Tag: Motley Fool Australia

2020 has been a crazy ride for many ASX 200 share investors.

The S&P/ASX 200 Index (ASX: XJO) is down 10.6% in 2020 thanks largely to the steep bear market over February and March. 

It’s true that investing in the share market isn’t for everyone. There are a lot of factors that should be considered before diving into ASX 200 shares and one of them is time.

I believe if you’re not investing for at least the next 7 to 10 years, it may not be wise to buy right now.

But if you’re looking to invest for the next decade or more, here are a few shares I would buy with $10,000 today.

Where to invest $10,000 in ASX 200 shares for 2030

I like a couple of blue-chip shares in the current market.

The first one I’m looking at right now is Fortescue Metals Group Limited (ASX: FMG).

The Fortescue share price is up 32.7% this year and more than 600% in the last 5 years.

The Aussie iron ore miner could be set for a big decade of growth in the 2020s. I think a strong relationship with China and growing sales to India could be the key to success for Fortescue in the decade ahead.

Combine this with a potential infrastructure boom in the short to medium-term, and Fortescue is one ASX 200 share definitely worth watching right now.

A2 Milk Company Ltd (ASX: A2M) is another ASX blue-chip on my radar.

Just like Fortescue, this dual listed dairy share has seen strong growth over recent years. In fact, the A2 Milk share price has rocketed 26% higher in 2020 alone.

A2 Milk is looking to expand internationally and not just throughout Asia. On top of the lucrative Chinese market, the company is looking to establish a foothold with the brand in Canada.

If A2 Milk can execute on its strategy over the next 10 years, I think it could be worth much more than its current $13.4 billion valuation.

But, it’s not only the blue-chips that I’ve got my eye on. I also like the look of ASX 200 growth shares like Xero Limited (ASX: XRO).

Xero is a leading accounting software provider that targets small and medium enterprises (SMEs). More innovation and a rise in small business participation could be a good thing for Xero sales in the coming years.

If Xero can continue its market domination, then who knows where this Aussie tech share’s price will be in 10 years’ time.

More reading

• Alphabet soup: Is the ASX 200 in for a V-shaped COVID recovery or rolling Ws?
• Ready to invest $5,000? I’d buy these ASX dividend shares today
• How ASX 200 shares like Xero could help you retire early
• Best growth shares to buy with $4,000
• 5 things to watch on the ASX 200 on Wednesday

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 Xero. 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.

The post Where to invest $10,000 in ASX 200 shares for 2030 appeared first on Motley Fool Australia.

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You might be eyeing the current market as an opportunity to buy some cheap ASX dividend shares.

The S&P/ASX 200 Index (ASX: XJO) is down 10.5% since the start of the year, which could mean there are some bargain buys.

However, I think it’s easier said than done to find undervalued shares. There are a lot of smart investors out there hunting for bargains.

Here are a few of the ASX dividend shares that I would consider investing in today.

Why Telstra is on my ASX dividend share watchlist

I think Telstra Corporation Ltd (ASX: TLS) shares are worth a look right now.

Telstra has been an ASX dividend share staple for a number of years now, although it’s true that there have been some steep share price declines and dividend cuts to Telstra shares in recent years.

That means the Aussie telco may not be the reliable income share it has been in the past, but I still think there could be some long-term value. Telstra is currently yielding 3.1%, which would be a handy portfolio boost in the current times.

Of course, dividend yields could be misleading right now, but I think Telstra’s future dividend payment prospects remain bright, particularly given its emerging position as a potential leader in the 5G network space. That could be the key to the Aussie telco gaining back market share (and earnings) it has lost to the NBN.

Are ASX bank shares worth a look?

Out of the ASX banks, I think Macquarie Group Ltd (ASX: MQG) could be a solid ASX dividend share to buy.

The Macquarie share price is down 11.8% this year and in my opinion could be an undervalued prospect, given its 3.5% dividend yield. Recent ASX bank dividend cuts don’t bode well for strong income in 2020, but there’s a chance Macquarie could maintain its distributions.

If Macquarie’s investment teams can capitalise on the current market volatility, that could pave the way for a strong half-year earnings result. Higher earnings often means more free cash flow, which is good news for investors holding out hope for half-year dividend payment.

Can this ASX dividend share outperform in 2020?

JB Hi-Fi Limited (ASX: JBH) is one ASX dividend share, in particular, that I think could outperform in the next 12 months.

The JB Hi-Fi share price is up 10% in 2020 but it could be set to climb higher if it continues its strong sales trajectory.

More Aussies working from home has been a big factor behind the recent share price move.

JB Hi-Fi’s electronics sales have skyrocketed in recent months but I think there’s more potential growth on the way. If we see a sustained shift towards a more remote working model, that could see more Aussies upgrade their home setups.

It’s certainly not a long-term trend, but any short-term sales boost is welcome in the current market. More sales means higher earnings and that could mean JB Hi-Fi maintains its distributions, while other top companies are forced to make cuts.

That would be good news for JB Hi-Fi and its investors, who could pick up a 3.6% dividend yield today.

Foolish takeaway

These are just a few of the ASX dividend shares that I think could be good value buys for income alongside some potential capital gains.

More reading

• Alphabet soup: Is the ASX 200 in for a V-shaped COVID recovery or rolling Ws?
• Where to invest $10,000 in ASX 200 shares for 2030
• Why I think the Telstra share price could hit $4 in 2020
• Is the Macquarie share price a buy?
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and 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 Ready to invest $5,000? I’d buy these ASX dividend shares today appeared first on Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) is on form again on Wednesday and on course to record a decent gain. At the time of writing the benchmark index is up almost 0.4% to 5,976.7 points.

Four shares that are climbing more than most today are listed below. Here’s why they are storming higher:

The Afterpay Ltd (ASX: APT) share price is up 3% to $60.93. Investors have been buying the payments company’s shares after it released an update on its UK business. According to the update, the Clearpay business has reached 1 million active customers after one year of operation in the country. Pleasingly, management notes that UK customers are using its service more frequently than its US customers were after one year in that market.

The APA Group (ASX: APA) share price has risen over 2.5% to $11.59. Investors have been buying the energy company’s shares after it revealed its distribution plans. APA announced an estimated final distribution of 27 cents per security for the second half. This brings its full year distribution to 50 cents per security, up 6.4% on FY 2019’s payout.

The Evolution Mining Ltd (ASX: EVN) share price has jumped 4% to $5.48. Investors have been buying the gold miner’s shares today after the gold price hit its highest level since late in 2012. Evolution is just one of a number of gold miners charging higher. So much so, the S&P/ASX All Ordinaries Gold index is up 2.5% at the time of writing.

The Sonic Healthcare Limited (ASX: SHL) share price has climbed almost 4% to $30.03. Investors have been buying the healthcare company’s shares after it released a trading update. That update revealed that its performance rebounded strongly in May and June following weakness in March and April. As a result, management revealed that it is in a position to provide guidance again. It now expects its EBITDA to be broadly flat in FY 2020.

More reading

• Sonic Healthcare share price pushes higher on FY 2020 guidance update
• Coronavirus second wave potential could drive investment portfolio changes
• Best growth shares to buy with $4,000
• 5 things to watch on the ASX 200 on Wednesday
• Afterpay share price on watch after reaching 1 million UK customers

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

The post Why Afterpay, APA, Evolution, & Sonic shares are storming higher appeared first on Motley Fool Australia.

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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to continue its positive run. At the time of writing the benchmark index is up 0.3% to 5,973.6 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

The AMP Limited (ASX: AMP) share price is down over 2% to $1.86. The financial services company’s shares were solid performers on Tuesday after announcing the receipt of the final regulatory approval required for the sale of its life business to Resolution Life. This morning analysts at Morgan Stanley responded to the news by holding firm with their equal weight rating and $1.40 price target.

The Qantas Airways Limited (ASX: QAN) share price has fallen 2% to $4.22. Investors may have been selling the airline operator’s shares amid concerns over another spike in coronavirus cases in Victoria. If it isn’t brought under control soon, there are worries it could delay the recovery in the domestic travel market.

The Qube Holdings Ltd (ASX: QUB) share price is down by 2.5% to $2.84. This morning analysts at Morgans downgraded Qube’s shares to a reduce rating with a $2.45 price target. It appears to believe the company’s shares are overvalued after a strong gain over the last few months. Qube’s shares are up a massive 59% since this time in March.

The Transurban Group (ASX: TCL) share price is down over 1% to $14.62. This decline may have been driven by a broker note out of UBS this morning. According to the note, the broker has downgraded the toll road operator’s shares to a neutral rating with a $14.85 price target. UBS made the move on valuation grounds after a strong rebound in its share price over the last couple of months.

More reading

• My 3 high-yield ASX dividend shares to buy now
• Coronavirus second wave potential could drive investment portfolio changes
• Forget term deposits! These ASX dividend shares are better
• ASX 200 finishes higher, Woolworths gives update
• Why the AMP share price is up 9% today

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

The post Why AMP, Qantas, Qube, & Transurban shares are dropping lower appeared first on Motley Fool Australia.

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The Sonic Healthcare Limited (ASX: SHL) share price is pushing higher on Wednesday after the release of a trading update.

At the time of writing the healthcare company’s shares are up almost 3% to $29.76.

What did Sonic Healthcare announce?

After withdrawing its FY 2020 guidance in March because of the pandemic, this morning the company revealed that it is now in a position to provide guidance once again.

Management notes that its trading results in March and April were substantially below forecast, but things have picked up since then. In May, its performance was stronger than expected and in June this positive trend has continued.

As a result of the above, the company expects to report statutory earnings before interest, tax, depreciation, and amortisation (EBITDA) at a similar to level to what it achieved in FY 2019 (excluding the impact of the new lease accounting standard AASB 16). In FY 2019 Sonic reported statutory EBITDA of $1.075 billion.

Sonic’s CEO, Dr Colin Goldschmidt, was pleased with the way the company performed during the crisis.

He commented: “Sonic’s global leadership teams have responded magnificently to the Covid crisis, making use of established executive experience, trusted culture, team spirit and wide-open Sonic collaboration channels at national and international level.”

“Our leaders have shown great flexibility and have adapted rapidly to an entirely new operating environment. Sonic continues to play a crucial frontline role in combating the pandemic, with our laboratories in Australia, the USA and Europe testing thousands of patients per day for Covid-19,” he added.

What about FY 2021?

Due to the uncertainty caused by the pandemic, Sonic advised that it is not in a position to provide guidance for FY 2021 at this time. Though, it does intend to provide a further update with the FY 2020 results release in August 2020.

More reading

• Why Afterpay, APA, Evolution, & Sonic shares are storming higher
• Top brokers are urging you to buy these 3 ASX stocks today
• Top brokers just upgraded these ASX 200 shares today
• Why the Healius share price will be in the spotlight tomorrow morning
• Why Costa, Freedom Foods, Sonic, & Westpac shares are tumbling lower

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

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Buying and holding ASX 200 shares can be a powerful way to build wealth and retire early.

If equities are to form a crucial part of your retirement plans, obviously selecting the right shares to buy today is extremely important.

For example, the Xero Limited (ASX: XRO) share price has rocketed more than 400% higher over the last 5 years. Xero is a leading Australian tech company with a specialist, easy-to-use accounting software platform.

If you’re a long-term investor in this ASX 200 tech share, you’d be sitting on a tidy capital gain right now.

But Xero isn’t the only company with long-term growth potential on my radar. Here are a couple of my other favourite picks in the current market.

ASX 200 shares that could help you retire early

I like the look of NextDC Limited (ASX: NXT) for its potential growth trajectory.

The NextDC share price is up 51.7% this year alone and 333.9% in the last 5 years. Whilst this could mean NextDC has been overbought, I still think there’s further growth ahead for this Aussie data centre operator.

NextDC is a leader in the Australian data storage and security space. The ASX 200 tech share has been surging in 2020 as demand for its services has increased.

NextDC posted a $4.9 million half-year loss in February as it continues to re-invest in the business and fuel expansion plans.

It’s a risky play, but one that could have a big payoff if successful in the decades ahead.

Outside of the tech sector, I also like the prospects of Polynovo Ltd (ASX: PNV) right now.

Polynovo is an ASX 200 company that specialises in the treatment of burns and which also produces other biotechnology solutions. 

The Polynovo share price is up an impressive 2,644% in the last 5 years including a 25.4% gain in 2020.

I think despite these gains, Polynovo shares could be set for more growth over the next decade. 

Polynovo’s NovoSorb product is already active in an addressable $1.5 billion market, but planned applications for hernia devices and breast implants could boost this towards the $7.5 billion mark.

That leaves a lot of potential growth for the ASX 200 biotech share if it can execute its strategy and capture a larger market share.

Foolish takeaway

These are just a couple of ASX 200 growth shares on my radar for building a comfortable retirement. As always, it’s important to consider your own investment horizon and lifestyle goals when it comes to purchasing shares. Also, ensure you maintain a balanced portfolio to help maximise your return whilst minimising your risk exposure.

More reading

• Where to invest $10,000 in ASX 200 shares for 2030
• Why this fund manager believes PolyNovo shares are undervalued
• Best growth shares to buy with $4,000
• How to try and beat the market with ASX shares
• ASX 200 Weekly Wrap: ASX back in the green

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 Xero. 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 How ASX 200 shares like Xero could help you retire early appeared first on Motley Fool Australia.

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The Serko Ltd (ASX: SKO) share price is tumbling this morning after the ASX small-cap reported its full-year results for the year ending 31 March 2020.

At the time of writing, Serko shares have fallen 3.96% to $2.91. This drop takes the company’s year-to-date share price loss to around 40%.

About Serko

Serko is an Auckland-based online travel and expense management technology provider. The company’s core software, Zeno, addresses two main functions: corporate travel and expense management.

Zeno Travel is an online travel platform that delivers AI-powered end-to-end travel itineraries, cost control and travel policy compliance to corporate customers.

Meanwhile, Zeno Expense provides finance teams with intelligent technology to automate and streamline the expense administration function, identify out-of-policy expense claims and prevent fraud.

What the numbers say

Starting at the top line, total operating revenue came in at NZ$25.9 million. While this result represented 11% growth over the prior corresponding period (pcp), it was substantially lower than Serko’s initial guidance range of 20% to 40%.

In light of COVID-19, Serko revised its revenue expectations in late February and then withdrew guidance completely in mid-March.

Turning to expenses, operating costs increased 59% to NZ$37.1 million. This reflected a full-year of InterplX operating costs, an expense management software provider Serko acquired in late 2018, and the scale-up of the company’s international presence.

This increase in operating costs led to Serko reporting a full-year net loss after tax of NZ$9.4 million, compared to an FY19 profit of NZ$1.6 million.

Serko capitalised NZ$11 million of development costs in FY20 compared to NZ$6.7 million in FY19. Total research and development amounted to NZ$13.6 million, representing 53% of net operating income compared to 39% in the pcp.

Following the company’s NZ$45 million capital raising in November 2019, Serko remains well-funded with NZ$39.9 million cash on its books as at 31 May 2020. Serko’s net cash burn for the year, including capital development, was NZ$16.5 million.

Moving forward, Serko is targeting a maximum cash burn average of no more than NZ$2 million per month.

Bookings growth

Serko achieved year-on-year bookings growth each month through to February 2020. The Australian and New Zealand markets generated most of Serko’s total bookings, the majority of which were domestic.

With this, the number of corporates transacting through Serko’s platforms continued to grow, increasing by more than 700 compared to the prior year.

In February, a peak of over 24,000 bookings were processed in a single day. This compares to a peak of 21,000 bookings in the same month in the prior year.

However, as detailed in previous trading updates, Serko noted that a gradual decline in bookings became evident in mid-February, which was followed a rapid decline in March.

As a result, total bookings for FY20 were up only 2% over the pcp.

What next?

Looking forward, Serko believes that the Australian and New Zealand domestic and trans-Tasman travel markets, which represents most of its revenue, are poised to recover more quickly than international routes outside of Australasia.

Serko noted that travel volumes gradually started to recover in May in light of the easing of domestic travel restrictions in New Zealand. However, it is yet to see any material increase in domestic travel in Australia.

Despite the uncertain outlook, the company anticipates that its core Australasian markets will be operating at 40% to 70% of their pre-COVID-19 activity levels by March 2021.

Commenting on the results, acting chair Claudia Batten said:

“The first three quarters of the financial year ended 31 March 2020 were characterised by monthly revenue growth and the achievement of a number of key milestones.”

“However, Serko’s performance was impacted in the fourth quarter of the financial year as the Covid-19 pandemic became widespread, significantly affecting booking volumes. This resulted in an adverse impact on the full-year result.”

More reading

• ASX 200 finishes flat, ASX travel shares drop
• ASX 200 falls 2%, ASX travel shares drop heavily
• 3 exciting small cap ASX shares to watch very closely
• Are these exciting small cap ASX tech shares the next Afterpay?

Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Serko Ltd. The Motley Fool Australia has recommended Serko 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 ASX dividend share game has changed in 2020 – markedly so. This time last year, we were likely discussing which ASX banks had the largest dividend yield, or how safe Transurban Group‘s (ASX: TCL) payouts are.

Fast forward to 2020 and we’re now asking which ASX bank will pay a dividend this year, or how low Transurban’s payouts will be.

So here are 3 ASX shares that I think are great choices for strong dividend income within this new paradigm.

The resources dividend giant

BHP Group Ltd (ASX: BHP) is an ASX mining behemoth. It would be our largest ASX company if it wasn’t for its multiple listings across London and New York. BHP has massive global operations across 4 key commodities: copper, oil, iron ore and coal. It’s this diverse earnings base that I think lends strength to BHP by enabling it to balance commodity pricing swings in any one area.

On current prices, BHP is offering a trailing dividend yield of 5.97% – or 8.53% grossed-up with full franking. I think this dividend is well funded today, and could even increase if iron ore prices stay above US$100 a tonne for an extended time. Either way, I think BHP is a top contender for a strong dividend in 2020.

The listed investment company

WAM Capital Limited (ASX: WAM) is a listed investment company (LIC) that has been around since 1999. Since that time, it has handily delivered investors outperforming returns, which stand at an average of 15.7% per annum. WAM’s focus is normally on growth-orientated, mid-cap ASX shares, which are bought when the company identifies a ‘growth catalyst’.

On current prices, WAM shares are offering a dividend yield of 8.42%, 12.03% grossed up with full franking. However, this LIC’s profit reserves are looking a little bare. It’s possible this dividend won’t be maintained at its current level moving forward.

The dark horse ASX bank

Commonwealth Bank of Australia (ASX: CBA) is our final dividend pick – and a long-shot. I, for one, don’t have massive expectations on the bank’s final dividend for 2020, due to be paid in September. However, I also don’t think CBA will follow its banking compatriots Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking GrpLtd (ASX: ANZ) and ditch the dividend entirely.

Although the ASX banking sector is facing a number of headwinds as a whole, CommBank is unquestionably our strongest bank and therefore the most likely to return to its former glory as a dividend kingpin, in my view. Thus, I think on current pricing, you could be picking up a great deal for a long-term dividend share winner.

More reading

• Coronavirus second wave potential could drive investment portfolio changes
• Forget term deposits! These ASX dividend shares are better
• Is a Fortescue Metals mega-merger on the cards?
• ASX 200 flat: Westpac tumbles, Woolworths reveals strong sales growth, Challenger sinks
• Should you buy ANZ, CBA, NAB, or Westpac? Here’s what this broker thinks

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. 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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The PolyNovo Ltd (ASX: PNV) share price may have jumped 56% over the last 12 months, but one fund manager believes it can still go higher.

Who is bullish on PolyNovo?

According to a recent update by the DNR Capital Australian Emerging Companies Fund, it has recently initiated a position in PolyNovo.

PolyNovo is the medical device company behind the NovoSorb technology, which was developed by CSIRO following the Bali bombings.

NovoSorb is a biodegradable material that can be used to aid the repair of bone fractures and damaged cartilage, and in skin grafts.

The key product in its portfolio is the NovoSorb Biodegradable Temporising Matrix (BTM) product. NovoSorb BTM is a wound dressing intended for treatment of full-thickness wounds and burns where the dermal structure has been lost to trauma, or damaged requiring surgical removal.

Why is PolyNovo undervalued?

DNR Capital believes that PolyNovo is undervalued based on its future cash flows.

It commented: “We believe Polynovo shares are undervalued based on our assessment of long-term cash flows. The company has a leading product that is in the early phase of its penetration into a large addressable market of $1.5b.”

It’s worth noting that DNR Capital isn’t including other markets that the company has its eyes on. Adding these into the equation would increase its addressable market opportunity to an estimated $7.5 billion per year according to management.

DNR Capital explained: “We don’t ascribe value to the hernia and breast opportunities given the limited visibility on cash flows, as these products need to pass certain milestones before they become commercial.”

In addition to this, the fund manager notes that PolyNovo’s earnings growth potential is very strong and its outlook is increasingly positive.

“With the business now at a cash-flow break even run-rate, we expect significant earnings growth as it penetrates a large addressable market estimated at $1.5b. The business generates attractive gross margins of 90%, which will lead to high returns on invested capital.”

“The company continues to reinvest into research and development with a number of new products to be launched targeting the hernia and breast market, with the combined opportunity valued at $6b,” it added.

Should you invest?

I think DNR Capital makes some great points and PolyNovo could be well worth considering with a long term view. Though, given the premium that its shares trade at, you might want to consider limiting an investment to just a small part of your portfolio.

More reading

• ASX 200 falls 0.9%, Afterpay share price hits new record
• Will Xero shares and these 2 other ASX companies be portfolio staples by 2030?
• 3 ASX 200 shares to buy and hold for decades
• 2 ASX 200 biotech shares to consider buying today
• Where next for the PolyNovo 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.

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I believe the Telstra Corporation Ltd (ASX: TLS) share price could hit $4 in 2020.

Let’s be clear, this isn’t an earth-moving price target. Telstra shares have been at $4 before, most recently in August last year. Before then, the ASX telco giant actually spent between 2012 and 2017 above $4 per share, even hitting $6.50 at one point in 2015. We were getting close to $4 in January this year (Telstra touched $3.90), but then the coronavirus pandemic hit and Telstra has been stuck in a rut at around $3.20 ever since. Right now, one Telstra share will set you back just $3.17.

So why do I think Telstra shares can make it back to $4 and potentially beyond in 2020?

There are two reasons:

Telstra shares and dividends

The first is Telstra’s dividend. This company has quite an infamous history when it comes to dividend payments. Some shareholders might still not have forgiven Telstra for slashing its dividend back in 2017 from 31 cents per share (annually) to 16 cents today. It’s my view, this was partly behind Telstra’s massive re-valuation between 2015 and 2018.

But Telstra has managed to keep it’s dividend steady at 16 cents per share for close to two years now, and I don’t believe there is any danger this will be cut down any further. For one, the dividend is comfortably covered by Telstra’s free cash flow. And two, the company is close to putting the damage done to its earnings by the NBN behind it.

So what’s so good about Telstra’s dividend then? Well, at 16 cents per share (which includes 6 cents in ‘special’ NBN dividends), Telstra is offering a 5.05% dividend yield. If you include the full franking that Telstra shares also come with, this grosses-up to 7.21%. That’s not a bad yield in a zero interest rate environment.

What about 5G?

The second reason I believe Telstra shares could reach $4 this year is the rollout of the new 5G mobile technology. 5G is the next generation of mobile network and promises unprecedented speeds, low latency and increased applications. We don’t know for sure just how many benefits 5G will bring to the table, but if the rollout of 4G a few years ago is anything to go by, it looks likely to be good news for all ASX telco companies. And Telstra looks set to be in prime position for this shift. It is investing more into 5G than its competitors, from what I can see, which could see better speeds and range for Telstra’s 5G network compared with anything Optus or TPG Telecom Ltd (ASX: TPM) delivers.

Foolish takeaway

All in all, I think Telstra’s healthy dividend policy, as well as its investment in 5G technology, could well see the Telstra share price hit $4 again in 2020. As such, Telstra is a share that I’m very happy to own, and I don’t anticipate this changing anytime soon.

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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 I think the Telstra share price could hit $4 in 2020 appeared first on Motley Fool Australia.

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