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The S&P/ASX 200 Index (ASX: XJO) is on course to end the year with a decline on Thursday. In late morning trade, the benchmark index is down 0.3% to 6,661.7 points.

Four shares that are not letting that hold them back are listed below. Here’s why they are pushing higher:

Costa Group Holdings Ltd (ASX: CGC)

The Costa share price is up 2% to $4.16. This morning Vitalharvest Freehold Trust (ASX: VTH) provided an update on its takeover by Macquarie Agricultural Funds Management. Costa leases seven farms from Vitalharvest and has agreed long term deals with Macquarie for them. Investors appear happy with the transaction’s progress.

Galaxy Resources Limited (ASX: GXY)

The Galaxy share price has pushed 3% higher to $2.27. The lithium miner’s shares have been strong performers recently and hit a multi-year high earlier today. Investors have been buying the company’s shares on the belief that lithium demand will increase greatly in the coming years thanks to growing electric vehicle adoption.

Oil Search Ltd (ASX: OSH)

The Oil Search share price has climbed 2% to $3.73. This appears to have been driven by a rise in oil prices overnight after a better than expected inventory draw in the United States. According to CNBC, Brent crude oil futures gained 0.5% to settle at US$51.34 per barrel and U.S. West Texas Intermediate (WTI) crude oil advanced 0.8% to settle at US$48.40 per barrel.

Ramelius Resources Limited (ASX: RMS)

The Ramelius share price has risen 3.5% to $1.68. Investors have been buying the gold miner’s shares after the price of the precious metal pushed higher overnight following further weakness in the US dollar. It isn’t just the Ramelius share price that is advancing this morning. At the time of writing, the S&P/ASX All Ordinaries Gold index is up a decent 1.2%.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Is the surging Bitcoin an existential threat to ASX gold miners?
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 up 0.5%: Big four banks rise, Smartgroup guidance, Transurban distribution update
• Here’s how ASX 200 energy shares have performed in 2020 so far

Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why Costa, Galaxy, Oil Search, & Ramelius shares are pushing higher appeared first on The Motley Fool Australia.

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If you’re looking to add some diversification to your portfolio in 2021, then you might want to look at exchange traded funds (ETFs).

ETFs are a great way to diversify because they give investors easy access to a large and diverse number of different shares that you wouldn’t ordinarily have access to.

But given the large number of ETFs to choose from, it can be difficult to decide which ones to buy.

Two ETFs that are popular with investors and could be worth considering are listed below:

BetaShares Global Cybersecurity ETF (ASX: HACK)

The first ETF to look at for 2021 is the BetaShares Global Cybersecurity ETF. This ETF has been setup to track the performance of an index that provides investors with exposure to the leaders in the global cybersecurity sector.

Given the increasing threat of cyber attacks on governments and businesses, demand for cybersecurity has been growing quickly and is expected to continue doing so in the future.

The BetaShares Global Cybersecurity ETF includes a number of cybersecurity giants and emerging players. This includes the likes of Accenture, Cisco, Cloudflare, Crowdstrike, and Okta.

Another positive with this ETF is that it provides investors with access to a sector which is heavily under-represented on the ASX.

BetaShares NASDAQ 100 ETF (ASX: NDQ)

A second ETF to consider for 2021 is the BetaShares NASDAQ 100 ETF. This highly popular ETF gives investors exposure to 100 of the largest non-financial companies on the famous Nasdaq index.

This means that investors will be buying a slice of some of the largest and most iconic companies in the world. And given their positive long term growth outlooks, the BetaShares NASDAQ 100 ETF has the potential to provide strong returns for investors over the 2020s.

Included in the ETF are tech giants such as Amazon, Apple, Facebook, Microsoft, Netflix, PayPal, and Tesla. They are joined by non-tech stocks including Gilead Sciences, Pepsico, and Starbucks.

More reading

• 2 fantastic ETFs for ASX investors to buy
• 3 ETFs for ASX investors to buy in 2021
• Here’s why the WhiteHawk (ASX:WHK) share price has rocketed 26% higher today
• 2 tech ETFs to buy for growth
• How to invest in US shares in 2021

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 BETA CYBER ETF UNITS and BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS. 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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With many brokers taking a well-earned break over the holiday period, broker notes are few and far between right now.

In light of this, I thought I would take a look at a few that have been released over the last few weeks that remain very relevant today.

Three buy ratings that you might want to pay attention to are listed below:

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

According to a note out of Morgans, its analysts have retained their add rating and lifted their price target on this banking giant’s shares to $26.00. Morgans notes that APRA will remove dividend restrictions on the banks from 2021 and expects this to result in ANZ lifting its dividend payout ratio to upwards of 70% in the coming years. As a result, the broker is forecasting a $1.27 per share dividend in FY 2021 and a $1.50 per share dividend in FY 2022. Which, based on the latest ANZ share price of $23.07, will mean dividend yields of 5.5% and 6.5%, respectively, over the next two years. 

BHP Group Ltd (ASX: BHP)

A note out of Ord Minnett reveals that its analysts have retained their buy rating and $50.00 price target on this mining giant’s shares. According to the note, the broker has lifted its forecasts for a number of commodities. It feels this bodes well for BHP in 2021 and has increased its estimates accordingly. Ord Minnett is now forecasting a fully franked ~$2.39 dividend in FY 2021. Based on the current BHP share price of $43.14, this represents a forward 5.5% dividend yield.

Zip Co Ltd (ASX: Z1P)

Analysts at Morgans have retained their add rating but reduced their price target on this buy now pay later provider’s shares slightly to $8.89. According to the note, the broker reduced its price target to reflect the dilution caused by Zip’s recent $150 million equity raising. Nevertheless, Morgans remains positive on the company’s prospects and notes that the funds will be used partly to support its growth in the key US market. It appears happy with this, particularly given management’s update which revealed that Zip’s US business more than tripled its transaction value in the country during November. The Zip share price is trading at $5.37 on Thursday.

More reading

• The BHP (ASX:BHP) share price has smashed the market in 2020
• Here are 6 of the top performing ASX fintech shares of 2020
• ASX 200 down 0.8%: Big four banks and tech shares drag the market lower
• Will ASX iron ore shares continue running in 2021? 
• 5 things to watch on the ASX 200 on Wednesday

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

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While most ASX companies already have products sold in the market and have built sales traction, there are also companies that are still preparing for market launch.

Here I’ve listed down three ASX small cap companies that are preparing to launch their products to the market in 2021.

Creso Pharma Ltd (ASX: CPH)

Cannabis producer Creso could gain from major changes in the global cannabis industry, following landmark decisions to decriminalise the drug.

Earlier this month, the United Nations announced a landmark decision to reclassify cannabis as a less dangerous drug.

That decision will see the UN Commission on Narcotic Drugs withdraw cannabis from Schedule IV classification. Schedule IV substances are considered the most dangerous and addictive drugs.

A week later, the United States House of Representatives passed a historic bill to end a federal ban on marijuana, which will effectively clear the way to erase non-violent federal marijuana convictions. 

On 15 December, Australia’s Therapeutic Goods Administration (TGA) announced its final decision to allow low-dose cannabidiol (CBD) containing products, up to a maximum of 150 mg/day, for use in adults, to be supplied over-the-counter by a pharmacist, without a prescription. 

Creso has said that the company is well positioned to take advantage of all these major changes in 2021 and beyond.

The Cresco share price is up by 38% for the year, but it’s risen by an incredible 260% in one month after the rulings were announced.

Rhythm Biosciences Ltd (ASX: RHY)

Medical technology company Rhythm Biosciences has had a fantastic 2020, with its share price returning over 600% for the year.

Driving the share price move is its one and only product ColoSTAT, which is the first proposed product ever intended as a test for the early detection of colorectal cancer.

According to the company’s recent presentation, the colorectal cancer screening market for the 50 – 74 year old population is worth roughly $38 billion. 

The company has been making progress in its preparation to bring ColoSTAT to the market. 

In early December, Rhythm Biosciences revealed that it has appointed France-based Biotem as the global manufacturer of its ColoSTAT test-kit. It was then granted a United States patent for ColoSTAT just two weeks ago.

Rhythm Biosciences said that small-scale manufacturing of ColoSTAT prototype test-kits has commenced.

These initial batches of test-kits will then undergo quality assurance and ongoing product verification.

They will then be used for testing on cancerous and healthy blood samples, forming Study 6, which is on track for completion by the third-quarter of FY21.

The year 2021 could indeed be an interesting one for Rhythm Biosciences.

Weebit Nano Ltd (ASX: WBT)

Weebit Nano develops next generation computer memory technology. 

The Weebit Nano share price has been on fire in 2020, returning over 500% for the investor, amid optimism around the company’s potential commercialisation of its memory technology in 2021.

The company has secured a few patents related to its technology, with the latest one being for its Silicon Oxide (SiOx) ReRAM product. 

To prepare for market launch of ReRAM, Weebit Nano has raised $15 million of capital in recent months. The money will be used to strengthen its sales team and increase marketing activities ahead of the product launch in mid-2021.

Weebit claims that its ReRAM product is cheaper, faster, and more energy efficient than the existing Flash technology. The company touts ReRam as an emerging memory technology that combines the advantages of both RAM and Flash, and believes its commercial usage will increase dramatically over the next few years.

It will be interesting to see how the market will react to the product, as that will determine how the Weebit Nano share price will perform in 2021.

More reading

• Why the Rhythm Biosciences (ASX:RHY) share price jumped over 600% this year
• Why the Weebit Nano (ASX:WBT) share price surged 12% today
• Why the Creso Pharma (ASX:CPH) share price is jumping 9% higher
• The Rhythm (ASX:RHY) share price is surging 5% higher today. Here’s why.
• Creso Pharma (ASX:CPH) share price lower despite supply agreement news

Motley Fool contributor Eddy Sunarto 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 Here are 3 ASX small cap shares with exciting product launches in 2021 appeared first on The Motley Fool Australia.

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It has been a bit of a mixed year for the CSL Limited (ASX: CSL) share price in 2020.

Although the biotherapeutics giant’s shares are on the cusp of recording a gain of almost 5% for the year, it could have been so much more.

Prior to the pandemic, the CSL share price was up almost 25% year to date. But since then, the company’s shares have gradually given back the majority of these gains.

What happened in 2020?

CSL has actually had a very positive year all things considered.

In FY 2020, the company delivered a strong result and looks set to build on this in the current financial year.

For example, for the 12 months ended 30 June 2020, CSL delivered a 7.2% increase in reported sales revenue to US$8,797 million. This was driven by solid growth from both its CSL Behring and Seqirus vaccines businesses during the year.

CSL Behring delivered an 8% increase in constant current sales to US$7,661 million. The key driver of this was demand for its immunoglobulins, which recorded a 22% lift in sales to US$4,014 million.

Whereas Seqirus sales increased 11% in constant currency terms to US$1,297 million. This was driven by a 21% lift in seasonal influenza vaccine sales during the 12 months.

And thanks to margin improvements, CSL’s earnings grew at an even quicker rate. The company’s net profit after tax came in at US$2,103 million. This was up 17% in constant currency terms and 9.6% on a reported basis.

What about FY 2021?

Despite facing headwinds from the COVID-19 pandemic, CSL is forecasting further growth in FY 2021.

It is guiding to a net profit after tax of approximately US$2.170 billion to US$2.265 billion in constant currency. This implies year on year growth of 3% to 8%.

Why is the CSL share price underperforming?

There have been a couple of things weighing on the company’s shares this year.

The first is the COVID-19 pandemic and its impact on plasma collections. Plasma is a key ingredient in its immunoglobulins products, which, as you can see above, contribute just under half of the company’s overall sales.

Collections have been challenging because of lockdowns and social distancing initiatives, which has led to higher prices being paid for donations. This will have an impact on the margins of these products in the future.

Also weighing on its shares was recent news that it has pulled the plug on a potential COVID-19 vaccine that was undertaking clinical trials.

While the vaccine is believed to have been highly successful at fighting COVID-19, the molecular clamp component of the vaccine was triggering false positives for HIV.  

Following advice from experts, CSL worked through the implications that this issue presents to rolling out the vaccine into broad populations. It generally agreed that significant changes would need to be made to well-established HIV testing procedures.

These changes were ultimately deemed too great, leading to CSL and the Australian Government agreeing the vaccine development will not proceed to Phase 2/3 trials.

Can the CSL share price go higher in 2021?

If analysts at UBS are to be believed, there could be strong gains ahead for the CSL share price in 2021.

The broker is positive on the company and has a buy rating and $346.00 price target on its shares. This price target implies potential upside of ~20% over the next 12 months.

More reading

• 5 things to watch on the ASX 200 on Thursday
• 2 of the best ASX 50 shares to buy today
• Why the CSL (ASX:CSL) share price will be on watch today
• 2 ASX healthcare shares to buy next week
• 3 unstoppable ASX shares to buy

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has 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 What happened to the CSL (ASX:CSL) share price in 2020? appeared first on The Motley Fool Australia.

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One of the best performers on the All Ordinaries index in 2020 has been the Redbubble Ltd (ASX: RBL) share price.

The ecommerce company’s shares have recorded in an incredible gain of 415% since the start of the year.

Why is the Redbubble share price up over 400% in 2020?

Investors have been fighting to get hold of the company’s shares this year after the pandemic accelerated the shift to online shopping.

This led to Redbubble delivering a very strong result in FY 2020. For the 12 months ended 30 June 2020, the company reported a 43% increase in full year revenue to $368 million and a 141% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to $15.3 million.

Pleasingly, despite bricks and mortar stores opening back up since then, this hasn’t slowed the company’s growth.

For example, during the first quarter of FY 2021, Redbubble reported revenue of $147.5 million, up 116% (122% on a constant currency basis) on the prior corresponding period.

Things were even better for its gross profit, which increased 149% (157% in constant currency) to $64.5 million for the quarter.

Positively, while fashionable COVID-related face masks had been a key driver of growth in FY 2020, they are playing less of a role in its growth this financial year.

In a note from October, Goldman Sachs commented: “Marketplace revenue was in line with GSe but strong gross margins were the positive surprise. RBL delivered 116% marketplace revenue growth in 1Q21 despite face mask revenue reducing as a percentage of total revenue through the quarter (27% in July to 14% in September).”

What else has helped drive the Redbubble share price higher?

Another key driver of its stellar share price gain was the aforementioned note out of Goldman Sachs.

The broker has been particularly bullish on Redbubble this year and currently has a buy rating and $6.25 price target on its shares.

It believes Redbubble is capable of growing its revenue and earnings at a strong rate over the coming years.

Goldman explained: “We remain Buy rated on RBL driven by: (1) expansion of its TAM through continued broadening of its product categories, (2) potential growth from increasing repeat usage on its platform (still relatively low at <1.5x p.a.), (3) further operating leverage as we expect RBL to manage cost growth well below revenue growth over our forecast period (we forecast opex to grow at a 7% CAGR FY20-FY23E vs. a marketplace revenue CAGR of 18% driving EBIT margins from 1.2% in FY20 to 11.3% in FY23E and an EBIT CAGR of 151%).”

If Goldman Sachs is on the money with its recommendation, the Redbubble share price could be destined to beat the market again in 2021.

More reading

• 2 ASX shares to buy that are growing rapidly
• The most crazy ASX chart of 2020
• 4 leading ASX growth shares to buy for 2021
• These are the 7 best ASX retail shares in 2020
• 3 exciting ASX tech shares to buy

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.

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2020 was not a great year as far as the Woodside Petroleum Limited (ASX: WPL) share price is concerned.

Shares in the Aussie oil and gas giant are down 33.1% ahead of the final trading day of the year. That’s despite the Woodside share price climbing 31.6% higher since the end of October to close out 2020 in strong fashion.

So, what’s been causing the share price slump for oil and gas giants like Woodside this year?

Why the Woodside share price has cratered in 2020

The coronavirus pandemic has dominated headlines and market movements all year. Oil and gas stocks slumped in the March bear market as COVID-19 shutdowns crimped demand for base commodities.

The Woodside share price fell more than 50 percent in the space of one month. That was largely thanks to global travel and manufacturing coming to a grinding halt. 

Crude oil prices are sensitive to supply and demand factors around the world. Governments around the world quickly shut borders and tightened trade to help minimise the economic and health impacts of COVID-19.

That sent oil prices plummeting lower as supply remained largely unaffected but demand slumped. The Woodside share price fell to a 52-week low of $14.93 having traded at $36.28 in mid-January.

Woodside was far from alone, with other ASX oil and gas shares also falling. The Beach Energy Ltd (ASX: BPT) share price is down 27.6% to $1.82 while Santos Ltd (ASX: STO) shares are down 22.8% to $6.35.

Despite big falls in 2020, all three companies remain in the S&P/ASX 200 Index (ASX: XJO) at year-end. Woodside still boasts a $22.2 billion market capitalisation with Santos ($13.2 billion) and Beach ($4.2 billi0n) not far behind.

Foolish takeaway

2020 was a tough year for investors in ASX oil and gas shares. The Woodside share price cratered in March before recovering strongly in November and December.

All eyes will be on these large producers as investors look ahead to 2021.

More reading

• 5 things to watch on the ASX 200 on Thursday
• ASX 200 drops lower
• Could inflation be coming in 2021?
• Can the ugliest ASX 200 dogs of 2020 turnaround in the New Year?
• Is the surging Bitcoin an existential threat to ASX gold miners?

Motley Fool contributor Ken Hall 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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The Betmakers Technology Group Ltd (ASX: BET) share price will be on watch this morning, following an update on the launch of the company’s share purchase plan (SPP).

Yesterday, the BetMakers share price finished the day at 70 cents per share.

Share purchase plan in detail

The Betmakers share price could be on the move today, after the company provided further details of its non-underwritten $10 million SPP. This comes after the company previously announced a $50 million placement to institutional and sophisticated investors to acquire UK-based Sportech PLC.

According to the announcement, the company is offering eligible shareholders the option to subscribe for up to $30,000 worth of new shares. The record date for eligibility expired at 7pm AEDT last night.

Under the SPP, all eligible shareholders will be able to participate in the offer, free of any associated brokerage or transaction costs.

BetMakers has determined that the offer price will be set at 60 cents per share. This represents a 6.6% discount on the volume weight average price over the last five trading days before the announcement on 1 December. It’s worth noting that the proposed offer price is also a 14% reduction on yesterday’s closing price of 70 cents.

The opening date for the SPP is 5 Janaury and it will run until close of business on 15 January. All shares acquired through the placement will rank equally with existing ordinary BetMakers shares.

The new allotment of shares will be added on 27 January.

How has the BetMakers share price performed in 2020?

The BetMakers share price has been on fire over the past 12 months, jumping close to 400%. In March, the company’s shares fell to an all-time low of 8.1 cents, before surging this month to a record-breaking 79.5 cents.

Based on current share price levels, the company commands a market capitalisation of around $421 million.

More reading

• Why the BetMakers (ASX:BET) share price is surging higher
• Why the Betmakers (ASX:BET) share price is seesawing today
• Why the BetMakers (ASX:BET) share price is surging 12% higher today
• Why BetMakers, Medical Development International, Qantas, & Zip are dropping lower
• Why the BetMakers (ASX:BET) share price is crashing 15% lower today

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Betmakers Technology Group Ltd. 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 Here’s why the Betmakers (ASX:BET) share price is on watch today appeared first on The Motley Fool Australia.

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There are some ASX tech shares that could be worth watching in 2021.

The next 12 months could be another interesting period with COVID-19 still impacting the world.

Here are those ASX tech share ideas:

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an electronic donation business. This year has seen accelerated growth during COVID-19 conditions of social distancing and restrictions. The main client base of Pushpay is large and medium US churches. Pushpay’s technology allows the churches to stay connected with the congregation, one of the tools it offers is a livestreaming service.

In the current financial year, Pushpay is looking to more than double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to a range of US$54 million to US$58 million.

The combined offering from Pushpay and Church Community Builder (called ChurchStaq) is proving popular with clients as it offers all of the relevant tools under a single product.

Over the long-term Pushpay is aiming to grow its annual revenue to US$1 billion, with an aim to significantly increase its market share.

Pushpay expects “significant operating leverage to accrue as operating revenue continues to increase, while growth in total operating expenses remains low.” The company reported in its 2021 interim result that its gross profit margin grew from 65% to 68% and the EBITDAF margin went up from 17% to 31%.

The ASX tech share is now looking to expand with smaller churches across the US.

Fund manager Ben Griffiths from Eley Griffiths wrote about Pushpay: “Over the last 12 months it has become clear Pushpay is at an inflection point for both Fund cashflow and earnings. Under the stewardship of CEO Bruce Gordon, Pushpay has transitioned from a founder-led investment phase into an optimize/monetization phase. What is more surprising is the very conservative nature of the accounts (a rarity in small cap tech, outside Iress Ltd (ASX: IRE). We believe the next few years for Pushpay will be rewarding and that COVID-19 will accelerate the already entrenched trend to digital giving/engagement from cash.”

At the current Pushpay share price it’s valued at 25x FY23’s estimated earnings.

EML Payments Ltd (ASX: EML)

This ASX tech share has a number of different payment services for clients to use. EML Payments has general purpose reloadable offerings such as gaming payouts with white label gaming cards, salary packaging cards, commission payouts and rewards programs. EML Payments also offers physical gift cards, shopping centre gift cards and digital gift cards. Finally, it offers virtual account numbers.

A couple of months ago EML Payments gave an update for the first quarter of FY21 which showed strong growth and improving trading conditions. Historically, the first quarter is the weakest quarter of the year.

In that first quarter, EML Payments said its gross debit volume (GDV) was $4.85 billion, which was up 51% compared to the prior corresponding period and 20% higher than the prior quarter, being the fourth quarter of FY20.

The growth in GDV helped EML generate revenue of $40.6 million, which represented growth of 75% compared to the prior corresponding period and up 20% compared to the fourth quarter of FY20.

In terms of profitability, EML generated $10 million of EBITDA in the FY21 first quarter, up 215% compared to the prior corresponding period and up 69% compared to the FY20 fourth quarter.

Gift and incentive volumes recovered significantly in the first quarter after the COVID-19 impacts, general purpose reloadable volumes grew significantly and virtual account numbers recovered to pre-COVID levels.

More reading

• The ASX tech shares to buy in 2021
• Here are 6 of the top performing ASX fintech shares of 2020
• Can these ASX IT shares carry their momentum into 2021?
• 3 of the best ASX shares to buy in January
• 2 rapidly growing ASX tech shares to buy

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 and recommends EML Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended EML Payments and PUSHPAY FPO NZX. 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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Cheap dividend stocks could offer more than just a high yield in 2021. In many cases, their financial positions and profit potential means that they could deliver a rising dividend in the coming years.

As such, now may be the right time to buy a selection of income shares with affordable dividends and improving financial prospects. They could provide a generous passive income in an era where other assets offer disappointing returns.

Selecting cheap dividend stocks with growth potential

Some cheap dividend stocks may face difficult futures at the present time. Risks such as coronavirus and political change could hold back their financial performances in the short run.

As such, it is important to assess their financial prospects before buying them. For example, companies with low debt levels and solid financial positions may find it easier to pay a rising dividend despite challenging operating conditions. Similarly, businesses that currently pay a modest proportion of their profit to shareholders as a dividend may have greater scope to raise their income payouts in 2021 and in the coming years.

Meanwhile, cheap dividend stocks with bright long-term futures may be among the most attractive means of generating a growing passive income. For example, companies that stand to benefit from the increasing digitisation of many industries, such as retail, could generate higher profitability that translates into a rising dividend.

Managing risk for a sustainable passive income

Of course, an uncertain economic outlook means that buying a selection of cheap dividend stocks is arguably more important than ever. Investors who rely on a small number of companies for their income may find that their financial prospects are negatively impacted even if a small number of them struggle in 2021.

Diversifying across not only different industries, but also various regions, could be a shrewd move. The coronavirus pandemic is affecting different parts of the world to differing extents. Therefore, it could be a sound move to spread investment across dividend stocks that operate in multiple geographies. Doing so may limit the negative impact of challenging economic circumstances in localised areas caused by lockdown measures.

A long-term view

While obtaining a growing passive income via cheap dividend stocks is an achievable goal in 2021, taking a long-term view is still a good idea. It may take some of today’s most attractive income shares a number of years to deliver on their potential. Weak investor sentiment that makes them attractive purchases today due to their low valuations may take time to reverse in sectors that are currently struggling to grow sales and profitability.

As such, by taking a long-term view, it is possible to fully benefit from a likely economic recovery. Over time, this could lead to a fast-paced growth in passive income that improves an investor’s financial situation.

More reading

• Why the A2 Milk (ASX:A2M) share price is down 18.5% in 2020
• The U.K. authorizes AstraZeneca’s coronavirus vaccine for emergency supply
• Why the Wesfarmers (ASX:WES) share price is up 24% in 2020
• The BHP (ASX:BHP) share price has smashed the market in 2020
• Rain or shine for these 3 ASX agricultural shares

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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