Tag: Motley Fool

The Qantas Airways Limited (ASX: QAN) share price has been a strong performer over the last six months.

During this time, Australia’s flag carrier airline’s shares have stormed 35% higher.

Can the Qantas share price go higher?

Although the Qantas share price has been soaring in recent months, one leading broker believes it can ascend even higher.

This morning Goldman Sachs reiterated its buy rating and $6.38 price target on the company’s shares.

Based on the latest Qantas share price of $5.21, this price target implies potential upside of 22% over the next 12 months.

What did Goldman Sachs say?

Goldman Sachs has been looking into the airline industry following the release of data from the Bureau of Infrastructure, Transport and Regional Economics (BITRE).

According to the note, domestic airfare data for the month of March reveals that ‘best discount’ fares declined by 23% year on year and ‘Restricted Economy’ fares declined by 18% year on year.

While meaningful discounting is never good for airlines, Goldman isn’t overly concerned at this stage, particularly given the improvement in fares financial year to date (FYTD).

It explained: “Volatility of fares has remained a key characteristic over the past 6 months as airlines continue to dynamically adjust fares to fill scheduled capacity (i.e. maximise load factors) in an environment characterised by unpredictable and sudden state border closures.”

“Through the past 6 months, airlines have been relatively proactive in restricting capacity to accommodate lower demand for travel, and reducing discounts on airfares to manage profitability. On a FYTD basis, the prices remain up +1.9% yoy. Notably on a FYTD basis, we highlight increases on the Canberra-Melbourne (up 63% yoy); Melbourne-Perth (up 54% yoy) and Perth-Sydney (up 41% yoy), highlighting the inelasticity of government and resources sector led demand.”

Why is the Qantas share price in the buy zone?

Goldman explained that it believes Qantas is a good COVID-recovery investment option for investors.

It concluded: “We reiterate our Buy rating on QAN.AX with our 12-month TP of A$6.38. While average ticket prices are falling, we note that a greater proportion of this travel is being taken on leisure routes and for QAN we expect greater penetration of the low-cost Jetstar brand.”

“QAN represents a strong recovery investment with Qantas/Jetstar brands forecasting capacity to return to c.80%/c.100% of pre-covid levels during the upcoming April holiday period. In our view, the combination of: (i) recent federal government support package; and (ii) if the Australian COVID-19 vaccination program has the effect of reducing community transmission of the virus and limits the need for domestic border closures, we think it likely that they will achieve this target.”

More reading

• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 dips, travel shares drop, Pushpay soars
• Why BrainChip, Crown, Qantas, & Quickstep shares are tumbling lower
• Qantas (ASX:QAN) share price dips after dismissed legal defection case
• 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 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 Will the Qantas (ASX:QAN) share price soar 20% higher from here? appeared first on The Motley Fool Australia.

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Inflation has been a topic of hot discussion in the investing community of late. The Reserve Bank of Australia (RBA) and other central banks around the world are insisting that rising prices won’t be a problem in the near future.

Despite that, bond markets have started to price in inflation fears, together with the interest rate hikes that normally follow. Rising bond yields have essentially been behind the volatility we have seen in the tech space over the past month or two.

So what if the RBA is wrong, and inflation does come to our economic shores sooner than anticipated? Here are three ways you can help protect your portfolio.

Plan ahead

Have a think about which ASX shares will perform in an inflationary environment. For example, miners might do well since commodity prices tend to rise with inflation. The ASX has many of these companies, including BHP Group Ltd (ASX: BHP) and South32 Ltd (ASX: S32). Banks are also effective hedges against inflation as they tend to benefit when interest rates rise.

Another factor to keep in mind is pricing power. If a company can raise the prices of its goods or services in line with inflation without losing customers, it’s more likely to be a winner.

Be prepared to rethink ASX dividend shares

ASX dividend shares have been a very popular asset over the last few years as interest rates have fallen. But, what falls can also rise. If interest rates start to inch up again, we could see a movement out of dividend-paying shares.

That’s because safer cash alternatives like savings accounts and term deposits will become more attractive. If an investor has a choice between a dividend share with a 3% yield, and a term deposit with a 3% yield, many will choose the term deposit.

Diversify into inflation-resistant assets

When it comes to inflation, there are some asset classes that are known to perform well. Adding some of these to your ASX share portfolio could offset some inflationary pressure. Gold is often touted as a good investment during times of inflation due to its scarce supply. Arguably, the same could be said of Bitcoin (CRYPTO: BTC), although that is far less verifiable at this stage.

But there are other options too. Many real estate investment trusts (REITs) hold properties with contractual inflation-linked rental increases built in. Infrastructure providers like toll road company Transurban Group (ASX: TCL) also offer similar inflationary protection. And there is always inflation-linked government bonds, like those held in the iShares Government Inflation ETF (ASX: ILB).

Foolish takeaway

Like most things, it’s better to have a plan and not need it, rather than need a plan and not have it. There are warnings that inflation may be on the horizon. Even if it doesn’t come to pass, the mere threat might be enough to justify an action plan today.

More reading

• 2 quality ASX dividend shares to buy this month
• How to counter the ASX 200’s Achilles heel
• Where to invest your BHP (ASX:BHP) dividends
• 5 things to watch on the ASX 200 on Tuesday
• Two ASX 200 banking and mining shares to own as inflation lurks

Sebastian Bowen owns shares of Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Bitcoin. The Motley Fool Australia owns shares of Transurban Group. 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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Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In part 1 of our interview, Spaceship portfolio manager Jason Sedawie tells how he aims to double his clients’ money every 5 years.

Investment style

The Motley Fool: What’s your fund’s philosophy?

JS: The fund we run here [within] the flagship Voyager fund is Spaceship Universe. So that was launched nearly 3 years ago and so we have this approach we call Where The World Is Going, WWG. 

In that approach, we try to anticipate trends and think about what products and services are getting more relevant in the future. We’re also focused on the moat, barriers to entry for potential competition — so that’s the philosophy in how we think about investing.

MF: What’s the typical investment horizon?

JS: So we tell our investors 7 years and when we’re investing ourselves, I guess we’re looking at a 5-year time horizon for the shares. We try to look over a 5-year period for the shares to double over that time. That works out to be 15% per annum, so that’s what we’re looking for.

MF: How has the fund performed in the past year?

JS: It ended up being a good year for the portfolio because the way we think about things is we talk about trying to anticipate trends and what products will be more relevant in the future. 

So we’re very focused on companies that are solving problems. A lot of these problems really came to light or they were just brought forward since people really needed to have an e-commerce solution or go online. A lot of our companies did really well. For the Universe fund, it was 54.96% for [the year to] February.

MF: What’s the proportion between Australian and foreign shares?

JS: It’s around 80% global and 20% Australian.

MF: Is the global portion dominated by the US?

JS: Yeah, a bit over half US.

MF: To give our readers an idea, what are your two biggest holdings?

JS: Good question. We run it equally weighted, so for me to say what are the two biggest holdings, it can fluctuate quite a lot. 

But the largest holding at the moment, just given the market movements, is Rakuten Inc (TYO: 4755), which is an e-commerce player in Japan. So that’s risen lately because Japan Post Holdings Co Ltd (TYO: 6178) just bought into the company and Tencent Holdings Ltd (HKG: 0700) have bought into the company. 

They’re obviously very large companies. You’ve got Japan Post on your side for delivery integration. Obviously Tencent’s background as a super app is really interesting. 

That will be our biggest at the moment, but it does change because we run it as an equally weighted portfolio.

MF: It sounds like Spaceship isn’t afraid of Japanese equities, which many investors have shied away from for many decades.

JS: It’s such a boom over there, [but] it’s still down what, 20-25% from 30 years ago. So they’ve seen a lot of equity destruction over there. We only have two companies in Japan, Rakuten and SoftBank Group Corp (TYO: 9984). 

It’s a very modern economy but it’s quite strange in some ways — the level of cash adoption is still quite high. There’s still a lot of stamp usage and faxes, and so it’s interesting for such a modern economy just to see some of the trends over there. But they’re changing as well over time.

Buying and selling 

MF: What do you look at closely when considering buying a stock?

JS: Probably like everyone else, we look for a couple of things. We have that Where The World Is Going approach — so to implement them we look at new habits being built, new solutions for problems or better ways to start doing things. 

Secondly, a moat. Are they building a moat? Just some scalable plan that will have a network effect there? 

Thirdly, management — do they understand if they are building a moat [and] how that fits with these trends. 

And finally the fourth one is the expected return rate on the company doubling every 5 years.

MF: What triggers you to sell a share?

JS: Deterioration of moat, I’d say, is the first one. So some sort of event where they lose market share or some scale is at risk. 

The second one [is] just a better competing product, some sort of disruption that might make the reason we own the stock change. 

And then finally, a pretty common one is just we find a better opportunity… we just think there’s something better out there with the capital.

MF: Have you ever had to sell a share because it fell out of that Where The World Is Going criteria?

JS: Yeah, it can happen quite a bit. With Netflix Inc (NASDAQ: NFLX) we just worried about the moat and the competition, and so we sold it just before COVID. And then obviously they benefited from COVID, but we just got concerned with the pricing power they had with [rivals like] Disney Plus and all the other services. 

So yeah, it’s not bulletproof but it’s a process that works over time. You know, you just got to stick to that process if you think that price is deteriorating a little bit — really reconsider the reason for owning it.

What’s coming up?

MF: Where do you think the world is heading at the moment?

JS: COVID has really accelerated changes in habits. 

Thankfully all these vaccines were put together in record time for COVID and I think that’s really interesting what’s happening in healthcare. 

If I step back as a fund manager I look at some of the largest companies in the world — companies like Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG), Facebook Inc (NASDAQ: FB), Snap Inc (NYSE: SNAP), Twitter Inc (NYSE: TWTR) and TikTok — they’ve all grown up on a small percentage of GDP: advertising. 

Advertising is only a bit over 1% of the US GDP. And half of that is online, so let’s say 0.5% of GDP has created massive companies that we all know about. So I’m really interested just to see the change in healthcare. Healthcare has historically been an inefficient industry, around 7% to 8% of the US GDP.

You see things like mRNA vaccines and all this tele-health, I think it’s a very interesting time in healthcare. And we’re just seeing these changes sort of happen across a lot of other industries as well. 

So for me personally it’s a very interesting time as a stock picker, because a lot of these problems are getting solved in a better way. If we can find the companies that provide the solutions, that could be a really good opportunity for us and our investors. 

Tomorrow: part 2 of our interview, where Sedawie reveals his most underrated and overrated stocks.

More reading

• How to counter the ASX 200’s Achilles heel
• Why it’s a great time for ASX investors to buy US shares
• When dividends can be a bad thing for an ASX share
• ASX tech shares: A once-in-a-lifetime buying opportunity?
• We’re betting on ASX growth shares: global fund

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Tony Yoo owns shares of Alphabet (A shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, Netflix, Twitter, and Walt Disney. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Facebook, Netflix, and Walt Disney. 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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There will be many retail ASX shares taking note that Aldi is planning to start online sales with an e-commerce offering of its special buys and alcohol items in the future.

News Corporation (ASX: NWS) reported that Aldi could decide to do online groceries at a later point, but the international supermarket business is planning to become more online-focused.

The Aldi CEO Tom Daunt was quoted by News Corp, he said:

We are likely to start with something more exciting like wine or Special Buys online before we would entertain a full grocery offer.

What kind of things are sold as Aldi’s special buys?

Well, almost anything can be sold in the special buy section, apart from fresh food, over the course of the year.

Toys, bed sheets, towels, shoes, tools, appliances, country-specific foods, furniture, some devices, books, stationery, clothes, cutlery, TVs, Easter items, Christmas items and so on are just some of the categories.

When you think about it, many of the product categories I just mentioned could challenge a whole heap of different ASX retailers such as: Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL), Accent Group Ltd (ASX: AX1), Nick Scali Limited (ASX: NCK), Adairs Ltd (ASX: ADH), Temple & Webster Group Ltd (ASX: TPW), Wesfarmers Ltd (ASX: WES), JB Hi-Fi Limited (ASX: JBH), Kogan.com Ltd (ASX: KGN)  and Reject Shop Ltd (ASX: TRS).

However, just because Aldi starts selling something online doesn’t mean it’s going to completely disrupt that category.

One big question will be how long those specific special buy items are sold online for. If they’re only sold for a week or two – like the in-store experience – then it won’t be providing year-round online competition to the ASX retail shares. However, if Aldi permanently sells some products online then that would be a different problem for ASX retail shares to deal with.

How important is e-commerce?

Many of the ASX retail shares are reporting very large online sales growth numbers right now, which is what is driving profit much higher during these strange COVID-19 times.

In the recent reporting season, Woolworths saw e-commerce sales rise 77.9% to $2.9 billion, Coles consumer online sales rose 61%, Accent’s online sales grew 110% to $108.1 million, Adairs online sales went up 95.2%, Wesfarmers online sales more than doubled (excluding Catch) to more than $2 billion and JB Hi-Fi online sales rose 161.7% to $678.8 million. You can see why Aldi wants in on this online action. 

Aldi’s moves will be interesting to watch in the coming years. News Corp said that Aldi now has a supermarket market share of 12.4%, according to data from Roy Morgan.

Despite the online move, Aldi continues to expand its network with 20 new stores planned this year in Australia.

More reading

• Why Zip (ASX:Z1P) and this growth share are in the buy zone today
• 3 under-appreciated income stocks yielding 4-9%: Motley Fool CIO Scott Phillips, on ausbiz
• 2 ASX retail shares delivering strong growth
• How to counter the ASX 200’s Achilles heel
• Leading brokers name 3 ASX shares to buy today

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 Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths Limited. The Motley Fool Australia has recommended Accent Group, ADAIRS FPO, and Temple & Webster Group 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 Westpac Banking Corp (ASX: WBC) share price will be on watch on Wednesday.

This follows the release of an update in relation to its Westpac New Zealand business this morning.

What did Westpac announce?

This morning Westpac revealed that the Reserve Bank of New Zealand (RBNZ) has instructed Westpac New Zealand to commission two independent reports concerning its risk governance and liquidity risk management.

According to the release, the first report will assess the bank’s risk governance processes and practices applied by its New Zealand board and executive management.

Whereas the second report relates to the effectiveness of the actions Westpac New Zealand has taken to improve the management of liquidity risk and the associated risk culture.

This follows previously identified breaches of the RBNZ’s Liquidity Policy (BS13) and potential non-compliance identified through the RBNZ’s liquidity thematic review.

These breaches were previously reported to the RBNZ and the Australian Prudential Regulation Authority (APRA). The latter regulator took action against Westpac for these issues in December.

What now?

The RBNZ has told Westpac that its New Zealand business will have to hold additional liquid assets until the central bank is satisfied that the previously required remediation work has been effective.

The bank commented: “Westpac New Zealand acknowledges the importance of liquidity and risk governance obligations and will support the independent reviewers to provide the necessary reports to the Reserve Bank. WNZL will also act promptly on any recommendations from the reviews.”

“WNZL has taken a number of steps to improve risk governance but recognises more work is required, and supports the additional oversight that the independent reports will provide.”

Westpac share price performance

The Westpac share price has been a strong performer over the last six months. During this period, it has gained an impressive 49% for shareholders.

More reading

• How to counter the ASX 200’s Achilles heel
• Top brokers name 3 ASX dividend shares to buy today
• Why the Commonwealth Bank (ASX: CBA) share price is on watch today
• ASX 200 Weekly Wrap: Inflation fears hold ASX down
• 2 blue chip ASX dividend shares to buy

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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 Westpac (ASX:WBC) share price on watch after NZ update appeared first on The Motley Fool Australia.

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More reading

• 2 quality ASX dividend shares to buy right now
• Why Zip (ASX:Z1P) and this growth share are in the buy zone today
• 2 leading ASX 200 dividend shares to buy for income
• 5 things to watch on the ASX 200 on Wednesday
• How does Airtasker (ASX:ART) stack up against its peers?

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Kate O’Brien owns shares of Apple and Rio Tinto Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. 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 looking for some top ASX dividend shares to add to your income portfolio, then you might want to look at the ones listed below.

Here’s what income investors need to know about them:

Aventus Group (ASX: AVN)

Aventus is the largest fully-integrated owner, manager, and developer of large format retail centres in Australia. Its 20 retail centres are home to a range of high quality national retailers such as ALDI, Bunnings, and Officeworks. In fact, at the last count, national retailers represented ~87% of its total portfolio.

Unlike many other retail landlords, Aventus has performed positively during the COVID-19 pandemic. This led to the company reporting both revenue and profit growth during the first half of FY 2021.

One broker that remains very positive on Aventus is Goldman Sachs. In response to its results, the broker retained its buy rating and $3.04 price target on its shares.

Goldman is also forecasting a ~16.6 cents per share distribution this year. Based on the current Aventus share price, this represents a 5.7% yield.

National Storage REIT (ASX: NSR)

National Storage is one of Australasia’s largest self-storage providers. From over 200 locations across Australia and New Zealand, it tailors self-storage solutions to residential and commercial customers.

Thanks to a combination of organic growth and growth through acquisitions, National Storage has been increasing its earnings and distribution at a decent rate over the last decade.

Positively, it looks well-placed to do the same over the next decade thanks to further acquisitions and developments and the booming housing market. The latter is traditionally a key demand driver.

Looking ahead, management expects the company to report underlying earnings per share of 7.7 cents to 8.3 cents in FY 2021. From this, it plans to pay out 90% to 100% to shareholders.

Based on the middle of both guidance ranges and the current National Storage share price, this represents a 4% yield.

More reading

• 2 high yield ASX dividend shares to buy today
• 2 high yield ASX dividend shares to buy next week
• 2 quality ASX dividend shares to buy next week
• This ASX dividend share has a very generous 5.9% yield
• 2 top ASX dividend shares with generous yields to buy

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended AVENTUS RE UNIT. 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 a growth investor? If you are, then you’re in luck. This is because the ASX is home to a number of companies growing strongly.

Two top ASX growth shares that have been tipped as buys are listed below. Here’s why they are highly rated:

Kogan.com Ltd (ASX: KGN)

Kogan is a leading ecommerce company that has been growing at an explosive rate.

For example, during the first half of FY 2021 Kogan delivered a 97.4% increase in gross sales to $638.2 million and a 250.2% jump in adjusted net profit after tax to $36.5 million.

Key drivers of this stellar growth were the accelerating shift to online shopping, the expansion of its product offering, acquisitions, and a big jump in customer numbers. In respect to the latter, the company reported a 76.8% increase in Kogan active customers to 3 million. It also has ~0.72 million Mighty Ape customers as well.

One broker that appears confident that the company has a long runway for growth is Credit Suisse. Earlier this month the broker put an outperform rating and $20.85 price target on its shares. This compares very favourably to the current Kogan share price of $13.33.

Zip Co Ltd (ASX: Z1P)

Zip is a leading buy now pay later (BNPL) provider which has also been growing at an explosive rate.

This has been driven by its international expansion, the acquisition of QuadPay, the decline in credit card usage, and the growing growing popularity of the BNPL payment method with both consumers and merchants.

During the first half of FY 2021, Zip reported a massive 141% increase in total transaction volume (TTV) to $2.32 billion and a 130% jump in revenue to $160 million. And while the company posted a sizeable loss, it has the balance sheet capacity to accommodate this.

Zip’s impressive first half sales growth was underpinned by another material increase in active customers. At the end of December, there were 5.7 million active customers on its platform globally. This was up 217% over the prior corresponding period.

One broker that was particularly impressed was Morgans. In response to its results, the broker retained its add rating and lifted its price target to $12.10. This compares to the latest Zip share price of $8.07.

More reading

• Afterpay and Zip were among the most traded ASX shares last week
• ASX 200 crash anniversary: 5 of the best performing shares of the last 12 months
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 Weekly Wrap: Inflation fears hold ASX down
• 2 ASX growth shares that could be strong buys

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of and 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.

The post Why Zip (ASX:Z1P) and this growth share are in the buy zone today appeared first on The Motley Fool Australia.

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There are a few high-quality S&P/ASX 200 Index (ASX: XJO) dividend shares that could be worth owning for income.

Not every that pays a dividend may be worth owning for income – dividends can be volatile and business profits can go backwards, which may lead to dividend cuts down the line.

These two ASX 200 dividend shares have demonstrated resilience over the past year:

Charter Hall Long WALE REIT (ASX: CLW)

This is one of the larger real estate investment trusts (REITs) on the ASX with a market capitalisation of $2.7 billion, according to the ASX.

Morgan Stanley currently rates the REIT as a buy with a price target of $5.35.

It isn’t based on one particular real estate sector. It’s actually invested in a broad array of properties such as telecommunications, government (office) buildings, grocery and distribution, fuel and convenience stores, pubs and bottle shops, food manufacturing, waste and recycling management and ‘other’ such as retail, banking finance and security and defence services.

What all of its properties do have in common are long term rental contracts, which is shown in the Charter Hall Long WALE REIT’s weighted average lease expiry (WALE) of 14.1 years. This is one of the longest in the sector.

It was one of the few REITs to increase its distribution to shareholders during the COVID-19-hit year of 2020.

The ASX 200 dividend share has an impressive list of “strong and stable” tenants such as Telstra Corporation Ltd (ASX: TLS), Australian government entities, BP, Woolworths Group Ltd (ASX: WOW), Ingham’s Group Ltd (ASX: ING), Coles Group Ltd (ASX: COL) and David Jones.

Morgan Stanley believes that Charter Hall Long WALE REIT will pay a distribution of 29.2 cents per unit in FY21, which equates to a forward distribution yield of 6.1%.

Brickworks Limited (ASX: BKW)

Brickworks was another business that didn’t cut its dividend during 2020. In-fact, it increased the dividend during the roughest part of the COVID-19 crash in March 2020.

Whilst the company is now seeing a recovery of demand from customers in Australia for building products, the US division is (or was) facing difficulty at the time of the last trading update. The company is due to release its FY21 half-year result this week, so we’ll get a closer look at how things are going. 

Brickworks owns a variety of Australian building brands like Austral Bricks, Austral Masonry, Bristle Roofing, Austral Precast and Pronto Panel.

In the US it owns a few brickmakers such as Glen Gery after acquiring them.

But it’s the other Brickworks assets that fund the dividend, which hasn’t been cut in over 40 years.

Brickworks owns around 40% of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which itself has been a reliable dividend payer over the last two decades thanks to its diversified and defensive portfolio of assets.

The ASX 200 dividend share also owns half of a growing industrial property trust along with Goodman Group (ASX: GMG). The concept is that the joint venture builds high-quality industrial properties on land that Brickworks no longer needs.

Two tenants that the industrial trust will soon have is Coles and Amazon. Once the warehouses are completed over the next couple of years, it could lead to rental profit to Brickworks growing by more than 25%.

At the current Brickworks share price, it has a grossed-up dividend yield of 4.5%.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• What experts are saying about Telstra’s (ASX:TLS) big restructuring plans
• ASX 200 dips, travel shares drop, Pushpay soars
• 3 under-appreciated income stocks yielding 4-9%: Motley Fool CIO Scott Phillips, on ausbiz
• Why the Xero (ASX:XRO) share price is outperforming today

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths 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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On Tuesday the S&P/ASX 200 Index (ASX: XJO) faded as the day went on and gave back its earlier gains to end the session with a small decline. The benchmark index fell 0.1% to 6,745.4 points.

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

ASX 200 futures pointing lower

The Australian share market is poised to edge lower on Wednesday following a weak night of trade on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 2 points lower this morning. In late trade on Wall Street, the Dow Jones is down 0.8%, the S&P 500 is down 0.7%, and the Nasdaq has fallen 1% This was despite bond yields falling again.

Oil prices sink lower

Energy producers such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could come under pressure today after oil prices sank lower. According to Bloomberg, the WTI crude oil price is down 6.4% to US$57.67 a barrel and the Brent crude oil price has fallen 6.1% to US$60.69 a barrel. Concerns over demand following further third-wave lockdowns in Europe are weighing on prices.

Gold price falls

It could be a tough day for gold miners Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Limited (ASX: NCM) after the gold price tumbled lower. According to CNBC, the spot gold price is down 0.75% to US$1,725.10 an ounce. The price of the precious metal fell after a firmer US dollar outweighed a dip in U.S Treasury yields.

Qantas rated as a buy

The Qantas Airways Limited (ASX: QAN) share price is in the buy zone according to analysts at Goldman Sachs. Although the broker notes that data shows that discounting is increasing by domestic carriers, it believes investors should overlook this. It explained: “We reiterate our Buy rating on QAN.AX with our 12-month TP of A$6.38. While average ticket prices are falling, we note that a greater proportion of this travel is being taken on leisure routes and for QAN we expect greater penetration of the low-cost Jetstar brand.”

Dividends being paid

Shareholders of a number of ASX 200 shares can look forward to being paid their latest dividends later today. Among the companies paying dividends are stock exchange operator ASX Ltd (ASX: ASX), iron ore giant Fortescue Metals Group Limited (ASX: FMG), and healthcare company Sonic Healthcare Limited (ASX: SHL).

More reading

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• Why the Xero (ASX:XRO) share price is outperforming today
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare 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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