Tag: Motley Fool Australia

Fortunately for growth investors, the Australian share market is home to a number of companies that look well-positioned to grow their earnings at a strong rate over the next few years.

Three which I think are among the best on offer are listed below. Here’s why I would buy them:

Bravura Solutions Ltd (ASX: BVS)

The first ASX growth share to consider buying is Bravura Solutions. It is a financial technology company best known for the Sonata wealth management platform. This popular wealth management platform allows users to connect and engage with their clients through computers, tablets, or smartphones. Demand for the platform has been growing very strongly in the past few years and shows no signs of slowing. In addition to this, the company has recently made a couple of key acquisitions that have bolstered its offering and opened it up to new and lucrative markets. Overall, I believe this leaves it well-positioned to grow its earnings at a solid rate over the long term.

Megaport Ltd (ASX: MP1)

I think Megaport could be a top option for investors due to its extremely positive outlook thanks to its exposure to the cloud computing boom. It offers scalable bandwidth for public and private cloud connections, metro ethernet, and data centre backhaul. Its global platform also enables customers to rapidly connect their network to other services across the Megaport Network. They can then be directly controlled by via mobile devices, their computer, or its open API. At the last count, it was connecting more than 1,842 customers in over 700 enabled data centres. And with the pandemic accelerating the shift to the cloud, Megaport looks well-positioned to benefit greatly from the increased demand. Overall, I feel this could make the Megaport share price a market beater over the next decade.

ResMed Inc. (ASX: RMD)

A third growth share to consider buying is this medical device company. I believe ResMed is well-placed for growth over the next decade thanks to its leadership position in a growing sleep treatment market. ResMed’s masks and software-as-a-service solution are among the best on the market and are likely to experience a surge in demand in the coming years as more and more people are diagnosed with sleep disorders. Management estimates that there could be upwards of 1 in 7 people impacted by sleep apnoea. So with the vast majority of these sufferers undiagnosed, it certainly has a long runway for growth. 

More reading

• The blue chip ASX shares to buy in August
• Is the Megaport share price a long term buy?
• Does the second wave of COVID-19 make these ASX 200 healthcare shares a buy?
• 3 ASX tech shares to leverage the shift to remote working
• 3 fantastic ASX growth shares to buy in August

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 and recommends MEGAPORT FPO. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia has recommended MEGAPORT FPO and 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.

The post Add these ASX growth shares to your portfolio in August appeared first on Motley Fool Australia.

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Are you looking to bolster your income with some dividends? Then you might want to consider buying one of the ASX dividend shares listed below.

Here’s why I think they would be top options for income investors:

Dicker Data Ltd (ASX: DDR)

The first ASX dividend share to consider buying is Dicker Data. It is Australia’s leading locally owned and operated distributor of IT hardware, software, cloud and IoT solutions for over 5,500 reseller partners. It distributes a wide suite of products from the world’s leading technology vendors, including Cisco, Citrix, Dell Technologies, Hewlett Packard Enterprise, HP, Lenovo, and Microsoft.

Thanks to an increasing number of vendor agreements and robust demand for information technology products, Dicker Data has been growing its earnings and dividends at a solid rate over the last few years. The good news is that this has continued despite the pandemic and it is on course to deliver a strong full year result in FY 2020. As a result, management intends to lift its fully franked dividend by 31% to 35.5 cents per share this year. Based on the latest Dicker Data share price, this represents an attractive 5% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

Another dividend share that I would buy is Telstra. I believe the telco giant’s medium term outlook is currently looking the brightest it has been in a long time. This is thanks to its T22 strategy, which is cutting costs and simplifying its business, the return of rational competition, and the easing of the NBN headwind.

All of this combined, I believe a return to earnings and dividend growth could be on the cards in the not so distant future. For now, though, I’m confident that the company’s 16 cents per share fully franked dividend is sustainable. Based on the current Telstra share price, this equates to a fully franked 4.75% dividend yield.

More reading

• 2 must-buy ASX 50 shares to snap up today
• The TPG share price has fallen 9% in a month. Time to buy?
• Pushpay and 1 other 5-star ASX share to buy right now
• Why Telstra is a top ASX dividend share to buy in August
• These shares were the ASX 200’s biggest losers last week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data 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.

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On Wednesday the S&P/ASX 200 Index (ASX: XJO) gave back its morning gains and dropped lower for a second day in a row. The benchmark index fell 0.2% to 6,006.4 points.

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

ASX 200 expected to rebound.

It looks set to be a very positive day of trade for the ASX 200 after a strong night on Wall Street. According to the latest SPI futures, the benchmark index is expected rise 51 points or 0.85% at the open. On Wall Street the Dow Jones rose 0.6%, the S&P 500 jumped 1.25%, and the Nasdaq stormed 1.35% higher. This follows the U.S. Federal Reserve’s decision to keep rates unchanged at close to zero.  

Rio Tinto half year results.

The Rio Tinto Limited (ASX: RIO) share price will be on watch following the release of its half year results after the market close. Australia’s largest iron ore producer posted a 6% decline in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to US$9.6 billion and declared a US$1.55 a share interim dividend. According to a note out of Goldman Sachs, it was expecting underlying EBITDA of US$9.1 billion and a US$1.51 per share interim dividend. Also on watch will be Fortescue Metals Group Limited (ASX: FMG). It is due to hand in its quarterly update this morning.

Janus Henderson Q2 update.

The Janus Henderson Group PLC (ASX: JHG) share price could be on the move today following the release of its second quarter update after the market close. Janus Henderson reported assets under management (AUM) of US$336.7 billion at the end of June, which was up 14% compared to the prior quarter. This reflects an improvement in global markets, which was partially offset by net outflows of US$8.2 billion.

Oil prices push higher.

It could be a good day for energy shares such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) after oil prices pushed higher. According to Bloomberg, the WTI crude oil price is up 0.6% to US$41.29 a barrel and the Brent crude oil price rose 1.3% to US$43.79 a barrel. Traders were buying oil following a sharp drop in U.S. crude inventories.

Gold price storms higher.

Gold miners including Resolute Mining Limited (ASX: RSG) and Saracen Mineral Holdings Limited (ASX: SAR) will be on watch after the gold price climbed higher again. According to CNBC, the spot gold price is up 1% to US$1,964.40 an ounce. The precious metal was given a boost when the U.S. Federal Reserve kept rates close to zero.

More reading

• Rio Tinto’s capital return crashes by half on $2.5 billion dividend payout
• ASX 200 drops 0.2%, APRA boosts big 4 ASX banks
• Is it too late to buy ASX gold shares like St Barbara?
• Downer share price lower despite contract wins
• How to turn $20,000 into $100,000 with ASX ETF shares

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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Online shopping has grown dramatically in Australia over recent years. The onset of the coronavirus pandemic accelerated this trend, with one out of every ten items purchased this year thought to have been bought online. The Australian eCommerce market was valued at $28.6 billion in 2019 and is expected to grow to $35.2 billion by 2021. eCommerce penetration is expected to reach 85.2% next year, meaning 22 million people will be buying online. There are plenty of retailers on the ASX, most of which offer goods both through shopfronts and online channels. But these two ASX online-only retailers have shown you don’t need stores to make sales. 

Temple & Webster Group Ltd (ASX: TPW) 

Temple & Webster is Australia’s largest online-only furniture and homewares retailer. The company offers over 180,000 products on its website from hundreds of suppliers. Temple & Webster runs a drop-shipping model where suppliers ship directly to the end customer. This means Temple & Webster does not need to hold inventory and can provide a larger product range. 

Temple & Webster saw sales accelerate with the onset of coronavirus. People have been spending more time at home so have been looking to upgrade their surroundings. FY20 revenue was up 74% to $176.3 million, with sales accelerating in 4Q FY20 when revenue was up 130% on the prior corresponding period. Active customers increased 77% across the year with EBITDA increasing 483% to $8.5 million. CEO Mark Coulter said “The advantages of being the online market leader are apparent as we continue to grow our market share”. 

Kogan.com Ltd (ASX: KGN)

Kogan is an online retailer offering products across a wide range of categories as well as a suite of private label brands. Kogan has also seen a spike in sales since the onset of lockdowns, with gross sales up 103% in April and May. This drove a 130% increase in gross profit. Sales almost doubled in June, rising 95% to more than $94 million. 

Kogan added 126,000 active customers in May, growing active customer numbers to 2,074,000 at the end of the month. In June, Kogan raised $100 million of capital to increase financial flexibility. This provides the company with the means to act quickly on accretive opportunities, continue expanding its customer base, and enhance its operating model. Founder Ruslan Kogan told the Australian Financial Review, “our business is booming as more customers than ever chose Kogan.com.”

Foolish takeaway

These two ASX online retail shares are proof that you don’t need stores to deliver impressive sales levels. Both have seen sales accelerate since the onset of the pandemic, benefiting from the shift to digital commerce. And if the forecasts are accurate, this shift looks set to continue into the future even after the pandemic has subsided.

More reading

• 3 top small cap ASX shares to buy now
• Goodman share price hits record high. Is it too late to invest?
• Why you should buy into this booming ASX retail sector today
• Top brokers have named 3 ASX shares to buy today
• 3 of the best ASX tech shares to buy and hold until 2030

Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group 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.

The post These ASX online retail shares prove you don’t need stores to make sales appeared first on Motley Fool Australia.

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Well, 2020 has been a rough year for holders of ASX dividend shares.

With S&P/ASX 200 Index (ASX: XJO) companies like Westpac Banking Corp (ASX: WBC),  Sydney Airport Holdings Pty Ltd (ASX: SYD) and Ramsay Health Care Limited (ASX: RHC) slashing or ‘deferring’ dividends left, right and centre, the forests of yield in 2020 are a sparse hunting ground indeed.

And with the Reserve Bank of Australia telling us that interest rates might not start climbing from their current record low of 0.25% for some years, it’s arguably never been more important to find solid ASX dividend shares.

So that’s why we’ll be looking at 2 such shares today, which I think income investors can confidently buy for solid dividends in 2020 and beyond.

AGL Energy Limited (ASX: AGL)

AGL is the largest electricity and gas retailer in the country. It also owns a portfolio of generation assets (power plants), so there is significant vertical integration with this company.

I like AGL because it is an extremely defensive business. We all need electricity (and gas, in many cases) all of the time, whether it’s for cooking, heating, cooling or just powering our homes and businesses. This makes a company like AGL, which supplies these modern-world necessities, a great business to own — rain, hail or shine.

The defensiveness extends to AGL’s dividends, in my view. On current prices, AGL offers a trailing dividend yield of 6.51%, which comes partially franked as well.

AGL may not be a get-rich-quick kind of share (best avoided anyway), but I think it’s a solid pick for dividend income in 2020 and beyond.

Transurban Group (ASX: TCL)

Another ASX dividend share to consider today is this toll-road giant. Transurban did get whacked by the coronavirus-induced lockdowns we saw earlier in the year (and which are still ongoing in Victoria).

More people working from home meant fewer cars on the road — and that wasn’t good news for Transurban. But with cars back on the roads (outside Victoria anyway), I think things are on the mend for Transurban shares.

With a virtual monopoly on tolled roads across Sydney and Melbourne, and a large presence in Brisbane as well as North America, I’m very bullish on Transurban’s long-term future. Even if lockdowns do come back across the country, I think this company will still be able to pay decent dividends for the remainder of the year and beyond.

Transurban’s recent final dividend came in at 16 cents per share — a step down from 31 cents per share the company paid for its interim dividend last year. Despite this setback, I think the company will pay another dividend this year and should be (in my opinion) back on track with its old payouts in 2021.

More reading

• Rio Tinto’s capital return crashes by half on $2.5 billion dividend payout
• ASX 200 drops 0.2%, APRA boosts big 4 ASX banks
• Short-sellers are targeting these ASX stocks ahead of the reporting season
• Warning! ASX investors might be turning away from the share market
• ASX big banks stocks outperform even as APRA caps dividends

Motley Fool contributor Sebastian Bowen owns shares of Ramsay Health Care Limited. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Ramsay Health Care 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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Small cap ASX shares could be the best way to generate large returns for your portfolio over the long-term.

It’s much easier to double profit from $10 million to $20 million than it is to double profit from $1 billion to $2 billion. The law of large numbers makes it harder to keep growing at a good pace the larger a business becomes. 

I don’t think a business like Commonwealth Bank of Australia (ASX: CBA) can generate much organic compound profit growth because it’s already so large.

However, I think these three small cap ASX shares could be worth buying for long-term returns:

City Chic Collective Ltd (ASX: CCX)

City Chic is a retailer of plus-size women’s apparel and accessories. Initially, that industry doesn’t sound like a huge growth opportunity – but the company is growing at a fast pace. In FY20 City Chic achieved sales growth of 31%.

COVID-19 obviously caused major disruption with City Chic having to close stores. However, the company saw robust demand online. The company already sold a solid amount of products online before COVID-19, but at the end of May 2020 it had seen 57% of online sales growth during the store closure period. I think that’s impressive. 

The business is aiming to be a global player in the plus-size fashion market. I think management have a smart strategy of acquiring competitors that are in financial difficulty and turning them into online-only offerings. Online brings better (and cheaper) efficiencies. Catherines in the US is the latest target.

I like that the small cap ASX share is looking to grow strongly internationally. Australia is a great place to do business, but it has a relatively small population.

At the current City Chic share price it’s trading at 22x FY22’s estimated earnings. I think that’s a good price for the small cap ASX share.

Duxton Water Ltd (ASX: D2O)

I think Duxton Water is one of the most interesting small cap ASX shares. It’s a company that purely owns water entitlements and leases them out.

Obviously farmers need water to grow their crops, so Duxton Water offers an essential service. It’s indirectly benefiting from Australia being a major supplier of food domestically and internationally.

There is a long-term shift of water demand by farmers to permanent crops that use more water, such as almonds.

The recent dry conditions have pushed up water values over the past few years which has helped the small cap ASX share, though the Duxton Water net asset value (NAV) has declined over the past few months. There has been a bit more rain this year compared to the last few years.

However, I think it has long-term potential because fresh water supply is a very important resource. Demand for Australian produce is expected to grow over the long-term.

The water company has provided guidance of dividend growth over the next couple of years, which is good for income investors.

At the current Duxton Water share price of $1.40, it’s trading at a low double digit discount to the pre-tax NAV. I think that’s decent value for the small cap ASX share.

Just be aware that the ACCC is currently reviewing the water market. If there is a negative outcome to water values due to the ACCC, I think it could prove to be a long-term buying opportunity of Duxton Water shares.

WAM Microcap Limited (ASX: WMI)

Maybe you love the idea of investing in small cap ASX shares, perhaps you’re just not sure of which ones to invest in. I do believe that you need to be picky. Some small cap ASX shares can be very high quality, whereas others could be very risky.

The investment team at Wilson Asset Management (WAM) have proven to be great investors for this listed investment company (LIC). Over FY20 the portfolio returned 11.8% before fees, expenses and taxes – outperforming the S&P/ASX Small Ordinaries Accumulation Index by 17.5%.

I like that with this LIC you get a diversified portfolio of some of the most exciting growth opportunities on the ASX, as judged by the WAM team. At the end of June 2020 some of its largest positions were Objective Corporation Limited (ASX: OCL), Temple & Webster Group Ltd (ASX: TPW) and Johns Lyng Group Ltd (ASX: JLG).

At the current WAM Microcap share price it offers a grossed-up dividend yield of 6.3%.

More reading

• Top brokers have named 3 ASX shares to buy today
• 3 unstoppable ASX shares to buy right now
• ASX 200 down 0.4%, Credit Corp and Temple & Webster impress
• Why Credit Corp, Nufarm, Regis, & Temple & Webster shares are jumping higher
• Can the Marley Spoon share price climb even higher?

Tristan Harrison owns shares of DUXTON FPO and WAM MICRO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Objective Limited and Temple & Webster Group Ltd. The Motley Fool Australia has recommended DUXTON FPO and Temple & Webster Group 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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I want to draw your attention to Visa Inc (NYSE: V). I won’t waste your valuable time explaining what Visa does. As the world’s largest payments network, there’s a good chance you have one of the company’s cards in your own wallet.

The global credit card company, with a market cap of US$418.9 billion (A$586.7 billion), hasn’t had the best of years. But that may make now the perfect time to pick up some Visa shares.

As you know, consumers around the globe have been tightening their belts of late. Some of that comes from falling incomes due to lost work as companies have been forced to shut down due to COVID-19 mitigation efforts. Most of the remaining spending slump can also be pinned on the coronavirus. If you can’t leave your hometown, or even your home, you’re much less likely to splurge on discretionary items.

Recent performance

After several months of falling spending, Visa reported a roughly 10% rise in recent weeks.

An increase in online spending made up for much of those gains. That’s good news for the stock, as it gets a much larger share of online transactions than it does from in-store sales.

Now it’s impossible to predict how consumer spending will fare over the coming months. Most of that is up to the microscopic virus that’s thrown a spanner into the global economy.

What is a near certainty is that humanity will triumph over COVID-19, hopefully within the next 12–18 months. And when we do, people are likely to go on historic spending sprees, splurging on travel, dining, and all the other goodies social distancing and lockdowns have denied them.

With the growing popularity of stocks like Afterpay Ltd (ASX: APT), not everyone will use Visa, which also offers debit cards. But many will.

After a lacklustre year, with the Visa share price up a mere 2.9% since 2 January, Visa is one global share you should consider adding to your own holdings, in my opinion.

A note on international shares

There are many good reasons to add international shares to your portfolio. Aside from diversification, the simple fact is many of the world’s best companies are listed outside of the ASX.

But not everyone is comfortable buying international stocks. While it’s become much simpler and cheaper in recent years, there are a few other aspects you need to consider. Currency fluctuations are chief among them.

If the US dollar falls against the Aussie, as it’s been doing in recent weeks, it would see your Aussie dollar returns increase once you sell your shares. But if the greenback rises, it will diminish your gains or increase your losses.

More reading

• Kanye West – ASX shares for his US presidential campaign
• Are Afterpay shares the next Visa?

Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Visa. 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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If you’re looking to add a bit of diversity to your portfolio, then you might want to consider buying an exchange traded fund or two.

I like exchange traded funds because they allow you to invest in a particular theme, index, or industry through just a single investment.

While there are countless exchange traded funds for for investors to choose from, three of my favourites are listed below. Here’s why I like them:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

If you’re looking for exposure to the Asia market, then you might want to consider the BetaShares Asia Technology Tigers ETF. This fund tracks the performance of the 50 largest technology and ecommerce companies that have their main area of business in Asia (excluding Japan). This includes the likes of Alibaba, Samsung, and Tencent Holdings. Given how these companies are among the fastest growing in the region and revolutionising the lives of billions of people, I believe this exchange traded fund could provide strong returns over the 2020s.

BetaShares NASDAQ 100 ETF (ASX: NDQ)

Another exchange traded fund which I think could provide strong returns for investors over the next decade is the BetaShares NASDAQ 100 ETF. This exchange traded fund gives investors exposure to the 100 largest non-financial businesses on Wall Street’s famous NASDAQ index. It has a high weighting towards technology shares, with the likes of Amazon, Apple, Alphabet, Facebook, Microsoft, and Netflix included in the fund. Given the positive long term outlooks for these companies, I believe the future is bright for the NASDAQ 100.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

A final option for investors to consider buying is the Vanguard MSCI Index International Shares ETF. This exchange traded fund gives investors access to some of the biggest and most well-known companies in the world. The fund is invested in a total of 1,579 listed companies across major developed countries. Its holdings include the likes of Apple, Mastercard, Nestle, Proctor & Gamble, and Visa. While I don’t think this exchange traded fund will grow as quickly as the others, I think the diversity it offers makes it worth considering.

More reading

• Here are easy ways to diversify your ASX portfolio
• How to become a millionaire with ASX shares starting with $0
• 3 ETFs for simple wealth building
• Got $10,000 to invest? I would buy these ASX shares
• Are ASX tech shares in a bubble?

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 BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS and 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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The Marley Spoon AG (ASX: MMM) share price will be one to watch on Thursday.

This follows the release of the global subscription-based meal kit provider’s second quarter update.

How did Marley Spoon perform in the second quarter?

During the second quarter of FY 2020, Marley Spoon continued to experience strong demand for its meal kits.

Management advised that this has been driven by the pandemic, which has accelerated the long-term adoption of online grocery shopping. Marley Spoon more than doubled its customer base year on year during the quarter to 350,000 active customers.

Also growing strongly was its revenue. The company’s second quarter revenue came in at 73.3 million euros. This was an impressive 129% increase on the prior corresponding period.

Pleasingly, the company reported that the retention of new customers remained strong and its customer acquisition costs significantly reduced. Marketing expenses as a percentage of revenue represented 13% of revenue in the quarter, compared to 18% in the prior corresponding period.

This supported a 6-point increase in its global contribution margin (CM) to a record 30.5%, which ultimately led to global operating earnings before interest, tax, depreciation, and amortisation (EBITDA) of €4.5 million.

The latter comprised operating EBITDA of 3.6 million euros in Australia and 4.6 million euros in the United States, which was offset slightly by a 3.7 million euros operating EBITDA loss in Europe.

“Surge in demand.”

Marley Spoon’s CEO, Fabian Siegel, was understandably very pleased with the company’s performance during the second quarter.

He said: “The COVID-19 pandemic has changed lives globally. Due to the crisis we continue to see an accelerated adoption of online shopping for all kinds of goods, including groceries. The resulting surge in demand for our brands has led to strong growth, a record margin and a full quarter of profitability.”

“Given our reduced customer acquisition costs, higher growth rate and associated scale benefits, we now expect significantly better results for the full year than we did previously, and are upgrading guidance,” he added.

Management has increased its revenue guidance for FY 2020. It now expects revenue growth of at least 70%, compared to previous guidance of ~30%.

One metric that won’t be upgraded is its CM guidance. Although it notes that its CM has already exceeded the previously guided level for the year (29.5% in Q1 and 30.5% in Q2), at this point it is not updating its CM guidance due to the uncertainty caused by the pandemic.

More reading

• Can the Marley Spoon share price climb even higher?
• Is now the time to sell your ASX shares?
• Are Marley Spoon shares future ASX blue-chips?
• Why Marley Spoon and these ASX shares are hitting new highs
• COVID-19 second wave concerns just sent these ASX shares to record highs

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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The Rio Tinto Limited (ASX: RIO) share price could come under pressure tomorrow after the miner posted a drop in its half year results and a smaller than expected cash handout.

Australia’s largest iron ore miner posted a 6% decline in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to US$9.6 billion ($13.4 billion) and declared a US$1.55 a share interim dividend.

The fall in earnings comes even as the iron ore price remains stubbornly high through the COVID-19 mayhem and is driven by falls in the aluminium and copper prices.

No dividend surprise

But what I think will disappoint more is the lack of a special dividend or other capital returns. Even though the interim dividend is 3% above what it paid last year, total cash returns paid to shareholders in the first half have fallen by more than half to US$3.8 billion from US$7.8 billion.

This is largely because Rio Tinto paid a special dividend worth US$3.9 billion in April 2019.

As I wrote yesterday, some experts were anticipating another special dividend from Rio Tinto as the miner holds excess cash on its balance sheet.

While there’s little consensus on what the interim dividend will be with estimates ranging from US$0.94 to US$2.21 a share, I think the US$1.55 will disappoint without an additional supplement.

Nervous outlook despite positive signs

Investors will view the dividend decision as a sign that management is nervous about the outlook even as demand for iron ore is holding up in this highly unpredictable environment, thanks in no small part to Vale SA’s coronavirus-stricken supply.

Chinese demand for the steel making ingredient is expected to remain robust despite growing tensions between China and Australia.

Our largest trading partner is counting on infrastructure construction to kick-start its sagging economy.

FY20 guidance intact

Rio Tinto reiterated its production guidance. It’s aiming to produce 324 million to 334 million tonnes of iron ore from its Pilbara mine at a unit cost of US$14-US$15 per wet metric tonne on a free-on-board (FOB) basis.

The miner’s aluminium business is the thorn in the side of the group, but this is well flagged and understood by the market.

Is Rio Tinto share price a buy?

Notwithstanding the negatives from the results, I am happy to remain overweight on the Rio Tinto share price.

While I would have rather it paid a special dividend, the stock is still yielding over 7% if franking credits are included. That’s a pretty good yield in this environment.

Another special dividend candidate

Looking forward, investors will now have to pin their capital return hopes on fellow iron ore miner Fortescue Metals Group Limited (ASX: FMG). Fortescue is better placed to surprise on this front than BHP Group Ltd (ASX: BHP).

The Rio Tinto share price lost 0.7% to $103.40 on Wednesday, while the BHP share price shed 2% to $37.30 and the FMG share price slipped 0.2% to $16.85.

More reading

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• Warning! ASX investors might be turning away from the share market
• ASX big banks stocks outperform even as APRA caps dividends
• Xero and 1 other ASX growth share to watch in August

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto Ltd. Connect with me on Twitter @brenlau.

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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