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If you’re in the market for some ASX 200 dividend shares to combat rising inflation, then look no further.

Listed below are two highly rated dividend shares that analysts have recently rated as buys with yields greater than 6%.

Here’s what you need to know about them:

Bank of Queensland Limited (ASX: BOQ)

The first high yield ASX dividend share for investors to look at is Bank of Queensland.

It is one of the biggest non-big four banks in Australia and responsible for the eponymous Bank of Queensland brand and the recently acquired ME Bank brand.

Analysts at Morgans believe the bank is a great option for investors right now and “see exceptional value” in its shares. This is due to its attractive valuation, transformation program, its above-system growth, and cost synergies from the ME Bank acquisition.

Morgans has an add rating and $11.00 price target on its shares.

The broker also expects attractive dividends. Morgans is forecasting fully franked dividends per share of 49 cents in FY 2022 and then 54 cents per share in FY 2023. Based on the current Bank of Queensland share price of $7.44, this will mean yields of 6.6% and 7.25%, respectively.

South32 Ltd (ASX: S32)

Another ASX 200 dividend share that is expected to provide investors with big dividends is South32.

This is thanks to the mining giant’s exposure to a number of commodities which are commanding high prices, putting South32 in a position to generate strong free cash flow in the coming years.

Goldman Sachs is very positive on South32 and expects its strong free cash flow generation to underpin fully franked dividends per share of 27.5 US cents in FY 2022 and 47.3 US cents in FY 2023.

Based on the current South32 share price of $4.41 and the latest exchange rates, this will mean very attractive yields of 9.2% and 15.4%, respectively.

Goldman also sees plenty of upside for its shares. It has a conviction buy rating and $5.70 price target on the miner’s shares.

The post 2 high-yield ASX 200 dividend shares to fight inflation according to brokers appeared first on The Motley Fool Australia.

More reading

• 2 ASX 200 dividend shares to buy according to a top broker
• Here are the 3 most heavily traded ASX 200 shares on Friday
• How has the Bank of Queensland share price travelled since the company’s half-year results?
• Why did the South32 share price beat the other ASX 200 miners today?
• Broker says South32 share price is great value and one of the ‘best’ options for investors

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Plenty of ASX dividend shares have seen share price declines in recent times. A lower share price can have the effect of boosting the potential dividend yield on offer from that business.

Of course, another potential benefit from a lower share price is being able to invest in the ASX share at better value as well.

With that in mind, here are two ASX dividend shares that I’d buy for income with $1,000:

Brickworks Limited (ASX: BKW)

Brickworks is a business with a significant presence in the property world.

The company produces a variety of different building products including bricks and pavers, masonry and stone, roofing, specialised building products, precast, cement, and timber battens. Austral Bricks, Austral Masonry, Bristle Roofing, and Austral Precast are some of the company’s brands.

The ASX dividend share boasts that its normal dividend has been maintained or increased every year since 1976. It has also grown its dividend every year for nine years in a row.

While part of the cash flow to fund its dividend comes from its investments division, Brickworks is particularly focused on the long-term growth of its industrial property trust in which it owns 50%, alongside Goodman Group (ASX: GMG).

Industrial properties are built on excess Brickworks land. Industrial real estate valuations are increasing in response to tailwinds such as online shopping. The demand for logistics properties is leading the trust to step up its building projects. As developments are completed, rental income keeps growing.

Brickworks explained the opportunity for property construction over the next few years:

There is a total of 221,100 square metres of lease pre-commitments already secured across the property trust. In addition, a further 176,400 square metres is available for development at the existing estates. Based on current demand, we expect these estates to be fully built out within three years. This will result in additional gross rent of around $60 million and leased asset value of $1.5 billion, taking total leased assets to around $4.5 billion.

I think the property trust can continue to add useful value for Brickworks, help grow its cash flow, and assist with dividend growth. At the current Brickworks share price, it has a grossed-up dividend yield of 4%.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is one of the largest S&P/ASX 200 Index (ASX: XJO) shares and it could also be one of the more compelling ASX dividend shares.

The company operates a number of leading retailers including Bunnings, Kmart, and Officeworks. It also has a presence in other areas such as a pure e-commerce business called Catch, various industrial businesses, and a segment called WesCEF which is for chemicals, energy, and fertilisers.

Wesfarmers has the flexibility to invest in different industries. It is currently working on the lithium project Mt Holland. The company also just completed the acquisition of Australian Pharmaceutical Industries which will be the start of a new health and beauty segment.

I think the diversification provides Wesfarmers with the ability to generate more consistent cash flow through economic cycles and, therefore, potentially pay a somewhat defensive dividend.

Wesfarmers balances its profit generation, balance sheet, potential acquisition opportunities, and rewarding shareholders when deciding on its dividend each year.

The trailing grossed-up dividend yield of Wesfarmers is 4.9%, after a 17% decline of the Wesfarmers share price in 2022 to date.

The post 2 ASX dividend shares I’d buy with $1,000 appeared first on The Motley Fool Australia.

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• 4 ASX shares of the most trusted brands in Australia
• Where next for the Wesfarmers share price?
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks. The Motley Fool Australia has positions in and has recommended Brickworks and Wesfarmers Limited. 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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Experts have identified two ASX shares that look good value and have rated them as buys.

Plenty of businesses in the retail sector have relatively low price/earnings (p/e) ratios. They can also offer larger dividend yields. However, sometimes downturns can lead to variable demand for products.

These are two ASX shares that are currently rated as opportunities.

Accent Group Ltd (ASX: AX1)

Accent is a retailer of multiple shoe brands. It owns some brands and it acts as the distributor for others.

Some of the brands are: CAT, Dr Martens, Glue Store, Hoka, Hype, Platypus, Skechers, Stylerunner, The Athlete’s Foot, Trybe, Timberland and Vans.

Morgan Stanley is one of the brokers that rates Accent as a buy right now. The broker has a price target of $2.70. That’s a possible rise of 90% over the next year. Morgan Stanley thinks the ASX share can benefit from life returning to normal after COVID-19 as well as the ongoing opening of new stores.

Since the start of 2022, the Accent share price has fallen around 40%. That’s despite a recent trading update that noted a higher profit margin.

The company pointed out it’s expecting to open 140 stores in FY22. Meanwhile, it will close stores where “sustainable renewal terms” cannot be achieved. Accent is focusing on growing some of its brands and making choices that improve the return on investment (ROI) in businesses and brands.

Sales are improving compared to the start of the second half of FY22, but were still subdued compared to expectations. However, Accent has continued to focus on a ‘full price, full margin’ sales strategy. This strategy has improved the gross profit margin ahead of expectations and last year. It will be interesting to see how this will play out for the ASX retail share.

Morgan Stanley thinks that the Accent share price is now valued at under 10x FY23’s estimated earnings.

JB Hi-Fi Limited (ASX: JBH)

JB Hi-Fi is one of the largest ASX retail shares. It sells a variety of electronics and home appliances such as phones, laptops, fridges and TVs.

One of the brokers that currently rates the ASX share as a buy is Macquarie. It has a price target of $57.80 on the business, implying a potential rise of around 20% over the next 12 months.

Despite seeing elevated sales since the start of COVID-19, JB Hi-Fi continues to experience demand and sales growth.

In a recent sales update for the three months to 31 March 2022, the company said that JB Hi-Fi Australia sales rose 11.9%, JB Hi-Fi New Zealand sales increased 4.8% and The Good Guys sales rose 5.5%. It also said that sales momentum has continued into the fourth quarter of FY22.

Based on the forecast FY23 numbers, Macquarie thinks the JB Hi-Fi share price is valued at 13x FY23’s estimated earnings with a projected grossed-up dividend yield of 7.25%.

The post 2 cheap ASX shares to buy right now: experts appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to sell next week
• Something’s afoot! Why is the Accent share price leaping 6% today?
• 3 ASX All Ordinaries shares having a stellar run on Wednesday
• Leading brokers name 3 ASX shares to sell today
• Top brokers name 3 ASX shares to sell today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group and Macquarie Group Limited. 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 Brambles Limited (ASX: BXB) share price is in focus after the company confirmed it’s in talks that could lead to a takeover bid.

The S&P/ASX 200 Index (ASX: XJO) pallets and containers manufacturer was recently rumoured to be gearing up to receive an acquisition offer valued at more than $20 billion.

For context, Brambles has a market capitalisation of around $15 billion.  

The Brambles share price is $10.43 as of Friday’s close.

Here are all the details on the multi-billion dollar takeover talks.

Brambles confirms takeover talks

The Brambles share price could be in for a big day on the ASX after the company responded to rumours claiming it’s on the radar of private equity juggernaut CVC Partners.

The ASX 200 company confirmed it’s been approached by the firm over a potential takeover bid this morning. The ASX 200 pallet maker hasn’t received any proposal yet.

Brambles also noted there’s still no guarantee an offer will be tabled.

Discussions between the pair are focused on securing a bid that would convince Brambles to allow CVC due diligence, the Australian Financial Review reports.

That could reportedly result in an offer valuing Brambles at more than $20 billion, including debt.

Brambles said it’s still working towards its ‘Shaping our Future’ plan, as well as other strategies to bolster shareholder value amid the takeover talks.

Its latest quarterly results saw the company reporting a 7% increase in sales revenues – coming in at around US$4 billion.

It also upped its financial year 2022 guidance. Brambles is expecting to report sales growth of between 8% and 9% for the 12 months ended 30 June 2022.

Brambles share price snapshot

The Brambles share price is outperforming the ASX 200 in 2022.

The company’s shares have slipped nearly 2% year to date while the index has tumbled close to 7%.

Over the last 12 months, Brambles’ stock has slumped around 2.6% while the ASX 200 has traded relatively flat.

The post Brambles share price on watch as takeover talks confirmed appeared first on The Motley Fool Australia.

More reading

• Broker names 3 more ‘champion’ ASX 200 shares to buy and hold
• These were the best performing ASX 200 shares last week
• Here are the top 10 ASX shares today
• Why Betmakers, Brambles, Challenger, and Stockland shares are charging higher
• Here’s why the Brambles share price is soaring 7% today

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 for some new growth shares to buy following the market meltdown, then it could be worth considering the two ASX shares listed below.

Both of these ASX shares have been tipped as buys with major upside potential. Here’s what you need to know about them:

Lovisa Holdings Limited (ASX: LOV)

The first ASX growth share that could be in the buy zone Lovisa. Especially with the growing fast-fashion jewellery retailer’s shares trading 21% lower year to date.

Analysts at Morgans are very positive on Lovisa due to its highly experienced management team and bold global expansion plans. It is for these reasons that the broker suspects that Lovisa could “prove to be one of the biggest success stories in Australian retail.”

And while its analysts acknowledge that a sizeable investment will be needed to expand its network in the US and Europe and to take the brand into new markets, it believes the returns could be stellar if successful.

Morgans currently has an add rating and $24.00 price target on its shares. This compares to the latest Lovisa share price of $15.85.

Megaport Ltd (ASX: MP1)

Another growth share that could be in the buy zone is Megaport. It is the leading global provider of elastic interconnection services, which has seen its shares crash 62% in 2022.

Megaport’s platform uses software defined networking (SDN) to rapidly connect users of its network to other services across the Megaport Network. The company notes that its service simplifies a hybrid cloud strategy by enabling dedicated private connectivity to on-premise facilities and direct connectivity to the public cloud from one place.

So, with the structural shift to the cloud continuing, Megaport appears well-placed to benefit from increasing demand and higher spending on enterprise networking.

Goldman Sachs, for example, estimates that the company’s “opportunity for further growth is immense [with] GSe A$129bn p.a. spent on fixed enterprise networking across MP1 geographies.”

In light of this, the broker has a buy rating and $13.10 price target on its shares. This compares favourably to the latest Megaport share price of $7.21.

The post Experts name 2 beaten down ASX growth shares to buy after the market meltdown appeared first on The Motley Fool Australia.

More reading

• Why is the Megaport share price rallying 6% on Friday?
• 3 ASX shares destined for greatness: Firetrail
• 2 ASX shares that could surprise you in a year’s time
• Are these 2 top ASX growth shares buys right now?
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended Lovisa Holdings Ltd and MEGAPORT FPO. 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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It has not been an easy time to be holding ASX shares in the technology sector.

The S&P/ASX All Technology Index (ASX: XTX) has plunged 40% since November.  And with more interest rates rises to come, immediate prospects still look grim.

But for those with long-term investment horizons, they need to grin and bear it if the business is continuing to perform.

Forager Funds is finding itself in exactly this position, with Whispir Ltd (ASX: WSP), Nitro Software Ltd (ASX: NTO) and Bigtincan Holdings Ltd (ASX: BTH) in the portfolio.

All three have halved their valuations since the start of the year.

Yikes.

Business performance is not linked to the share price dive

Forager, in a memo to clients, indicated the operational updates have been positive.

“Trends in revenue growth for all three remain at least in line with expectations, ranging from 24% at Whispir (using the recurring component of its revenue only) to more than 40% at Nitro.”

A blessing in disguise due the current market rout might be that these businesses have cleaned up their costs.

“Nitro reduced its estimate of current year losses and expects to be generating cash flow in the 2024 financial year. 

“Bigtincan was already cash-generative in the March quarter and should improve from there.”

With stock prices plummeting more than 50% this year, the market obviously doesn’t believe these tech firms will make a profit soon enough.

But Forager sees no reason why its conviction should change.

“The current period losses are very modest in contrast with the long-term revenue annuities being built,” read the memo.

“How valuable those annuities ultimately become is still to be proven, but as we get more evidence and if share prices continue falling, you should expect higher portfolio weightings.”

Surging interest rates, Forager admitted, might further impact investors valuations of tech shares. But the operational impact on these three businesses is “minimal”.

“Where the operating performance continues to justify our valuations, [we are] gradually increasing portfolio investments in the most heavily punished holdings.”

The analyst community generally agrees with Forager.

According to CMC Markets, all seven analysts that cover Nitro rate it as a “buy”. All four fund managers follow Whispir rate it as a “buy”.

Bigtincan has just Canaccord Genuity covering it, but it has labelled it a “strong buy”.

The post 3 ASX tech shares we’re sticking with: Forager appeared first on The Motley Fool Australia.

More reading

• Here’s why the Bigtincan share price is jumping 10% today
• Analysts say these top ASX growth shares are buys
• 2 highly rated small cap ASX shares that analysts say have huge potential
• Analysts say investors should buy these top ASX shares
• 3 quality ASX All Ordinaries shares tumbling 10% or more today

Motley Fool contributor Tony Yoo has positions in Nitro Software Limited and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended BIGTINCAN FPO and Whispir Ltd. The Motley Fool Australia has positions in and has recommended BIGTINCAN FPO. The Motley Fool Australia has recommended Nitro Software Limited and Whispir Ltd. 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 Friday, the S&P/ASX 200 Index (ASX: XJO) finished a tough week on a high. The benchmark index stormed 1.9% higher to 7,075.1 points.

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

ASX 200 expected to rise again

The Australian share market looks set to start the week strongly following a great night on Wall Street on Friday. According to the latest SPI futures, the ASX 200 is expected to open the day 54 points or 0.8% higher this morning. On Wall Street, the Dow Jones rose 1.5%, the S&P 500 climbed 2.4%, and the Nasdaq stormed 3.8% higher. The latter bodes well for the tech sector today.

Oil prices jump

Energy producers Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could have a good start to the week after oil prices stormed higher. According to Bloomberg, the WTI crude oil price rose 4.1% to US$110.49 a barrel and the Brent crude oil price climbed 3.8% to US$111.55 a barrel. This follows supply concerns as China looks to ease COVID restrictions.

Goodman Q3 update

The Goodman Group (ASX: GMG) share price will be on watch when the industrial property company releases its third quarter update. Goodman has provided guidance for earnings per share growth of 20% in FY 2022. However, a number of brokers believe that the company will outperform this. This could mean the market will be looking for an upgrade to its guidance this morning.

Gold price rises

Gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could have a poor start to the week after the gold price weakened on Friday night. According to CNBC, the spot gold price is down 0.9% to US$1,808.2 an ounce. A stronger US dollar weighed on the precious metal.

Aristocrat Leisure share price is in the buy zone

The Aristocrat Leisure Limited (ASX: ALL) share price could be in the buy zone according to the team at Goldman Sachs. Ahead of the gaming technology company’s half-year results this month, the broker has retained its buy rating and $43.00 price target on its shares. Goldman expects Aristocrat to deliver a 29% lift in net profit to $531 million for the half.

The post 5 things to watch on the ASX 200 on Monday appeared first on The Motley Fool Australia.

More reading

• These were the best performers on the ASX 200 last week
• Why I would invest $10,000 into these ASX 200 shares right now
• These were the worst performers on the ASX 200 last week
• Here are the top 10 ASX shares today
• Why did the Telstra share price rebound nearly 2% on Friday?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that investors might want to be aware of are summarised below.

Here’s why brokers think investors ought to buy them next week:

IDP Education Ltd (ASX: IEL)

According to a note out of UBS, its analysts have retained their buy rating and $35.90 price target on this student placements and language testing company’s shares. This follows news that its CEO, Andrew Barkla, is stepping down from the role in the coming months. While UBS acknowledges that the news is a negative, it remains very positive on the company’s prospects and sees it as one of the best growth shares on the Australian share market. The IDP share price ended the week at $23.17.

Webjet Limited (ASX: WEB)

A note out of Goldman Sachs reveals that its analysts have retained their buy rating and $6.90 price target on this online travel agent’s shares. Ahead of the release of Webjet’s results next week, the broker has reiterated its buy rating. It feels that the company’s outlook is very positive thanks to the growing online channel, its Bedbanks business, and strong balance sheet. The latter gives it opportunities to make bolt-on acquisitions. The Webjet share price was fetching $5.47 at Friday’s close.

Xero Limited (ASX: XRO)

Another note out of Goldman Sachs reveals that its analysts have retained their buy rating but trimmed their price target on this cloud accounting platform provider’s shares to $118.00. This follows the release of a full-year result which fell a touch short on earnings and subscribers. Despite this, Goldman remains positive and continues to forecast strong growth over the coming years and sees value in its shares after recent weakness. The Xero share price ended the week at $84.16.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

More reading

• 3 top ASX growth shares I’d buy next week
• Here are the top 10 ASX shares today
• Nearmap share price jumps 9% on Friday
• Why 5E Advanced Materials, Block, Neometals, and Xero shares are racing higher
• ASX 200 midday update: Block and Xero rebound, gold miners fall

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Idp Education Pty Ltd and Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended Webjet Ltd. 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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There are plenty of ASX dividend shares available for income investors to look at. I plan to hold Rural Funds Group (ASX: RFF) forever because of the income it can produce.

Rural Funds operates as a real estate investment trust (REIT) that owns farmland and agricultural assets across Australia.

There are a few different reasons why I’m planning to keep holding Rural Funds in my portfolio for many years to come. Let’s take a look.

Diversification

Rather than just a single property in one location, Rural Funds owns a diverse portfolio of farms.

The ASX dividend share owns properties across agricultural sectors including cattle, vineyards, almonds, macadamias and cropping (sugar and cotton).

I think it is useful for Rural Funds to own different types of farmland for diversification purposes. For example, if the REIT’s portfolio were limited to just cattle farms, the investment ‘universe’ would be smaller. Diversification also allows management to look at a wider array of potential opportunities.

Rural Funds’ properties are also spread over different climatic conditions. In times of variable weather, this can lower short-term and longer-term risks. In addition, Rural Funds owns substantial water entitlements for its tenants to use.

Speaking of tenants, the REIT’s tenant base is mostly comprised of large, stable businesses. Some of the largest ones include Select Harvests Limited (ASX: SHV), Treasury Wine Estates Ltd (ASX: TWE), Olam International and JBS.

Distribution growth

For me, one of the main attractions of Rural Funds as an ASX dividend share is its goal to increase its distribution by 4% per annum.

While 4% per year isn’t exactly rocketing higher, it’s usually faster growth than inflation and it can compound over time.

I’m looking for businesses that hopefully provide income security even during times of economic uncertainty. Rural Funds stuck to its 4% distribution growth goal even during the COVID-19 year of 2020.

In FY22, it’s expecting to grow its annual distribution by 4% to 11.73 cents per unit. It has increased its distribution every year since it listed several years ago.

Contracted rental growth

One of the main ways that Rural Funds can achieve this distribution growth is through contracted rental indexation.

Rural Funds notes that 44% of its lease income is based on CPI inflation, which is currently running at an elevated rate. Most of the rest of the contracted income sees fixed annual increases, with occasional market reviews.

The ASX dividend share also invests in productivity improvements at its farms, which aims to increase the value of the farm for tenants (and Rural Funds), and aims to lead to further rental growth.

Yield

One of the final things that I like about Rural Funds is that it has a pretty good dividend yield. At the current Rural Funds share price, it has an FY22 distribution yield of 4%.

At the moment, its adjusted net asset value (NAV) per unit is $2.24. That’s the underlying value of the business. Currently, the Rural Funds share price is at a 30% premium to its NAV.

The post I plan to hold this quality ASX dividend share forever. Here’s why. appeared first on The Motley Fool Australia.

More reading

• 2 ASX shares that could benefit from rising inflation
• 2 top ASX dividend shares to think about
• 2 ASX dividend shares with great yields to beat inflation

Motley Fool contributor Tristan Harrison has positions in RURALFUNDS STAPLED. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended RURALFUNDS STAPLED. The Motley Fool Australia has recommended Treasury Wine Estates Limited. 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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Time and time again, statistics show that the most popular ASX exchange-traded funds (ETFs) are those that track ASX shares themselves.

That is not too surprising. Australian investors seem patriotic in that way, or perhaps they just stick to the companies we all know best. But international ETFs have also been rising in popularity as many investors want to add exposure to world-class companies outside Australia, companies perhaps like Apple Inc (NASDAQ: AAPL) and Amazon.com Inc (NASDAQ: AMZN), to their portfolios.

ETF provider Vanguard has the distinction of running the ASX’s most popular ETF — the Vanguard Australian Shares Index ETF (ASX: VAS). VAS is by far the winner. But Vanguard’s flagship international offering — the Vanguard MSCI International Shares Index ETF (ASX: VGS) — is a distant laggard. It is not even the ASX’s most popular international shares ETF. That honour goes to the iShares S&P 500 ETF (ASX: IVV).

VGS vs. IVV: Which ASX ETF comes out on top?

VGS and IVV are both remarkably similar, and yet quite different. On paper, VGS is far more diversified than IVV. It invests in shares ranging from more than 20 different advanced economies. These include Britain, Japan, Canada, the United States, and Europe. Its current basket counts almost 1,500 different individual shares.

In contrast, IVV tracks the US-centric S&P 500 Index. This index houses 500 of the largest companies that are listed on the US markets.

Yet both ETFs here largely have similar top 10 holdings. That is because both ETFs are weighted by market capitalisation. And the largest companies on both the S&P 500 and in VGS both happen to be the same.

But let’s get down to the $64,000 question: which ETF has been better to own for investors?

So as of 30 April, the iShares S&P 500 ETF had returned 8.5% over the preceding 12 months (including the value of dividend distributions). Over the past three years, IVV units have returned an average of 13.2% per annum. That grows to 14.5% over the past five years.

In contrast, VGS has returned 4.7% over the past year. It has averaged 10.1% over the past three, and 11.4% over the past five.

So it appears VGS’s increased diversification has held this ETF back compared to IVV. This makes IVV the unbridled winner in a showdown with VGS over any recent time period.

Of course, past performance is no guarantee of future gains, so this could well change in the future. But it perhaps explains why iShares’ S&P 500 ETF remains a far more popular choice than Vanguard’s International Shares ETF for ASX investors.

The post VGS: Were you better off buying the S&P 500 ETF? appeared first on The Motley Fool Australia.

More reading

• 3 fantastic ETFs for ASX investors to buy this week
• How diversified is the Vanguard International Shares ETF?
• Here are 2 top ETFs for ASX investors to buy next week
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Amazon and Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Apple, and Vanguard MSCI Index International Shares ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Amazon, Apple, Vanguard MSCI Index International Shares ETF, and iShares Trust – iShares Core S&P 500 ETF. 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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