Tag: Motley Fool Australia

I think it’s fairly safe to say that most ASX investors love a good dividend share, particularly those that offer franking credits. The unique way our tax system is structured makes it very attractive for ASX shares to pay dividends to investors. Over time, this has led to most ASX companies adopting a dividend payout policy, even if they’re still very much in their ‘growth phase’.

We can see this reflected in the yields that an S&P/ASX 200 Index (ASX: XJO) fund provides. Let’s take the iShares Core S&P/ASX 200 ETF (ASX: IOZ). It has a trailing yield of 4.51% on current prices, which also comes with some franking credits.

By comparison, a US-based index fund like the iShares S&P 500 ETF (ASX: IVV) currently offers a trailing dividend yield of just 1.94%, with no franking credits in tow.

No brainer, right?

Well, maybe.

What’s wrong with ASX dividend shares?

Dividends are great – I love them myself. But perhaps dividend income isn’t quite as good as it initially seems.

Let’s look at 2 hypothetical companies.

Company A and Company B both make $1 in earnings per share. That’s $1 a shareholder of both Company A and Company B is entitled to as a part owner.

But let’s say both companies can achieve an internal Return on Invested Capital (ROIC) of 15%.

If company A retains its earnings and reinvests that $1 back into the company, it should be able to provide $1.15 of earnings per share in the following year. Since it is reinvesting this money, it’s not subject to corporate taxes. As such, shareholders of Company A get the benefit of an untaxed profit of 15 cents per share that is now compounding and working to create even more wealth in the future.

The real cost of a dividend

By Contrast, Company B instead pays out half of its earnings as a dividend of 50 cents per share. It then reinvests the remaining 50 cents per share back into the business. Thus, Company B owners are getting 50 cents per share in dividend income and can expect 57.5 cents in earnings per share the following year.

But given that 50 cents per share is being paid out of profits, this money must first be subjected to corporate tax. Afterward, the dividends will come with a receipt that tax has been paid, commonly known as a franking credit. This franking credit enables the dividend not to be taxed again as income when received by its shareholders.

But it is still taxed money, even if only taxed once. The point here is that Company A shareholders can expect  $1.15 in earnings the following year, on which no tax is payable. Company B shareholders can expect $1.075 in earnings the following year, half of which will be taxed.

Over time, this gap in earnings power will widen, making one group of shareholders a lot wealthier than the other. And all because Company B is paying out half its profits while Company A is reinvesting them.

Sure, Company B shareholders are getting some income on the side, but this income is coming at a cost. Unless you can reinvest your dividends for a return greater than 15% per annum, you’re losing out.

Foolish takeaway

Everything comes at a price, and dividend income is no different. So if you’re swooning over how great dividend shares are, have a think about what your company might be giving up to fund paying you these dividends. Or find companies that can manage both growth and funding a dividend.

More reading

• Top brokers name 3 ASX 200 shares to sell next week
• Top brokers name 3 ASX 200 shares to buy next week
• How mum and dad investors are beating fund managers at their own game
• Is this ASX small cap the best placed to benefit from the $700m HomeBuilder grant?
• Invest like Warren Buffett with these ASX 200 shares

Motley Fool contributor Sebastian Bowen 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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Do you want to replace your entire wage with dividends? It’s definitely possible to do it with ASX dividend shares.

I think having excess cash in the bank making interest at less than 1% just seems like a missed opportunity.

Before the coronavirus, wage growth was low and switching jobs seemed like the only way to get a good wage increase. These days ASX dividend shares may be the best way to boost your income.

The type of ASX shares that you could be looking at depends on how much dividend income you’re trying to make and how quickly.

You need to replace your wage fairly soon

You could be at a stage in life where retirement is coming up soon. Perhaps you are in a physical job and you won’t be able to do that for much longer. If this kind of situation describes you then high dividend yields could be the answer. But whatever you pick still needs to have a bit of potential growth too.

If you’re at retirement age and you aren’t rolling in money, you could be eligible for the pension or part pension which could help supplement your income needs.

Maybe you have $100,000 or $200,000 to invest to boost your income. The overall ASX share market is not a bad option for dividends, with a long-term investment in Vanguard Australian Shares Index ETF (ASX: VAS). The UK share market also has a solid dividend yield, which we can access through Betashares FTSE 100 ETF (ASX: F100)

There are also some listed investment companies (LICs) with big dividend yields like WAM Research Limited (ASX: WAX) and Naos Emerging Opportunities Company Ltd (ASX: NCC). Both of these LICs have grossed-up dividend yields of more than 9% and have paid reliable dividends over the past several years. They both look at smaller shares which have more growth potential than blue chips. A $100,000 portfolio with a 9% dividend yield makes $9,000 a year before accounting for income tax.

You have longer to replace your wage

You may not have an urgent need to build your income. In that case it’s probably better to go for ASX dividend shares that have good yields but are still generating growth over the long-term.

ASX blue chips like Wesfarmers Ltd (ASX: WES) and Macquarie Group Ltd (ASX: MQG) have been two good options that combine dividends and growth. Real estate investment trusts (REITs) like Rural Funds Group (ASX: RFF) are also solid income options. Infrastructure shares such as APA Group (ASX: APA) can also be reliable dividend payers.

However, some of the best ASX dividend shares could be ideas that have a solid starting yield, keep growing their dividend and can make capital gains over the long-term.

I’m thinking about shares like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Magellan Global Trust (ASX: MGG), WAM Microcap Limited (ASX: WMI), Future Generation Investment Company Ltd (ASX: FGX) and Brickworks Limited (ASX: BKW).

Foolish takeaway

I’m aiming to replace my work earnings with dividends over time with many of the businesses I’ve named above. The younger you are the easier it is to plan ahead for your portfolio and benefit from compound interest. It just takes time. Plan ahead to replace your earnings. I think a monthly investment plan is a good routine. Eventually you’ll reach excellent wealth and dividends.

More reading

• Is this ASX small cap the best placed to benefit from the $700m HomeBuilder grant?
• 3 ASX dividend shares for retirees
• 3 ASX shares for a beginner’s portfolio
• Are Macquarie Group shares worth investing part of $3,000 into this June?
• ETFs I’d pick to build a passive portfolio

Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO, MAGLOBTRST UNITS, RURALFUNDS STAPLED, WAM MICRO FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, Macquarie Group Limited, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of APA Group and Wesfarmers 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 How to replace your entire wage with dividends appeared first on Motley Fool Australia.

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The 2020 stock market crash has caused many investors to experience significant paper losses on their portfolios. In the short run, further declines cannot be ruled out due to the possibility of a second wave of coronavirus and its potential impact on the world economy.

However, now could be the right time to buy high-quality stocks while they trade on low valuations. By adopting a long-term view and reinvesting dividends received where possible, you could capitalise on the recent market crash to increase your chances of making a million.

A long-term view

As mentioned, the short-term prospects for the stock market are highly uncertain. Previous bear markets have included brief market rallies that have not lasted for a sustained period of time. Therefore, while many stocks have risen from their recent lows, there is the potential for them to deliver disappointing returns in the coming months.

As such, adopting a long-term view towards your stocks could prove to be a highly worthwhile move. The stock market’s past performance shows that it often has periods of negative growth, but in the long run it has historically delivered relatively high returns compared to other mainstream assets.

By accepting that your investments could experience difficult periods over the short run, and allowing them the time they need to deliver high returns, you could increase your portfolio’s growth rate.

Focusing on value

It can be tempting to simply buy the cheapest stocks you can find in a market crash. However, some industries and businesses may fail to make a comeback from the current difficulties they are facing. They may, for example, have high debt levels or be void of a clear competitive advantage over their peers.

Therefore, it is important to consider the quality of a business, as well as its price, before buying it. In doing so, you can unearth the best value stocks that are on offer. They may be better placed to survive the upcoming economic challenges facing the world economy, as well as deliver a strong recovery relative to their peers over the long run.

Reinvesting dividends

A large proportion of the stock market’s historic total returns have been derived from the reinvestment of dividends. Therefore, reinvesting your income returns whenever possible following the recent market crash could boost your chances of making a million.

With many stocks currently trading on low valuations following their recent declines, now could be an opportune time to make use of your dividend income stream through buying high-quality stocks at low prices. You may even wish to reinvest in your existing holdings through an automated dividend reinvestment service. Over time, this could lower your average purchase price and enable you to benefit to a greater extent from the stock market’s likely long-term recovery.

More reading

• Is this ASX small cap the best placed to benefit from the $700m HomeBuilder grant?
• Invest like Warren Buffett with these ASX 200 shares
• 3 ASX dividend shares for retirees
• 3 ASX shares for a beginner’s portfolio
• Is 2020 a good time to get a credit card?

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

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The federal government’s $688 million cash handout to stimulate the home construction sector will benefit several S&P/ASX 200 Index (Index:^AXJO) stocks. But there’s at least one ASX small cap that’s also well placed to cash in.

This small cap is Beacon Lighting Group Ltd (ASX: BLX) and Citigroup believes the lighting retailer is better placed to outperform its peers in the post COVID-19 world.

Best small cap retailer?

“The introduction of the government’s $680 million HomeBuilder scheme, further entrenches Beacon Lighting as our top pick in small cap retail,” said the broker.

“In our view the HomeBuilder scheme means that Beacon is well placed to continue outperforming the broader discretionary retail sector once JobKeeper ends.”

That’s a big plus as there are worries about what would happen to discretionary spending in September.

Not only will the JobKeepter wage supplement come to an end, but other support measures, like JobSeeker and the moratorium on evictions, ends.

Beyond the HomeBuilder boost

There are a few other reasons why Citi believes the $235 million small cap ASX stock will outperform most other retailers.

Beacon’s outlets remained open throughout the coronavirus outbreak when many other retailers shut their doors. This means it faced less competition.

Another reason is that consumers were actively engaging in home improvement projects during the lockdown, and that bodes well for Beacon.

“We expect FY21e LFL [like-for-like] sales of 2% to be underpinned by renovation activity, noting that ~60% of Beacon’s customers are home renovators,” added Citi.

“However, benefits from HomeBuilder may be skewed towards 2H21 given eligible building contracts can be executed up until 31 December 2020 and lighting is typically purchased at the later stages of a renovation.”

Beacon shares on sale

The stock is looking cheap too on the broker’s forecasts. Beacon’s shares are trading on an undemanding FY22 price-earnings multiple of 13 times, which is a 15% discount to its Australian housing retail peers.

Citi is recommending the stock as a “buy” and lifted its price target to $1.24 from $0.95 a share. This implies a 16% plus return over the next 12-months if dividends are included.

Foolish takeaway

The way the HomeBuilder program is designed will benefit larger companies more than smaller ones.

This is one of the criticisms of the stimulus as eligible projects have to be worth between $150,000 to $750,000. Small contractors and sole traders are likely to miss out.

The same can be said about ASX companies. The grants will disproportionately benefit large cap stocks.

Some of these companies that I’ve highlighted include building materials supplier James Hardie Industries plc (ASX: JHX), Bunnings owner Wesfarmers Ltd (ASX: WES) and property developer Stockland Corporation Ltd (ASX: SGP).

More reading

• Invest like Warren Buffett with these ASX 200 shares
• Is 2020 a good time to get a credit card?
• Should you buy ASX shares or hold cash right now?
• What the 10 largest companies in the world have in common
• Why is it so hard to outperform the ASX 200 index?

Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc. The Motley Fool Australia owns shares of Wesfarmers 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 Is this ASX small cap the best placed to benefit from the $700m HomeBuilder grant? appeared first on Motley Fool Australia.

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One investment strategy that legendary investor Warren Buffett has utilised throughout his career is buy and hold investing.

This strategy involves investors buying shares in quality companies which have positive long term outlooks.

Investors will then hold onto them for as long as the investment thesis remains intact, which allows them to benefit from compounding.

The good news is that there are plenty of shares on the S&P/ASX 200 Index (ASX: XJO) which I think would tick a lot of boxes for someone like Buffett.

Three ASX shares that jump out at me are listed below:

CSL Limited (ASX: CSL)

The first ASX share which I think Warren Buffett would approve of is CSL. It is one of the world’s leading biotherapeutics companies and arguably Australia’s highest quality business. I’m a big fan of the company due to the strength of its portfolio of therapies, its expansive plasma collection network, and its heavy investment in research and development activities. Combined, I believe the company is well-positioned to continue growing its earnings at a strong rate for the foreseeable future.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Another top buy and hold option to consider is Domino’s Pizza. I think it would tick a lot of boxes for Warren Buffett, especially given his exposure to the industry through an investment in Restaurant Brands International. I like Domino’s due to its strong brand, in demand offering, and its bold growth plans. Over the next five years the company is aiming to deliver annual same store sales growth of 3% to 6% and annual organic new store additions of 7% to 9%. I expect this to underpin strong earnings growth for many years to come.

REA Group Limited (ASX: REA)

A final share that I believe Warren Buffett would like is REA Group. I think the realestate.com.au operator is a quality buy and hold option. This is due to its market-leading position and its incredibly resilient business model. And while trading conditions are likely to be tough in the near term, I believe it is worth focusing on the long term. When the headwinds it is facing ease, I expect its earnings growth to accelerate.

More reading

• Is 2020 a good time to get a credit card?
• How to turn $20,000 into $275,000 in 10 years with ASX 200 shares
• Should you buy ASX shares or hold cash right now?
• Are Macquarie Group shares worth investing part of $3,000 into this June?
• What the 10 largest companies in the world have in common

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited and REA 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.

The post Invest like Warren Buffett with these ASX 200 shares appeared first on Motley Fool Australia.

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ASX dividend shares could be key for retirees to be able to fund their lifestyle in the future.

Assets like bonds and term deposits don’t offer much income any more. Official interest rates have been pushed very low.

I think ASX dividend shares can be the answer because they can generate bigger profits.

Here are three ideas to look into for income:

Rural Funds Group (ASX: RFF)

Rural Funds is a farmland real estate investment trust (REIT). It has a diverse farm portfolio including almonds, macadamias, cattle, cotton and vineyards.

There is always going to be demand for food, so Rural Funds should always be able to find a quality tenant for its farms. At the moment its weighted average lease expiry (WALE) is longer than 10 years right now, so there is a lot of income visibility as an ASX dividend share for retirees.

It only has large businesses as tenants like Select Harvests Limited (ASX: SHV), Treasury Wine Estates Ltd (ASX: TWE) and Olam.

Rental indexation is built into all of its contracts, which is linked to either a fixed 2.5% increase or CPI inflation, plus market reviews.

As an ASX dividend share for retirees it has a solid FY21 yield of 5.5%. The most attractive thing could be that management aim to increase the distribution by 4% every year.

Brickworks Limited (ASX: BKW)

Brickworks is a very reliable option for income in my opinion. It hasn’t decreased its dividend for over 40 years. There aren’t many ASX dividend shares that could claim to be as reliable as Brickworks.

There are three great divisions to Brickworks. It has a building products business that has been around for decades. It’s the leading brickmaker in Australia, but it also has other attractive businesses involved in roofing, precast, masonry and cement.

The building product division was recently expanded with acquisitions in the US. It’s now the market leader in the north east of the country.

It has a large holding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares, which is seen as one of the most reliable, durable businesses on the ASX. Soul Patts itself is a great ASX dividend share for retirees.

Finally, Brickworks has a stake in a growing industry property trust along with Goodman Group (ASX: GMG). It is steadily growing its net rental profit with more completed properties and steady rental growth.

Brickworks has a grossed-up dividend yield of 5.1%.

APA Group (ASX: APA)

The infrastructure giant has been one of the best ASX dividend shares for retirees this century. It has grown its dividend every year for the past decade and a half. Few shares on the ASX have a distribution growth record going back before the GFC.

It owns a vast network of 15,000km of natural gas pipelines around Australia with a presence in every mainland state and the Northern Territory. It also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms). APA owns, or manages and operates, a portfolio of assets worth more than $21 billion and delivers half the nation’s natural gas usage.

The ASX dividend share funds its distribution purely from its cashflow each year, which is steadily growing as new projects come online. It currently has a FY20 distribution yield of 4.4%.

Foolish takeaway

For retirees, each of these ASX dividend shares have very reliable income prospects over the coming years. Their share prices are likely to move up and down quite a bit, but the dividends should be reliable. At the current prices I’d probably go for Brickworks first.

More reading

• What ASX shares should you invest in during a bull market?
• Telstra shares and 2 other ASX companies to buy in a low-interest rate world
• Will the HomeBuilder stimulus boost ASX 200 building shares?
• Have $10,000? This is where I’d invest it into ASX shares
• 3 high yield ASX dividend shares to buy right now

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, Treasury Wine Estates Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of APA 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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ASX shares are a great way for a beginner to start building their wealth.

Unlike property which takes tens of thousands of dollars to start investing, you can start with ASX shares with as little as $500.

Here are three ASX shares I’d buy as a beginner investor:

Vanguard MSCI Index International Shares ETF (ASX: VGS)

The easiest way to invest may be to just invest in the entire global share market in just one investment.

Vanguard is a world leader in providing exchange-traded funds. The idea is that Vanguard is owned by the investors and it shares its ‘profits’ by lowering steadily lowering fees.

This ETF is invested in over 1,000 businesses across the world. It’s invested in businesses like Alphabet (Google), Microsoft, Amazon, Nestle, LVMH, Unilever, SAP, Toyota and so on. It’s not focused on shares on the ASX. 

It’s the type of investment that could be your only investment for many years. It pays a decent dividend and only has a management fee of just 0.18%, which is very cheap for such a diversified product.

Future Generation Investment Company Ltd (ASX: FGX)

I think everyone should take an interest in Future Generation. It’s a philanthropic listed investment company (LIC) that donates 1% of its net assets each year to youth charities. It amounts to millions of dollars every year.

The LIC invests in fund managers who work for free for Future Generation. It’s a great system. It offers excellent diversification with how many different funds it’s invested in, which each represents a portfolio of ASX shares. The shares it’s invested in are generally smaller, so they have more growth potential.

I also like that the LIC has the potential to outperform when the market is falling with the cash it’s holding.

An attractive portion of the returns come to investors in the form of fully franked dividends from Future Generation.

MFF Capital Investments Ltd (ASX: MFF)

MFF Capital doesn’t invest in ASX shares, it invests in some of the best shares in the world like Visa and Mastercard.

Chris Mackay has expertly guided the globally-focused LIC to be one of the best performers over the past decade. I think MFF Capital can continue to be a long-term performer by the focus on quality and reasonable valuations.

MFF Capital is growth-focused, so I think it suits beginners well because you don’t need big income to start with.

Foolish takeaway

I think each of these ASX shares would be a good way for beginners to start investing with their diversification and solid historical performances. At the current prices I’m more drawn to MFF Capital and Future Generation than the Vanguard ETF.

More reading

• What ASX shares should you invest in during a bull market?
• Is the global share market in a bubble?
• Have $10,000? This is where I’d invest it into ASX shares
• Why it’s a good week to buy international shares
• Should your share portfolio actually be 50% cash right now?

Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO and Magellan Flagship Fund Ltd. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. 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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In my view, 2020 could be the perfect time to get a credit card. There’s a lot of economic uncertainty right now, which has been reflected in how volatile the S&P/ASX 200 Index (ASX: XJO) has been lately.

But before you start spending like crazy on the plastic, here are a few things to consider…

Why 2020 could be a good time for a credit card

I think one of the biggest advantages of using credit is keeping your money for longer. For instance, your card provider might afford you 60 or 90 days before payment is required.

That means your money could be sitting in a savings account or used elsewhere for those 90 days. It might seem like small amounts of money, but these can add up over time.

But the main reason why 2020 could be a good year for a credit card is the extra protection it can provide. When you pay on a debit card, that money is gone when you transact.

However, when paying on credit, the risk really remains with the credit provider. That could be especially helpful if you’re booking travel in 2020.

You might book a hotel or flight a few months ahead of time. If you pay by credit, and the hotel or airline cancels your booking, you could try and get a charge-back from the credit provider.

It’s a similar story with buying from retailers right now. If you pay by credit card and the retailer folds before you receive your goods, you have a better chance of getting your money back than if you paid by debit.

But… credit isn’t for everyone

The important thing with credit cards is to not overspend. That can be particularly hard to do when economic times are tough.

If you don’t trust your self control, paying by credit may not be the best option. Credit card debt can quickly spiral if you don’t have a good handle on your expenditure.

There’s also the potential fees involved. Reward programs and sign-up bonuses can be enticing, but a no-fee credit card could be a better option depending on your goals.

You could also look to dip your toe in the water with a service like Afterpay Ltd (ASX: APT) to see if you can control your spending without paying by debit card.

More reading

• Should you buy ASX shares or hold cash right now?
• Building a $100,000 portfolio with Afterpay shares and 3 other ASX companies
• What ASX shares should you invest in during a bull market?
• What the 10 largest companies in the world have in common
• Why is it so hard to outperform the ASX 200 index?

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 AFTERPAY T FPO. 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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Earning an income from traditional interest-bearing assets like term deposits is becoming increasingly difficult.

Right now, Westpac Banking Corp (ASX: WBC) is offering 1% per annum yields on 12-month term deposits. This is broadly in line with what other banks are offering.

This means that even if you invested $1 million into these term deposits, you’d only get $10,000 of income from them.

Fortunately, the Australian share market is home to a number of ASX dividend shares which offer vastly superior yields.

Three dividend shares which I think would be great as part of a balanced income portfolio are listed below. Here’s why I would buy them:

Dicker Data Ltd (ASX: DDR)

Dicker Data is one of my favourite ASX dividend shares. It is a wholesale distributor of computer hardware and software which has consistently grown its earnings and dividends at a solid rate for many years now. This looks set to continue in FY 2020 with management intending to increase its full year dividend by 31% to 35.5 cents per share. This represents a 4.5% fully franked dividend yield.

Rio Tinto Limited (ASX: RIO)

Another dividend share to consider buying is Rio Tinto. It looks well-positioned to deliver strong profits in the near term thanks to sky high iron ore prices and its world class and low cost operations. Last month analysts at Morgans suggested that Rio Tinto’s shares could offer a fully franked ~8.5% FY 2021 dividend yield.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

A final option for income investors to look at is the Vanguard Australian Shares High Yield ETF. It invests in a wide range of high yielding dividend shares. This includes mining giants, the banks, and many other blue chip favourites. I like this exchange traded fund because of the diversity it gives investors. Which, as we have seen during the pandemic, is very important to have. I estimate that its units offer a forward dividend yield of at least 5%.

More reading

• ASX 200 closes higher, banks keep rising
• Brokers name 3 ASX shares to buy today
• ASX 200 down 0.35%: UBS upgrades NAB and Westpac, Qantas soars again
• Is the Westpac share price too high?
• Why today might be a good day to buy NAB and Westpac shares

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

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I’m a big fan of buy and hold investing and believe it is one of the best ways for investors to grow their wealth.

To demonstrate how successful it can be, every so often I like to pick out a number of popular ASX shares to see how much a single $20,000 investment 10 years ago would be worth today.

This time around I have picked out the three ASX shares that are listed below:

Aristocrat Leisure Limited (ASX: ALL)

Aristocrat is a gaming technology company which has been a strong performer over the last decade. This is thanks largely to the popularity of its poker machines and the emergence of its lucrative and fast-growing digital business. Combined, they have underpinned strong earnings growth and market-beating returns for investors. Over the last 10 years its shares have generated an average total annual return of 21.9%. This would have turned a $20,000 investment into $145,000 today.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Thanks to its successful expansion throughout Australia and in several international markets, this pizza chain operator has been growing its earnings at a very strong rate over the last 10 years. This has led to Domino’s shares generating an average total return of 29.9% per annum over the period. Which means that a $20,000 investment in its shares in June 2010 would now be worth a cool $275,000. The good news for shareholders is that Domino’s is aiming to grow its store footprint materially over the next five years. I believe this could lead to further strong returns over the next decade.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Despite losing almost a third of its value since hitting its high in December, this airport operator has still been a great place to invest over the last decade. Increasing international tourism from China and the United States and growing ancillary revenues have underpinned solid income and distribution growth since 2010. This has led to Sydney Airport’s shares beating the market with an average total return of 13.1% per annum over the period. This would have turned a $20,000 investment into $68,500 today.

More reading

• ASX 200 down 0.35%: UBS upgrades NAB and Westpac, Qantas soars again
• Why Kogan, NAB, Qantas, & Sydney Airport shares are racing higher
• These top ASX dividend shares could be perfect for income investors
• 3 large cap shares beating the ASX 200 this year
• 3 of the best ASX shares to buy with $3,000 right now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Domino’s Pizza Enterprises 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 How to turn $20,000 into $275,000 in 10 years with ASX 200 shares appeared first on Motley Fool Australia.

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