Tag: Motley Fool

The two ASX dividend shares revealed below both have dividend yields of more than 4%. They have also been delivering good dividend growth in recent years.

Not every dividend stock has been increasing the dividend in recent times. COVID-19 has made it very difficult for shares like Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD).

However, these two picks have solid starting yields and a record of growth:

JB Hi-Fi Limited (ASX: JBH)

JB Hi-Fi is one of the largest retailers in the country. It specialises in selling phones, computers, TVs and household appliances. It’s currently rated as a buy by the broker Credit Suisse which has a price target on the business of $57.39. That suggests a potential upside over the next 12 months of more than 20%.

After a 12% fall in the share price over the last month, the JB Hi-Fi share price is now more attractive according to the broker. It was particularly impressed by the trading update for the quarter ending 31 March 2021. In that update, JB Hi-Fi Australia quarterly sales grew by 10.4%. JB Hi-Fi New Zealand sales rose 16%. The Good Guys sales rose by 5.8%.

JB Hi-Fi said that it continues to see heightened customer demand and strong sales growth rates over a two-year period. The broker believes investors don’t appreciate how much household demand there still is for the ASX dividend share’s products.

Based on Credit Suisse’s numbers, the JB Hi-Fi share price is valued at 11x FY21’s estimated earnings with a forecast grossed-up dividend yield of 8.3%.

Kogan.com Ltd (ASX: KGN)

The Kogan share price has fallen heavily during 2021. Over the last month alone Kogan shares have dropped by 25%.

For potential dividend investors, this has had the effect of boosting the trailing dividend yield on offer. Using the dividends paid over the last 12 months, Kogan currently offers a grossed-up dividend yield of 4.1%.

If the e-commerce company is able to sort out its inventory issues sooner rather than later should it should mean that there’s no long-term impact on the Kogan dividend.

In the FY21 half-year result, Kogan revealed 97.4% gross sales growth, 126.2% gross profit growth and 164.2% net profit after tax (NPAT) growth. This gave the board the flexibility to increase the interim dividend by 113.3% to 16 cents.

The ASX dividend share has been struggling due to inventory issues, but it continued to report growth of customers and sales. Kogan.com customers jumped over 77% to 3.2 million whilst gross sales went up 47%. This could signify positive trends for the longer-term.

Broker Credit Suisse thinks the Kogan.com share price is a buy too with a price target of almost $18.

Looking to FY22, the Kogan share price is valued at 22x forward earnings with a projected FY22 grossed-up dividend yield of 4.2%.

More reading

• 2 beaten down ASX shares rated as buys
• Down 9% today, why the Redbubble (ASX:RBL) share price continues to tumble
• These are the 10 most shorted shares on the ASX
• 3 quality mid cap ASX shares rated as buys
• Are there buying opportunities among ASX COVID fallen stars?

Tristan Harrison 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. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Exchange-traded funds (ETFs) are a really good way for investors to get strong diversification through a single investment.

Some ETFs only give exposure to a few dozen shares, whilst others give exposure to a few hundred or even thousands of shares.

However, more investments in a portfolio can lead to slightly smaller returns. So, the below two investments are potential ideas for good returns and very strong levels of diversification:

iShares S&P 500 ETF (ASX: IVV)

A S&P 500 fund is one of Warren Buffett’s favourite ideas to talk about for investors because of its low fees, good returns and solid diversification.

This investment gives investors exposure to 500 businesses that are listed in the US. These are among the biggest, best and most profitable companies listed there.

You do get exposure to the biggest names, with its top holdings being some of the biggest companies in the world such as: Apple, Microsoft, Amazon, Facebook, Alphabet, Berkshire Hathaway, JPMorgan Chase, Tesla and Johnson & Johnson.

One of the main advantages with S&P 500 shares is that they are usually global companies in their sector. That means that it’s not just a US ETF, but it’s a globally-focused ETF. These businesses have huge addressable markets and have created very impressive profit margins because of how large they have become, benefiting from economies of scale.

Another of the main benefits of this ETF is how low the management fee is at just 0.04%. That means almost all of the return is left in the hands of the investors. Over the last decade this investment has created an average return per annum of just over 18% with a very diversified portfolio.

Vanguard Msci Index International Shares ETF (ASX: VGS)

Whilst the first ETF gives exposure to US-listed shares, this ETF is about most of the global share market. It’s invested in every major share market including the US, the UK, France, Germany, the Netherlands, Japan and Canada.

In total, it’s actually invested in more than 1,500 businesses. Whilst it’s invested in the same global US names as the S&P 500, it is also invested in other major businesses like LVMH, ASML, SAP, Nestle, Unilever and GlaxoSmithKline.

The Vanguard Msci Index International Shares ETF has an annual management fee of 0.18% per annum. That’s a bit more than the first ETF, but still cheaper than most other active fund managers.

The returns have been in the double digits over the longer-term. Over the last three and five years, the average return per annum has been 13.26% and 13.76% respectively.

However, whilst this ETF is more globally diversified than the S&P 500, it still has more than two thirds of the portfolio invested in US-listed businesses.

More reading

• 2 excellent ETFs for ASX investors to buy in May
• Is Vanguard MSCI Index International Shares ETF (ASX:VGS) a strong investment idea for diversification?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended iShares Trust – iShares Core S&P 500 ETF and Vanguard MSCI Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Thursday the S&P/ASX 200 Index (ASX: XJO) was out of form again and tumbled notably lower. The benchmark index fell 0.9% to 6,982.7 points.

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

ASX 200 expected to rebound

The Australian share market looks set to end the week on a better note. According to the latest SPI futures, the ASX 200 is expected to open the day 46 points or 0.65% higher this morning. This follows a solid night on Wall Street, which saw the Dow Jones jump 1.3%, the S&P 500 climb 1.2%, and the Nasdaq rise 0.7%.

Oil prices sink

Energy producers including Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could finish the week in the red after oil prices sank overnight. According to Bloomberg, the WTI crude oil price is down 3.5% to US$63.76 a barrel and the Brent crude oil price is down 3.4% to US$66.97 a barrel. Concerns about rising COVID-19 cases in India and the resumption of the US gasoline pipeline weighed on prices.

Xero rated as a buy

The Xero Limited (ASX: XRO) share price crashed lower following the release of its full year results on Thursday. One broker that believes this is a buying opportunity is Goldman Sachs. This morning the broker has reiterated its buy rating, albeit with a slightly trimmed price target of $151.00. It commented: “Reflecting the FY21 result and strong sub momentum, we revise FY22-23 revenue +3 to +4%. However, given the step up in investment our EBITDA is -29%/-28%, but our FY30+ earnings are largely unchanged.”

Gold price rises

Gold miners Newcrest Mining Ltd (ASX: NCM) and St Barbara Ltd (ASX: SBM) could finish the week on a positive note after the gold price pushed higher. According to CNBC, the spot gold price is up 0.25% to US$1,827.30 an ounce. The precious metal was given a boost from easing treasury yields.

Carsales shares to return?

The Carsales.Com Ltd (ASX: CAR) share price could return from its trading halt this morning. The car listings company has requested the halt in order to raise funds to acquire a 49% stake in United States-based business Trader Interactive for approximately US$624 million (A$800 million). To fund the acquisition, Carsales is looking to raise $600 million via a pro rata accelerated renounceable entitlement offer at $17.00 per new share.

More reading

• ASX 200 sinks alongside largest US inflation rise in 12 years
• Has the A2 Milk (ASX:A2M) share price finally found a bottom?
• ASX 200 falls below 7,000, Xero sinks, Afterpay falls
• 3 reasons why the Xero (ASX:XRO) share price selloff could be an opportunity
• Why American Pacific Borates, NAB, Perenti, & Xero are tumbling lower

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 Xero. The Motley Fool Australia has recommended carsales.com Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The HeraMED Ltd (ASX: HMD) share price tanked today, closing 9% lower at 15 cents apiece.

This came despite the company signed a pilot deal with Obstetrix Medical, one of the USA’s largest women’s and children’s healthcare providers.

HeraMED and Obstetrix pilot agreement

HeraMED is a company focused on enhancing the digital resources available throughout the maternity process.

HeraMED’s pilot deal with Obstetrix links the company with US giant Mednax, of which Obstetrix is a subsidiary. Mednax provides maternity services to one in four babies across 39 US states.

Obstetrix is focused on providing birthing clinical services to obstetricians, including clinical research and a range of telehealth services.

Obstetrix has signed a pilot deal to evaluate HeraMED’s HeraCARE software and devices, which allow mothers to self-monitor their foetus’ heart rate, among other services. The deal involves the purchase of 100 HeraCARE licences.

HeraMED says that when the pilot program is complete, both companies aim to form a “comprehensive agreement” for further purchases.

HeraMED management comments

HeraMED CEO, David Groberman said:

We are delighted to have signed our first pilot agreement in the U.S. with a company of such significant status and scale. As a physician-led national medical group that partners with hospitals, health systems and health care facilities, focused exclusively on women’s and children’s care, Obstetrix Medical Group is a highly relevant partner and very well placed to support our commercialisation strategy.

Our focus remains on progressing the growing pipeline of potential partnerships, and HeraMED is well placed to capitalise on these opportunities and will update the market at the appropriate time.

HeraMED share price snapshot

The HeraMED share price has gained 24% in the past month and 40% this year to date. It’s traditionally been a fairly volatile share, and was just nine cents at the end of March this year.

However, a commercial agreement with Joondalup Health Campus saw the HeraMED share price hit 17.5 cents in mid-April before retreating again to its current price.

More reading

• 2 ASX 200 blue chip shares rated as buys
• ASX 200 sinks alongside largest US inflation rise in 12 years
• 2 rapidly growing small cap ASX shares to watch
• These ASX dividend shares offer generous fully franked yields
• How the Federal Budget will impact the ASX

Motley Fool contributor Lucas Radbourne-Pugh 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 Bruce Jackson.

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Are you wanting to buy some blue chip ASX 200 shares for your portfolio? If you are, then I would suggest you check out the two listed below.

These quality companies could have the potential to grow at a solid rate over the next decade. As a result of this, they have been tipped as blue chips to buy. Here’s why:

Cochlear Limited (ASX: COH)

The first ASX 200 blue chip share to look at is Cochlear. It is a global leader in the development, manufacture, and distribution of cochlear implantable devices for the hearing impaired.

Among its growing portfolio of world class products you will find the Nucleus Profile Plus Series cochlear implant and the Nucleus Kanso 2 Sound Processor. 

While the pandemic had a big impact on the company due to the deferral of elective surgeries, the company has bounced back strongly. For example, in February Cochlear released its half year results and reported an underlying net profit of $125.3 million.

While this was down 4% on the prior corresponding period, it is worth remembering that the prior period was before COVID-19 was a thing. Not only that, it was also a record first half profit.

Looking ahead, the company looks well-placed for growth in the future thanks to the ageing populations tailwind, its strong market position, wide distribution network, and the industry’s high barriers to entry.

Macquarie is a fan of the company. Its analysts currently have an outperform rating and $245.00 price target on Cochlear’s shares.

Woolworths Limited (ASX: WOW)

A second blue chip ASX 200 share that has been rated as a buy is Woolworths. The retail giant has been tipped as a buy due to the favourable outlooks for its key businesses. These include BIG W, BWS, Dan Murphy’s, and the jewel in the crown, Woolworths supermarkets.

In addition to this, the company has just confirmed that it plans to go ahead with its demerger of the Endeavour Drinks business in the very near future. This is expected to strengthen its balance sheet and lead to upwards of $2 billion of capital returns for shareholders.

Macquarie is also a fan of Woolworths. Earlier this week its analysts retained their outperform rating and $44.50 price target on the company’s shares.

More reading

• Top brokers name 3 ASX shares to buy today
• How the Woolworths (ASX:WOW) share price has withstood today’s market selloff
• Woolworths (ASX:WOW) share price higher on PFD acquisition news
• ASX 200 jumps, A2 Milk sinks, Crown rises
• ASX 200 up 1.1%: A2 Milk crashes, Crown-Star $12bn merger, Woolworths update

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 Cochlear Ltd. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended Cochlear Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) is 0.72% lower today and back under 7,000 points for the first time in over a month. It’s the third consecutive day of losses for the index – each one above 0.7%.

Today’s market fall comes after the United States Bureau of Labor Statistics announced the consumer price index (CPI) for the country increased by 0.9% for the month of April – the largest rise in the measurement since 2009. Over the past 12 months, it jumped 4.2%; 160 basis points more than the 12 months up to March.

Both the Nasdaq Composite (INDEXNASDAQ: .IXIC) and the S&P 500 Index (INDEXSP: .INX) fell heavily – 2.7% and 2.1% respectively – after the figures were announced. The ASX followed the trend today when trading resumed at 10am.

ASX 200 falls as US inflation rises

Motley Fool Australia’s own chief investment officer, Scott Phillips, said that the performance of American stock and Australian shares usually correlated.

“I think it’s common for the ASX to follow US markets, almost slavishly,” he said. “The old saying is ‘when America sneezes, Australia catches a cold’.”

Mr Phillips agreed that inflation numbers out of the US were likely to have impacted today’s ASX 200 performance. “Yes, either directly or indirectly, it did affect the ASX. Directly, fears of inflation here are heightened [by the CPI results].”

Meanwhile, the tech slide continues

Tech shares have also had a rough day on the trading floor today. Afterpay Ltd (ASX: APT) finished the day 5.6% lower ($84.35), Xero Limited (ASX: XRO) collapsed by 13.7% ($116.47), while Nuix Ltd (ASX: NXL) shares equalled their 52-week low during morning trade before recovering to only be down 0.88% ($3.39). It should be noted Xero also released its full-year results up to 31 March 2021 today.

High growth shares (like those in the tech sector) and bond yields are usually inversely correlated. Bond yields, most of the time, go up when investors expect inflation to increase. According to Reuters, today’s US CPI results were “bigger than expected“.

Mr Phillips said today’s slide in tech shares may not have so much to do with the inflation numbers themselves, but rather reflected an ongoing downward pattern with tech shares at present.

“It’s more likely a continuation of a trend to sell off any growth stocks rather than anything new,” he said.

Is inflation really on the up?

While investors, both on the ASX 200 and in the US, are worried about rising inflation on the back of falling unemployment and government stimulus, policymakers do not appear to agree.

The Reserve Bank of Australia chair, Dr Phillip Lowe, said at the last meeting of the RBA board he did not expect interest rates to go up until 2024 at the earliest. The main reason he cited was because of low inflation.

[The RBA] will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.

For this to occur, the labour market will need to be tight enough to generate wages growth that is materially higher than it is currently. This is unlikely to be until 2024 at the earliest.

The last annual CPI result in Australia was a much lower 1.1% when compared to the US.

According to Reuters, US Federal Reserve chair Jerome Powell and economists agree that today’s result is a blip due to a confluence of factors resulting from the coronavirus pandemic coming to an end.

“This is not a sign of an inflation problem,” economist Robert Barbera was quoted as saying.

“…we simply need time to get things back online [and ease supply bottlenecks].”

More reading

• Has the A2 Milk (ASX:A2M) share price finally found a bottom?
• ASX 200 falls below 7,000, Xero sinks, Afterpay falls
• Should you buy Afterpay (ASX:APT) and this ASX tech share following the selloff?
• What’s driving the Afterpay (ASX:APT) share price to 8-month lows?
• 3 reasons why the Xero (ASX:XRO) share price selloff could be an opportunity

Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Nuix Pty Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Nuix Pty Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you’re interested in adding some exposure to the small side of the market to your portfolio then you might want to take a look at the shares listed below.

Here’s why these ASX small caps have been tipped as buys:

Nitro Software Ltd (ASX: NTO)

Nitro is a global document productivity company. It helps businesses of all sizes eliminate paper, accelerate business processes, and drive digital transformation. This is achieved by providing PDF productivity and eSigning for all in a single, affordable solution.

At present, Nitro is helping drive digital transformation across more than 11,000 businesses globally. This includes 68% of the Fortune 500 and three of the Fortune 10.

It was a very strong performer during FY 2020. For the 12 months ended 31 December, Nitro reported a 64% increase in annualised recurring revenue (ARR) to $27.7 million. This was driven by increasing demand for its popular Nitro Productivity Suite.

Positively, similarly strong growth is expected in FY 2021. Management’s guidance for the year ahead is ARR in the range of $39 million to $42 million. This will mean year on year growth of 41% to 51.6%.

One broker that is a fan is Morgan Stanley. Its analysts currently have an overweight rating and $3.70 price target on the company’s shares. This compares to the current Nitro share price of $2.63.

Volpara Health Technologies Ltd (ASX: VHT)

Another small cap ASX share to watch is Volpara. This healthcare technology company’s VolparaEnterprise software solution is a cost-effective, mission-critical tool that helps clinics deliver the highest-quality breast imaging services.

Volpara also has a growing number of add-on solutions that work with VolparaEnterprise and are expected to boost its average revenue per user (ARPU) metric in the future. These include its VolparaDensity, VolparaDose, VolparaPressure, VolparaLive, and VolparaPositioning products.

Management estimates that its whole suite of products equates to US$10 per user, which is seven times greater than its current ARPU of US$1.40. Combined with further market share gains, this could support significant revenue growth in the future.

Morgans is positive on Volpara’s future. It currently has an add rating and $1.94 price target on its shares. This compares to the latest Volpara share price of $1.23.

More reading

• 2 ASX tech shares that are growing rapidly
• 3 exciting small cap ASX shares to watch in May
• 2 exciting small cap ASX shares to watch
• 2 quality SaaS ASX shares to buy in May 2021
• Brokers name 3 ASX shares to buy now

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 VOLPARA FPO NZ. The Motley Fool Australia has recommended VOLPARA FPO NZ. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Unfortunately for income investors, it looks as though interest rates are going to remain at ultra low levels for some time to come.

But don’t worry because the Australian share market is home to countless dividend shares. Two that offer generous yields are listed below. Here’s what you need to know about them:

BWP Trust (ASX: BWP)

BWP is the largest owner of Bunnings Warehouse sites across Australia, making it the envy of many retail landlords.

At the last count, BWP had a total of 68 properties which were leased to the home improvement giant. It also owns seven other properties, adjacent to its Bunnings properties, that are leased to other retailers.

Pleasingly, thanks to Bunnings’ strong performance during the pandemic, it has been able to collect rent as normal this year. This trend looks set to continue for the foreseeable future given the overall strength of the hardware giant’s business and Australia’s economic recovery. This could bode well for future dividend payments.

For now, the BWP board is aiming to pay a full year distribution of ~18.3 cents per share in FY 2021. Based on the current BWP share price, this equates to an attractive 4.4% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

Another ASX dividend share to look at is Telstra. Thanks to its improving outlook due to the T22 strategy and its separation and asset monetisation plans, Telstra’s dividend appears to have finally bottomed at 16 cents per share.

And with management targeting a return to growth in FY 2022, it may not be long until the company is in a position to start thinking about dividend increases once again.

Goldman Sachs is a fan of the company. Its analysts currently have a buy rating and $4.00 price target on the company’s shares. 

The broker is forecasting 16 cents per share fully franked dividends for the foreseeable future. Based on the latest Telstra share price, this will mean dividend yields of 4.65%.

More reading

• Why it might be time to give the TPG (ASX:TPG) and Telstra (ASX:TLS) share price a second look
• ASX 200 down 0.4%: Xero sinks, Telstra hit with $50m fine
• Telstra (ASX:TLS) share price higher despite being hit with $50 million penalty
• Why has the Telstra (ASX:TLS) share price retreated from its 52-week high?
• Brokers name 3 ASX shares to buy now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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ASX investors have been keeping a close eye on the government’s spending plans.

And for good reason.

The Federal Budget is a doozy.

As the government continues to prioritise getting the economy up to full speed and standing on its own 2 legs, they’ve loosened the purse strings to the hilt.

This will see the budget deficit likely reach 7.8% of Australia’s GDP, its highest share of GDP since the post-World War II rebuild efforts in 1946.  

However, Shane Oliver, head of investment strategy and chief economist at AMP Capital, said the government’s focus on growing the economy rather than staying within budget “is the right thing to do at present”.

Oliver spearheaded AMP Capital’s Webinar yesterday.

I covered off his overall take on the Federal Budget as well as his 5 essential tips for ASX investors in separate articles.

Here, we’ll focus on the budget’s likely impact on the ASX, as well as Australia’s red-hot residential property market.

How the Federal Budget will impact the ASX

While cautioning about the likelihood of a short-term correction on the ASX (which may currently be underway), Oliver’s mid-term outlook for the All Ordinaries Index (ASX: XAO) is decidedly bullish.

“One of the things the share market likes is more stimulus,” he said. With plenty more stimulus contained in the Federal Budget, this will be good for earnings. Indeed, he expects to see “very strong earnings growth”.

Oliver added the following words of caution:

Just allow that shares have had a very strong run up already this year, up until the record high a couple of days ago. At some point we’re going to see a bit of a correction. Now they are normal. They make everyone nervous, but they are normal.

Despite forecasting a correction (generally defined as a pullback of more than 10% but less than 20%, which is labelled a ‘crash’), Oliver is bullish on his outlook for the overall performance of the ASX this year. “I reckon shares will end the year higher than they are presently,” he said.

Positive factors he listed that will support the ASX performance over the medium term include: the rollout of effective coronavirus vaccines; the reopening of developed nations; a falling US dollar, the safe-haven currency, which is normally positive for shares; and easy fiscal and monetary policy continuing, with stimulus still working its way through the economy.

ASX dividend shares were also on his radar.

According to Oliver, “The dividend yield on shares, which was cut last year, is now on the way back up again.”

AMP forecasts grossed-up yields, taking franking credits into account, of around 5% this year.

Comparing that to the 0.5% from bank deposits, Oliver said, “Obviously that creates a flow of money into share markets through time.”

As for potential risks to the ASX performance, Oliver noted 3: China tensions spiralling; dangerous COVID variants; and an inflation spike.

Inflation is coming to the ASX but likely transitory

The key risk of the Federal Budget to ASX shares that Oliver pointed to was that it could push the Reserve Bank of Australia (RBA) to raise rates faster than the central bank has said it will.

The RBA remains adamant it will not move to raise before 2024. A date AMP Capital already believes is a bit optimistic.

“We’re expecting them to raise rates in 2023,” Oliver said. “Two years away, but a little earlier than the Reserve Bank is talking about. That’s still a long way away. But all this extra stimulus could bring forth the timing of that a bit.”

Not that you should expect any significant returns from your cash deposits anytime soon.

“If you’re a bank depositor, you’re still going to get really low rates for some time to come,” Oliver said. He noted that even if the RBA does start raising rates, the increase will likely be fractional. First moving the cash rate from 0.10% to 0.25%, and then 0.50%.

“They’re still going to be very low numbers. I don’t think you’re going to get a lot of relief as a bank investor or bank deposit investor.”

Oliver is equally bearish on his outlook for the returns you’re likely to get from long-term government bonds. “With bond yields at around 1.7%, you’ve got a lot of running yield. If bond yields rise over time as the global economy continues to recover, which will probably happen, then you get capital loss.”

Even if inflation does come back stronger than the RBA forecasts, Oliver doesn’t expect it will be sustained. Rather it’s more the result of temporary distortions from post-pandemic lockdowns creating a bottleneck of supply due to lockdowns running into the resurgent demand. That and the big price slump from a year ago distorts the year-on-year price rise figures.

“There’s a good probability that when companies see demand pick up they ramp up production again which pushes prices back down,” he said. “And eventually the spending will rotate back to services and take the pressure off of goods.”

The 40-year trend of declining inflation looks over

While Oliver doesn’t believe the inflation pressures will be an issue for more than the next 12 months, he did say that we’ve probably seen the lowest point in interest rates and inflation, both of which were historically low for several years before the onset of the pandemic.

This will eventually impact ASX shares that are more dependent on earnings growth as well as property more dependent on rental growth, both of which have benefited for years from falling rates. However, Oliver doesn’t expect this to become an issue for the next year or so.

Higher debt levels for residential property

Moving away from the ASX, Oliver looked at the extra stimulus in the Federal Budget for residential property.

That includes “more assistance for homebuyers via deposit schemes with a Family Home Guarantee to help 10,000 single parents buy their own home with just a 2% deposit”.

“I think it’s great to help first-time buyers and single parents,” Oliver said. “But if you make it easier for that group to get in without dramatically changing the supply and taking something away from other groups then you just end up with higher prices, and people getting in with very high debt levels.”

Oliver noted that there were no forced sales during the downturn, “so with the reopening, prices took off”.

He said, “Growth slowed a little in April but the residential property market is still very, very strong. You can see that in the auction clearance rates.”

By 2023 AMP Capital forecasts that housing price growth may pause, or even “come down a bit”. That’s a factor of low population growth with a virtual halt to immigration along with an increasing number of unit completions.

“In the meantime, we’re on a bit of a run,” Oliver said. “I reckon this year we’ll see [housing] price growth of 15%, and next year around 5%.”

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Motley Fool contributor Bernd Struben 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 Bruce Jackson.

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Laybuy Holdings Ltd (ASX: LBY) shares were sinking today despite the company’s update on a key new appointment in the United Kingdom. By the market’s close, the Laybuy share price had fallen 3.7% to 65 cents. For context, the All Ordinaries Index (ASX: XAO) also had a pretty average day, closing around 1% lower.

Let’s take a look at what the buy now, pay later (BNPL) provider announced.

New general manager

Investors were selling Laybuy shares despite the company progressing its plans to drive growth across the United Kingdom.

According to its release, Laybuy has appointed Mr John Gillian into a newly created role of general manager of the UK and Europe. Laybuy highlighted the appointment as an important step in capitalising on its opportunities within the UK market.

In Laybuy’s FY21 fourth-quarter results released last month, it highlighted that its UK operations delivered annualised gross merchandise value (GMV) of NZ$358 million. This represents a 230% jump (NZ$108 million) on the prior comparable period. Most importantly, the strong result makes the UK Laybuy’s largest market. The company said its UK merchants, along with strategic partnerships, are driving the rapid growth. Laybuy shares also slumped on the day the results were released.

Furthermore, Laybuy expects to gain robust instore traction with the United Kingdom launch of its ‘Tap to Pay’ product this month. The feature is seen as a way forward in a post-COVID-19 environment. Both Australia and New Zealand successfully rolled out the product in Q3 FY21.

In the role, Mr Gillian will be responsible for all UK operations, including developing a strategy to support growth. Management noted Mr Gillian’s achievements in holding the position as vice president for global adtech company, Criteo.

Laybuy managing director Gary Rohloff commented:

John’s proven track record in working with some of the largest merchants in the world at the most senior level, combined with his passion for championing the customer makes this appointment a particularly exciting one for Laybuy’s growth plans.

Mr Gillian will be based in London and commence the role from next month.

Laybuy share price summary

Over the past 12 months, the Laybuy share price has fallen by more than 65% and is 50% down year to date. The company’s shares have been trending lower ever since its listing in early September 2020.

Based on the current share price, Laybuy presides a market capitalisation of roughly $114 million, with 174 million shares outstanding.

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Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

The post Laybuy (ASX:LBY) share price slides despite key UK appointment appeared first on The Motley Fool Australia.

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