grew its total revenue across other markets, outside of Australia and China, by 20 times when compared with the prior corresponding period.

Bubs is now cashflow positive and, I believe, has significant potential to continue building overseas revenue over the long term. Vietnam alone could represent a highly attractive market for the goat milk infant formula business.

Motley Fool contributor Tristan Harrison does not own shares of Bubs Australia Ltd.

Ken Hall: Transurban Group (ASX: TCL)

The Transurban share price is right at the top of my stock picks for July 2020.

Shares in the Aussie toll road operator have edged lower in 2020 but I think there could be a strong rebound later this year. While many workers are now returning to their normal places of work, public transport numbers are still low. A continued focus on reducing the spread of coronavirus could mean more people driving to work across major cities and, therefore, a boost in revenue for Transurban in 2020 and 2021.

Despite the tough outlook for many ASX dividend shares, I believe Transurban could be a surprise performer this year.

Motley Fool contributor Ken Hall does not own shares in Transurban Group.

Matthew Donald: Austal Limited (ASX: ASB)

Austal is a defence company specialising in the design, construction and support of defence and commercial vessels. I believe it could be a great ASX stock to buy in July for the following reasons…

On 29 May 2020, Austal increased its FY2020 earnings guidance stating that COVID-19 had not impacted its business to the extent initially anticipated. In addition, favourable exchange rates, US R&D tax credits, a new vessel construction contract and stronger business performance all contributed to stronger than expected earnings.

Furthermore, as announced on 22 June, the US government is investing US$50 million in Austal USA to allow it to protect, maintain and expand its steel ship building capabilities over the next two years.   

Motley Fool Contributor Matthew Donald does not own any shares in Austal Limited.

James Mickleboro: Telstra Corporation Ltd (ASX: TLS)

I think Telstra would be a great ASX stock for investors to consider buying in July.

I’m a big fan of the telco giant due to its improving outlook and its defensive qualities (which have been on display for all to see in FY 2020). In respect to the former, I believe a return to growth for Telstra could definitely be possible in the coming years with reduction of the company’s costs and an easing of the NBN headwind.

In the meantime, I expect its free cash flows to be sufficient to maintain a 16 cents per share dividend for the foreseeable future. This represents an attractive yield in this low interest rate environment.

Motley Fool contributor James Mickleboro does not own shares in Telstra Corporation Ltd.

Lloyd Prout: Nanosonics Ltd. (ASX: NAN)

Nanosonics’ ‘trophon’ system is a disinfection technology, setting the standard for ultrasound probe reprocessing. Nanonsics shares are currently trading nearly 13% below their 14 February all-time high. I think this provides a decent entry point for long-term investors in this quality business. 

The company operates one of my favourite business models – the ‘razor and blades’ model. This means it sells certain equipment at relatively low prices in order to generate future sales of complementary consumables. Nanosonics is continuing to grow its installed base at a decent clip, meaning more sales of high-margin consumables into the future. Increased sales for Nanosonics are also likely to come from new product releases, significantly increasing the company’s total addressable market.

Motley Fool contributor Lloyd Prout owns shares in Nanosonics Limited and expresses his own opinion.

Daryl Mather: Boral Limited (ASX: BLD)

Boral is currently repositioning itself for a resurgence over the next financial year. A new CEO has been named and will be starting on 1 July 2020. Zlatko Todorcevski recently resigned his position as an Adbri Ltd (ASX: ABC) board member to take up the Boral role.

At the same time, Seven Group Holdings Ltd (ASX: SVW) has purchased a 10% stake and will also be a force for increased productivity, with the company undertaking an enterprise-wide review. At its current share price, which is down by 14.5% year to date, Boral has a trailing, 12-month dividend yield of 6.3%. 

Motley Fool contributor Daryl Mather does not own shares in Boral Ltd. 

More reading

• Where I would invest $10,000 into ASX shares in FY 2021
• Why the Telstra share price lost 18% in FY20
• Why the TPG share price is up 38% in FY20
• Telstra and this ASX 200 share could be top picks for retirees
• Why I would buy and hold CSL and this quality ASX 200 share

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited, BUBS AUST FPO, CSL Ltd., Kogan.com ltd, and Nanosonics Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited and VOLPARA FPO NZ. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Ansell Ltd., BUBS AUST FPO, Kogan.com ltd, and Nanosonics 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 Top ASX Stock Picks for July 2020 appeared first on Motley Fool Australia.

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If you’re looking to invest $10,000 into the share market in FY 2021, I think the three ASX shares listed below could be quality options.

I believe all three have the potential to beat the market over the next 12 months and beyond. Here’s why I like them:

BetaShares NASDAQ 100 ETF (ASX: NDQ)

The first option for investors to consider investing $10,000 into is the BetaShares NASDAQ 100 ETF. This exchange traded fund allows you to invest in the 100 largest non-financial businesses listed on the famous technology-focused NASDAQ index through a single investment. This means you’ll be investing in shares such as Amazon, Apple, Netflix, Facebook, Microsoft, and Google’s parent, Alphabet. I think these are among the highest quality businesses in the world and capable of driving the NASDAQ index higher in FY 2021 and throughout the 2020s.

NEXTDC Ltd (ASX: NXT)

Another option to consider for that $10,000 investment is NEXTDC. I believe the data centre operator is positioned perfectly to capitalise on the cloud computing boom. According to global technology research firm Gartner, it has forecast that 80% of all organisations will shift their workloads to third-party data centres by 2025. And given that this prediction was made pre-pandemic, I wouldn’t be surprised if this shift has accelerated. Overall, I expect this to lead to increasing demand for its innovative data centre outsourcing solutions. This should support solid earnings growth as the company scales.

ResMed Inc. (ASX: RMD)

Another ASX share to consider buying with the $10,000 is ResMed. I’m confident the medical device company can be a strong performer in FY 2021 and beyond. This is due to its focus on the sleep treatment market and the proliferation of obstructive sleep apnoea, which is driving increasing demand for its masks and software solutions. In addition to this, a second wave of coronavirus in a number of key markets looks likely to lead to strong ventilator sales in the near term.

More reading

• Here are 2 easy ways to invest in quality international shares on the ASX
• 2 quality ASX shares I would buy with $10,000 in July
• Why ResMed and these ASX shares have just hit new highs
• 3 five-star ASX stocks to buy in July
• 10 high quality ASX shares to buy in FY 2021

Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) went up 1.4% today, defying the ongoing negativity with COVID-19.

This afternoon the Victorian Premier Daniel Andrews has announced that restrictions will be reintroduced for 10 Victorian suburbs. People will only be allowed to leave their house for four reasons. Those reasons are: for work or school, for care or care giving, for daily exercise, for food and other essentials. Police will actively enforce the suburb lockdowns with on-the-spot fines if people are out of their homes for anything other than the permitted reasons.

Collins Foods Ltd (ASX: CKF) delivers tasty returns

The ASX 200 fast food business announced its FY20 result today.

Revenue grew by 8.9% to $981.7 million. KFC Australia delivered same store sales growth of 3.5%. However, KFC Europe’s same store sales dropped 5.8% mainly due to COVID-19.

Collins Foods said that Taco Bell continues its expansion amidst high brand engagement, with recent shifts towards drive-thru and delivery channels.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) (pre AASB 16) grew 6.3% to $120.6 million. Underlying net profit after tax (NPAT) (pre AASB 16) rose by 5.1% to $47.3 million. Statutory NPAT came in at $31.3 million.

Collins Foods said that net debt was down to $203.2 million (compared to $212.5 million in FY19). The net leverage ratio was down to 1.69 times (compared to 1.87 times in FY19).

The board of Collins Foods decided to declare a final dividend of 10.5 cents per share, bringing the total FY20 dividend to 20 cents per share, up from 19.5 cents in FY19.

In FY21 Collins Foods wants to add up to 12 new KFC Australia restaurants, three to four European KFC restaurants and four to six Taco Bell restaurants.

Freedom Foods Group Ltd (ASX: FNP) CEO resigns

The board of ASX 200 company Freedom Foods announced today that last night it accepted the resignation of CEO and managing director Rory Macleod. He has resigned from all board and executive positions.

The company also announced that further to the update it released on 25 June 2020, it has engaged Ashurst and PwC to advise and assist with ongoing investigations into the company’s financial position.

Freedom Foods shares remain suspended.

Lifestyle Communities Limited (ASX: LIC) acquisition

The business has acquired a new 9-hectare site in Clyde which is located in the south east growth corridor.

The new site will add approximately another 230 homes which increases Lifestyle Communities portfolio to 4,518 home sites including sites in planning, development or under management.

Lifestyle Communities also announced an increase of its existing debt facility by $50 million and extended its tenor. The result of the amendments is a combined facility of $275 million comprising a $165 million tranche maturing in March 2024 and a $110 million tranche with a maturity of June 2025.

The managing director of Lifestyle Communities, James Kelly, said: “We are seeing a number of high-quality sites come to market because of the change in macro conditions. The increase in facility size is an important step to ensure we have capacity to secure additional sites that meet our site selection criteria as they become available.”

Nufarm Limited (ASX: NUF) announces changes to global manufacturing footprint

After the market had closed, ASX 200 agri business Nufarm announced that it’s going to cease manufacture of insecticides and fungicides at its Raymond Road site in Laverton, Australia and curtail herbicide manufacturing at its operations in Linz, Austria.

Nufarm expects that the initiatives announced will deliver an improvement to earnings before interest, tax, depreciation and amortisation (EBITDA) of up to $15 million per annum. However, there will be one-off cash costs relating to the restructuring of approximately AU$25 million, which will be partially offset by proceeds from the future sale of the Raymond Road property.

More reading

• Why the Telstra share price lost 18% in FY20
• Why the TPG share price is up 38% in FY20
• Top brokers name the latest ASX shares to buy today
• What to expect from ASX 200 shares in FY2021
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods Limited and Freedom Foods Group 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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Now that the 2020 financial year has officially ended for ASX shares (as of market close), we can take a definitive look at how individual companies have performed over the last 12 months.

Due to the coronavirus pandemic, most ASX shares have recorded heavy losses over the past year, although there have been quite a few exceptions. Telstra Corporation Ltd (ASX: TLS) is not one of those exceptions, much to the chagrin of its shareholders.

Telstra shares started the financial year last July at $3.83. Today, those same shares have ended the trading day at $3.13, which means the Telstra share price has returned -18.28% over the period. Even accounting for Telstra’s hefty dividend payments, shareholders are still underwater. Over the same period, the S&P/ASX 200 Index (ASX: XJO) is down around -11.3%, which means Telstra has lagged the broader market too.

Why have Telstra shares underperformed in FY20?

The Telstra share price has been under pressure for a few years now. Remember, this was a company that was commanding a $6.50 per share price tag 5 years ago.

Telstra has been suffering throughout the rollout of the National Broadband Network (NBN). This has taken away Telstra’s ownership of the old copper ducts and networks which are still lucrative telecommunications infrastructure. Telstra used to be able to charge its competitors for the use of this infrastructure, which was obviously a great position to be in. Now, it has to compete on a level playing field, which, while great for consumers, is bad for Telstra’s bottom line.

Telstra has also been out of favour because it is set to gain a newly beefed-up competitor in the form of the recently merged Vodafone-TPG Telecom Ltd (ASX: TPM). The ACCC initially blocked the TPG merger from going ahead, but an appeal to the Federal Court has resulted in the roadblock being rescinded. Coincidentally, today is the first ASX trading day of the new TPG. Since TPG was a formidable competitor in the fixed-line space and Vodafone in the mobile space, the combined company could cause a headache for Telstra’s market dominance. Although personally, I don’t see it as quite as significant a threat as perhaps some other investors. Even so, the market appears to be betting on TPG shares over Telstra right now.

Is Telstra a bargain buy today?

At its current level, I actually think there is a lot to like about the Telstra share price. Telstra commands the lion’s share of the Aussie telco market. It has a strong brand, an arguably superior mobile network and is also the market leader in investment in the new 5G technology, which is set to supersede the current-generation 4G mobile network over the next year or two.

Telstra also pays a healthy dividend of 16 cents per share on a trailing basis (including the special NBN payments). On current prices, that would give Telstra a trailing yield of 5.09%, or 7.27% grossed-up.

For a strong dividend share with potential 5G upside, I think Telstra shares are well worth considering for FY2021.

More reading

• ASX 200 rises 1.4%, Collins Foods delivers tasty returns
• Why the TPG share price is up 38% in FY20
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• What to expect from ASX 200 shares in FY2021

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. 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 Why the Telstra share price lost 18% in FY20 appeared first on Motley Fool Australia.

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Of all the S&P/ASX 200 Index (ASX: XJO) shares that have delivered outperforming returns for investors in the 2020 financial year, I think TPG Telecom Ltd (ASX: TPM) is one of the most surprising. After all, an ASX telco isn’t the first place most investors look in the search for a market-beating investment.

But the performance of the TPG share price over FY2020 has warranted a re-think of this logic. TPG shares began FY20 at $6.47. Today (on the eve of the new financial year), those same shares will set you back $8.93. That represents a 38.02% gain for TPG shareholders over the past 12 months.

Why has the TPG share price hit the roof?

The past year has been a perfect storm for TPG shares, with several events coming together in the telco’s favour. Firstly, TPG’s planned merger with Vodafone has been greenlit by shareholders and the Federal Court after initially being blocked by the ACCC on competition grounds. This enables TPG to merge its high-performing, fixed-line network of customers with Vodafone’s established market of mobile customers. This ‘new TPG’ looks better set to take the fight up to its competitors in Optus and Telstra Corporation Ltd (ASX: TLS). The combined entity (which officially listed today) is due to start ordinary trading in its own right soon, under the far more appropriate ‘TPG’ ticker symbol.

Secondly, shareholders have also been excited about TPG’s spin-off of its Singapore telco business into another separate entity, Tuas Limited (ASX: TUA), which also hit the boards this morning. As part of this ‘bait and switch’ merger/de-merger, TPG shareholders are also looking forward to a special 49 cents per share dividend which is set to be paid on 13 July.

All of these factors have combined to push sentiment surrounding TPG shares to new highs.

Is TPG still a buy today?

I think the new TPG is shaping up to become a force to be reckoned with on the ASX telco scene. It looks as though the company will benefit from synergies with Vodafone, and TPG’s enigmatic-but-highly-rated CEO David Teoh is a proven performer. However, I do think TPG still has its work cut out for it in competing with Telstra. Telstra has always been the dominant business in the ASX telco space, and I don’t see TPG erasing this advantage anytime soon. Telstra still has the lion’s share of both the fixed-line and mobile markets, and will likely continue holding on tightly to these due to the company’s strong brand and dominant mobile network.

Furthermore, I’m far more bullish on Telstra’s 5G network plans than TPG’s, with the latter acknowledging it has fallen behind in the 5G race. 5G promises to be the ‘next big thing’ in telco, with higher speeds, lower latency and almost limitless ‘Internet of Things’ applications being touted. Even though TPG shares have been the winner in FY2020, I’m still betting on Telstra for the rest of the decade.

More reading

• Top brokers name the latest ASX shares to buy today
• Telstra and this ASX 200 share could be top picks for retirees
• What to expect from ASX 200 shares in FY2021
• Morgans picks the best FY21 ASX buys for the COVID-19 world
• Afterpay shares have exploded 142% in FY20

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. 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 Why the TPG share price is up 38% in FY20 appeared first on Motley Fool Australia.

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