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Whether or not the cash rate goes lower again next month, only time will tell. But one thing I’m very confident of, is that it will be a long time until rates go higher again.

In light of this, I continue to believe that dividend shares are better options for income investors than traditional interest-bearing assets such as term deposits and savings accounts.

With that in mind, here are two ASX dividend shares I would buy for income:

Aventus Group (ASX: AVN)

I think Aventus would be a great option for income investors. It is the owner and operator large format retail parks across Australia. While retail property is a tough place to be, Aventus’ focus on every day needs has allowed it continue its growth during the pandemic. For example, in FY 2021 it delivered a 4.2% increase in funds from operations (FFO) to $100 million.

I’m expecting more of the same in FY 2021, especially given the tax cuts that have been promised with the Federal Budget. These cuts should be supportive of consumer spending. In light of this, I forecast a 13.5 cents per share distribution this year. Based on the current Aventus share price, this represents an attractive 5.6% yield.

Telstra Corporation Ltd (ASX: TLS)

I think this telco giant would be a great option for income investors due to its generous yield and improving outlook. The latter is thanks to its T22 strategy, the arrival of 5G internet, and the easing of the NBN headwind. Together, I believe a return to earnings and dividend growth could be on the cards in the coming years.

For now, following its annual general meeting update this week, I’m very confident that Telstra will maintain its fully franked 16 cents per share dividend for the foreseeable future. Based on the latest Telstra share price, this represents a 5.5% dividend yield.

More reading

• Why the Telstra (ASX:TLS) share price soared 4% today
• ASX 200 jumps more than 1%, big ASX banks rise
• ASX 200 up 0.9%: Telstra dividend update, Afterpay & Xero hit record highs
• Why Afterpay, HUB24, NEXTDC, & Telstra shares are storming higher
• Telstra (ASX:TLS) share price in focus after AGM dividend update

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 Australia has recommended AVENTUS RE UNIT. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why I would buy Telstra (ASX:TLS) and this ASX dividend share right now appeared first on Motley Fool Australia.

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On Tuesday the S&P/ASX 200 Index (ASX: XJO) was on form again and extended its impressive run. The benchmark index rose just over 1% to 6,195.7 points.

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

ASX 200 expected to drop lower.

The ASX 200 looks set to finally end its winning streak on Wednesday. According to the latest SPI futures, the ASX 200 is poised to open the day 55 points or 0.9% lower this morning. This follows a mixed night on Wall Street. In late trade the Dow Jones is down 0.5%, the S&P 500 is 0.6% lower, and the Nasdaq is edging slightly higher

Bank of Queensland results.

The Bank of Queensland Limited (ASX: BOQ) share price will be on watch today when it releases its full year results. Last month the regional bank warned that its result would include loan impairment expense of $175 million (pre‐tax). This is inclusive of $133 million of COVID‐19 related collective provision expenses. According to a note out of Goldman Sachs, it expects the bank to report a 34% decline in cash earnings to $210 million. It is also forecasting the payment of its deferred 10 cents per share interim dividend and a final 2 cents per share dividend.

BHP quarterly update.

The BHP Group Ltd (ASX: BHP) share price will also be on watch today when the mining giant releases its first quarter update. According to a note out of Goldman Sachs, it expects BHP to report Petroleum production of 26Mboe, Copper production of 365kt, and iron ore shipments of 71.5Mt. The latter will be a 7% quarter on quarter decline.

Gold price sinks lower.

Gold miners such as Northern Star Resources Ltd (ASX: NST) and Saracen Mineral Holdings Limited (ASX: SAR) could come under pressure today after the gold price sank lower. According to CNBC, the spot gold price is down 1.6% to US$1,897.40 an ounce. The precious metal came under pressure after a strong rally by the U.S. dollar.

Oil prices rise.

It could be a good day for energy shares such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) after oil prices pushed higher. According to Bloomberg, the WTI crude oil price is up 2.2% to US$40.29 a barrel and the Brent crude oil price is up 1.9% to US$42.52 a barrel. Oil prices jumped after the release of strong China trade data.

More reading

• Short-sellers are stepping up their attack on these ASX stocks
• ASX 200 jumps more than 1%, big ASX banks rise
• Top brokers are urging you to buy these ASX stocks today
• 3 ASX 200 growth shares to buy today
• The Unibail (ASX:URW) share price is climbing today. Here’s why.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Apple Inc.‘s (NASDAQ: AAPL) stock price is up nearly 60% this year, and it has doubled in the last 12 months. At $2.16 trillion, the company’s market capitalisation is the largest on the U.S. exchanges; and until a recent pullback, shares were repeatedly hitting all-time highs. 

Those data points might scare some investors away. After all, the company was already huge. Now, its market cap is roughly $400 billion more than the next two largest companies, fellow tech giants Amazon.com, Inc. (NASDAQ: AMZN) and Microsoft Corporation (NASDAQ: MSFT), which are both around $1.7 trillion.

Is Apple’s big run a result of overly exuberant investors who have sent it soaring too high? Or can this tech behemoth keep getting bigger and continue to produce market-smashing returns?

The valuation has gone up — a lot

Here’s a look at some of Apple’s key valuation metrics and how those compare to a year ago:

Date	P/E Ratio	P/S Ratio	P/FCF Ratio
October 2020	35.7	7.6	29.0
October 2019	19.2	4.1	17.9

Data source: YCharts. Data through market close Oct. 9. P/E = price-to-earnings; P/S = price-to-sales; P/FCF = price-to-free-cash-flow. 

Those numbers illustrate that investors have gotten much more optimistic about Apple in the last year. A year ago, a dollar of sales was valued at $4.10 in the stock price. Today, that dollar is valued at $7.60. The same thing has happened with the company’s earnings and free cash flow. Put simply, Apple’s stock price has gone up much faster than its earnings, sales, and free cash flow.

How do these metrics compare to its largest tech company peers? Here’s a look.

Company	P/E Ratio	P/S Ratio	P/FCF Ratio
Amazon.com, Inc.	126.5	5.2	61.8
Microsoft Corporation	37.5	11.6	36.7
Apple Inc.	35.7	7.6	29.0

Data source: YCharts. One-year change in valuation through the close of trading Oct. 9. 

While Apple’s valuation has risen quickly, it remains lower than those of its peers. One reason is Amazon and Microsoft have higher growth rates. Amazon is forecast to grow adjusted earnings per share by 38% this year, and Microsoft just completed its fiscal year with 21% year-over-year growth. By comparison, Apple is expected to grow 9% in fiscal year 2020, which ended in September.

Reasons for investor optimism

In recent years, Apple’s iPhone sales growth stalled, and the device accounted for about two-thirds of the company’s total revenue. If iPhone sales weren’t growing, investors wondered, how would Apple grow?

That skepticism was reflected in the company’s relatively low valuation. In May 2016, when legendary investor Warren Buffett started scooping up Apple shares for Berkshire Hathaway Inc. (NYSE: BRK.A) (NYSE: BRK.B), Apple’s P/E ratio was only about 11. It has since tripled, and a lot of that expansion has come in the last year. I believe there are two main reasons investors have changed their view of the company.

First, there’s optimism that iPhone sales could be in for a boost. On Oct. 13, Apple is expected to announce that its iPhones released this fall will support 5G connectivity, a technology that could significantly improve download speeds. That update could prompt many iPhone users — and there are about a billion of them — to upgrade to a new phone.

Second, Apple has been diversifying its revenue streams. In early 2017, CEO Tim Cook said he wanted the company to double its services revenue by 2020. That has happened, and in the quarter ended in June, the company set a record for services revenue ($13.2 billion). Apple has an installed user base of more than 1.5 billion devices, and if it can get those customers to increase their use of services like Apple Music and the App Store, that will fuel growth.

The company also has grown its wearables, home, and accessories segment, which includes products like AirPods, Apple Watch, and Beats. When Apple reports full-year earnings on Oct. 29, it will have more than doubled the segment’s revenue in just three years.

Those two segments are having a much more meaningful impact on revenue. In 2016, they accounted for just 16% of Apple’s revenues. Through the first nine months of fiscal year 2020, they produced $62 billion, accounting for 30% of total revenue. Even with that growth, the iPhone still accounts for more than half the company’s revenue.

Is Apple overvalued?

Valuation is in the eye of the beholder. That means the question of whether Apple is overvalued can only be answered by each investor. After all, the market is built on people taking opposite sides of trades: buyers and sellers.

For investors who emphasize traditional valuation metrics, Apple probably looks scary. It hasn’t had valuations this high in more than 10 years.

For investors who look at Apple as one of the most innovative companies of all time, the perspective could be different. The company’s innovation has helped build a massive and loyal customer base, which is why Forbes magazine ranks Apple as the world’s most valuable brand year after year.

With that track record of innovation and customer loyalty, I don’t think Apple is overvalued. Historically, there has never been a bad time to buy Apple stock, as long as you held those shares. As a $2.16 trillion company, Apple’s largest growth days are behind it, but I think it can continue to provide long-term investors with market-beating returns for years.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Buy alert: Microsoft (NASDAQ:MSFT) stock is headed higher
• Why the Buddy (ASX:BUD) share price is up today
• Where will Facebook (NASDAQ:FB) be in 5 years?
• Where will Amazon (NASDAQ:AMZN) be in 10 years?
• Amazon (NASDAQ:AMZN) is going all out to dominate this bustling e-commerce market

Mike Strain owns shares of Amazon, Apple, Berkshire Hathaway (B shares), and Microsoft. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Apple, Berkshire Hathaway (B shares), and Microsoft and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, long January 2022 $1920 calls on Amazon, and short December 2020 $210 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Amazon, Apple, and Berkshire Hathaway (B shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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In my view, ASX consumer staple shares represent a solid investment during times of economic uncertainty and market volatility. Consumer staples companies sell products that people use everyday. These include things like durables, food, beverages, tobacco, household goods and personal products. 

In this article, I take a closer look at three consumer staple companies with solid track records and trusted brands.

Woolworths Group Ltd (ASX: WOW)

Woolworths operates retail stores throughout Australia and New Zealand. Currently, Woolworths supermarkets and Metro food stores number over 1,000 across the country. In New Zealand, the group operates over 180 supermarket stores under the Countdown brand. The other major chain that Woolworths owns and operates is the Dan Murphy’s brand. This, combined with BWS, Cellar Masters and Langtons, numbers above 1,600 stores as well.

Woolworths provides consumer staples and its share price has held up well during the recent coronavirus crisis.

Let’s take a closer look…

Woolworths share price

The Woolworths share price hit an all-time high on 20 February 2020, reaching $43.96. The coronavirus pandemic initially hit the company hard, causing its share price to fall to a low of $32.12 by 13 March, less than one month later. Following this, Woolworths shares have had a steady recovery, moving from $32.12 up to $38.50 at today’s price.

I think the fact that the Woolworths share price has held up in the current climate is, in part, due to its consumer staple product base. No matter what’s happening with the economy, people still need essential products and Woolworths can provide almost all of them. Even with the pandemic still in play, overall the Woolworths share price is up 6.5% in 2020.

Dividends

Woolworths has a long history of paying solid dividends, notwithstanding the fact these have fallen lower recently. If we take a look at ten years ago, Woolworths’ average dividend yield was over 4%. Today, the company’s dividends offer an average yield of around 2.5%. Despite this, I believe Woolworths is such a stable investment that its dividends only add to its appeal for investors.

Blackmores Limited (ASX: BKL)

Blackmores develops, sells and markets natural health products for both humans and animals. It operates in Australia, New Zealand, Asia and various other locations internationally. Blackmores’ product suite includes vitamins, minerals, herbs and other supplements. The company’s range of products is vast and assists with a variety of health-related concerns such as arthritis, muscle strength, brain health, cold and flu, immunity, digestive health, eye health and more. With such a diverse array of products, I believe Blackmores can appeal to customers across a broad cross section of markets. To me, this makes the company a clear member of the ASX consumer staple shares cohort. It provides products that people rely on, regardless of the economic climate.

Blackmores share price

Like many companies on the ASX, the pandemic hit the Blackmores share price hard in the early months of this year. Between 6 February and 13 March, a period of a little more than 30 days, the Blackmores share price fell from $95.68 down to $59.84. However, as with other consumer staple companies, the Blackmores share price quickly recovered up to more than $80 by April. Unfortunately, in the second half of the year, the company’s shares have consistently fallen, all the way back down to $66.18 at the time of writing.

Considering how long this brand has been around and what a trusted name it has in the market, I’m inclined to think the Blackmores share price is a deal at current prices and can only get better as the economy improves. Maintaining good health is something that most people regard as a priority and I feel this is only likely to become more widespread into the future. So whilst Blackmores may not provide critical health services like hospitals, I still believe its offering can be regarded as a consumer staple in most climates. Blackmores does not currently offer a dividend.

Inghams Group Ltd (ASX: ING)

Inghams may seem like a specialist provider, however it is still considered a consumer staple in my books. This company produces and sells chicken and turkey products in Australia and New Zealand. Additionally, it has a business within the stock feed niche, providing food to poultry, swine, dairy and equine producers. Having been around for more than 100 years, Inghams was founded in 1918 and is, I believe, a trusted and well-known brand in the Australian and New Zealand marketplaces.

Inghams share price

The Inghams share price also suffered during the initial stages of the coronavirus pandemic, falling from $3.77 down to $3.03 over a period of around one month. However, the share price has remained relatively stable since then, fluctuating between approximately $3.00 and $3.50. Closing today’s trade at $3.10, I consider Inghams to be a strong brand and a stable stock to invest in.

Dividends

One thing to note about Inghams is that it pays a comparatively high dividend, with a yield of 4.58%. Although Inghams has only been paying dividends since 2017, it has maintained a fairly reliable yield over time. Its first dividend, issued in 2017, represented a 3.3% yield. Since then, Inghams dividends have fluctuated between 3% and 5.8%.

ASX consumer staple shares summary

Consumer staple shares might not be considered the most exciting stocks on the market. However, they are frequently associated with the older, established and more trusted brands in the market. The great thing about consumer staples is that they continue to be needed, no matter what state the economy is in. For me, this makes them a far more attractive option for longer-term investments. 

More reading

• Revealed: ASX Christmas winners and losers
• Why Woolworths is too expensive right now
• Ignore EBITDA and P/E ratios? This fundie does
• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• These are the 10 most shorted shares on the ASX

Motley Fool contributor glennleese has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia owns shares of Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why I like ASX consumer staples shares in the current climate appeared first on Motley Fool Australia.

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If you’re wanting to invest in the small side of the Australian share market, I think the three small caps listed below could be worth a closer look.

While there is certainly still a lot of work to be done, they all appear to be carving out bright futures for themselves.

Here’s why I think they should be on your watchlist right now:

Audinate Group Limited (ASX: AD8)

Audinate is a digital audio-visual networking technologies provider. It is best known for its innovative Dante audio over IP networking solution which is used widely across the professional live sound, commercial installation, and recording industries globally. This product is the clear market leader with a significant advantage over the competition. And while the pandemic has hit its sales greatly this year, I’m confident this is just a short term headwind and expect demand to increase materially once trading conditions improve.

Serko Ltd (ASX: SKO)

Another small cap share that has been hit by the pandemic is Serko. It is the online travel booking and expense management provider behind the Zeno Travel and Zeno Expense platforms. Zeno Travel provides AI-powered end-to-end travel itineraries, cost control and travel policy compliance to corporate customers. Zeno Expense allows its users to automate and streamline the expense administration function, identify out-of-policy expense claims, and prevent fraud. As with Audinate, I believe demand will bounce back strongly when the pandemic passes and travel markets return to normal.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is a healthcare technology company that uses artificial intelligence to assist with the early detection of breast cancer. It achieves this by analysing mammograms and associated patient data. Users can then use this software to provide clinical decision support and practice management tools in a cost-effective way. Volpara is currently generating NZ$19.9 million in annual recurring revenues (ARR), but estimates that it has a US$750 million ARR opportunity in breast cancer screening.

More reading

• Leading brokers name 3 ASX shares to buy today
• Volpara (ASX:VHT) share price jumps 5% up after business update
• Top ASX growth shares to buy in October 2020
• 3 small cap ASX healthcare shares to watch closely in the 2020s
• Why Afterpay, Genetic Signatures, Qube, & Serko shares are charging higher

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 AUDINATEGL FPO, Serko Ltd, and VOLPARA FPO NZ. The Motley Fool Australia has recommended AUDINATEGL FPO, Serko Ltd, and VOLPARA FPO NZ. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Microsoft Corporation‘s (NASDAQ: MSFT) stock has generated a total return of more than 400% over the past five years, thanks to CEO Satya Nadella’s “mobile first, cloud first” strategy. Under Nadella, who took the helm in 2014, Microsoft expanded its cloud services, integrated them into Windows 10, launched new mobile apps on iOS and Android, introduced new Surface devices, and grew its Xbox gaming ecosystem.

Those efforts turned Microsoft, which had often been dismissed as a mature tech stock, into an exciting growth stock again. It also rallied more than 50% over the past 12 months as it brushed off the trade war, COVID-19, and other macro headwinds. Investors might be reluctant to buy Microsoft’s stock at these levels, but I believe it could still head higher through to the end of the year, for four simple reasons.

Microsoft’s “commercial cloud” revenue rose 36% to over $50 billion, more than a third of its top line, in fiscal 2020 (which ended on June 30). That business includes Office 365, the cloud-based versions of its productivity software; its CRM (customer relationship management) platform Dynamics; and its cloud infrastructure platform Azure.

Azure, which grew its revenue year-over-year at an average rate of nearly 60% over the past four quarters, is the segment’s core growth engine. Microsoft doesn’t disclose Azure’s exact revenue, but Canalys estimates it controlled 20% of the cloud infrastructure market in the second quarter of 2020 — putting it in second place after Amazon.com, Inc (NASDAQ: AMZN) Web Services’ (AWS) 31% share.

Azure could still have plenty of room to run, for three reasons. First, companies that compete against Amazon, particularly retailers, will likely use Azure instead of feeding Amazon’s most profitable business. Second, Microsoft recently beat Amazon to secure the Pentagon’s lucrative $10 billion JEDI (Joint Enterprise Defense Infrastructure) contract for upgrading its cloud infrastructure — which could open the door for more government contracts.

Lastly, the broader cloud infrastructure market will keep expanding as people use more cloud-based services, apps, and streaming services. Grand View Research estimates the global cloud computing market could still grow at a compound annual growth rate of 14.9% between 2020 and 2027.

2. The Xbox Series S and X are about to launch

Microsoft will launch its next-gen Xbox gaming consoles, the Series X and Series S, next month. The Series X will cost $500, while the cheaper, less powerful, and all-digital Series S will cost $300.

Sony Corp‘s (NYSE: SNE) PS5 will cost the same as the Series X, but its all-digital PS5 Digital Edition (which sports the same hardware as its bigger brother) will cost $400. Microsoft’s Series S will be less powerful than the PS5 Digital Edition, but the $100 difference could win over more casual gamers.

Microsoft also recently purchased ZeniMax, which owns iconic franchises like Doom, Fallout, Wolfenstein, and The Elder Scrolls, for $7.5 billion to strengthen its game publishing division and counter Sony’s exclusive games. Microsoft is already bundling ZeniMax’s games with its Xbox Game Pass subscription service (which offers unlimited downloads from a library of over 100 games), Xbox Live, and Project xCloud with its new “Xbox Game Pass Ultimate” subscription plan for $15 a month.

If those aggressive efforts bear fruit, Microsoft’s gaming business, which grew its revenue 2% to $11.6 billion and accounted for 8% of its top line last year, could become a major growth engine again in fiscal 2021.

3. The PC market is still strong

Worldwide shipments of PCs rose 13% year-over-year in the third quarter and marked the industry’s strongest growth in a decade, according to Canalys. That expansion was largely attributed to a shift to remote work and online learning throughout the COVID-19 crisis.

Rising PC sales will bolster Microsoft’s Windows business, which generated 16% of its sales last year, as well as its Office and other products business, which generated 25% of its sales. The growth of those two core businesses, along with the strength of its cloud and gaming segments, should offset the impact of the pandemic on its enterprise-oriented businesses.

4. Its premium valuation is justified

Wall Street expects Microsoft’s revenue and earnings to rise by 10% and 12%, respectively, this year. Those are stable growth rates, but some investors might flinch at the stock’s forward price-to-earnings (P/E) ratio of 33. That valuation isn’t cheap, and its forward dividend yield of 1% doesn’t offer much downside protection.

Nonetheless, I believe Microsoft’s resilience throughout the pandemic, the ongoing growth of its commercial cloud business, and its upcoming gaming tailwinds all justify that slight premium. In short, investors who accumulate the stock today could be sitting on decent gains next year.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• ASX investors were buying Tesla (NASDAQ:TSLA) and Apple (NASDAQ:AAPL) shares last week
• ASX investors were buying Tesla (NASDAQ:TSLA) and Snowflake (NYSE:SNOW) shares last week
• Microsoft (NASDAQ:MSFT) boosts dividend by 10%
• Brokers upgraded JB Hi-Fi (ASX:JBH) share price and this other ASX stock to “buy” today
• Better buy: Slack Technologies vs Microsoft

Leo Sun owns shares of Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Buy alert: Microsoft (NASDAQ:MSFT) stock is headed higher appeared first on Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Buddy Technologies Ltd (ASX: BUD) share price is trading higher after the company announced it was expecting record sales from Amazon Prime Day, 2020. The Buddy share price is currently trading 3.03% higher to a price of 68 cents.

Buddy’s consumer business trades under the LIFX brand and is a provider of smart lighting solutions. The company has a wide portfolio of Wi-Fi enabled lights that are used in nearly 1 million homes and sold in more than 100 countries.

What happened today?

After a brief trading halt this morning, the Buddy share price soared as it announced that US giant Amazon.com, Inc. (NASDAQ: AMZN) had purchased large quantities of its LIFX white smart lights for its Amazon Prime Day. The massive two-day global shopping event is happening in Australia today and tomorrow.

Amazon is launching Prime Day bundle deals that will offer the light free with the purchase of select Alexa devices. This includes the Amazon Echo Dot which has historically been one of the highest selling products across all of Prime Day. The bundle is expected to boost Buddy light sales significantly. The 2019 Prime Day event saw more than 175 million items sold, eclipsing the previous Black Friday and Cyber Monday sales combined.

In a later announcement today, Buddy advised that Amazon had ordered approximately 1 million LIFX smart lights to support its Prime Day and holiday sales events.

What now for the Buddy share price

Bundling of Buddy LIFX lights with Amazon products offers a huge market opportunity for the light company. Its product will now be marketed to millions of Prime members worldwide. Furthermore, the company has confidence that it will see record sales over the duration of this sales event. The Buddy share price is currently sitting at 68 cents having risen 73% so far this year.

More reading

• Where will Facebook (NASDAQ:FB) be in 5 years?
• Where will Amazon (NASDAQ:AMZN) be in 10 years?
• Amazon (NASDAQ:AMZN) is going all out to dominate this bustling e-commerce market
• This is my favourite ASX share right now
• ASX investors were buying Tesla (NASDAQ:TSLA) and Apple (NASDAQ:AAPL) shares last week

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daniel Ewing 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 Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I think that there are some little-known ASX dividend shares that could be worth buying for income.

Australia’s official interest rate is now just 0.25%. That makes it really hard to generate any meaningful income from a bank account. It’s hard for bank interest to even keep up with inflation at the moment.

I believe that these two ASX dividend shares could be good ways to generate more dividend income:

Pacific Current Group Ltd (ASX: PAC)

Pacific is a boutique investment business. It partners with global asset managers to help them grow. Pacific takes an equity stake and it also brings its expertise to help them grow funds under management (FUM).

One of the most important things to remember is that a dividend is going to be quite closely linked to the earnings. If the earnings are growing at a fast pace then the dividend can rise rapidly too.

In FY20, Pacific Current delivered underlying net profit after tax (NPAT) growth of 21%, rising to $25 million and underlying earnings per share (EPS) grew by 18% to $0.44. The FY20 annual dividend was grown by 40% to $0.35 per share. That represents a sustainable underlying dividend payout ratio of around 80%.

Despite COVID-19 impacts, FY20 was a strong year of growth for the ASX dividend share. Excluding stakes sold and acquired during the year, funds under management (FUM) grew by 52% to $93.3 billion. Pacific thinks that asset gathering efforts could improve in FY21 with new commitments.

Using the current Pacific share price and FY20 dividend, it has a grossed-up dividend yield of 8%. That’s a good starting yield for an ASX dividend share.

However, looking ahead, the Pacific share price is trading at just 9x FY23’s estimated earnings.

Naos Emerging Opportunities Company Ltd (ASX: NCC)

This is a small listed investment company (LIC) which targets small ASX shares. Indeed, it looks for businesses with market capitalisations under $250 million.

Naos operates a strategy of only owning shares that it has high conviction in. That translates to owning around 10 names in its portfolio.

It owns some promising ASX shares in its portfolio. In its latest update for September 2020, it revealed that three examples of its core portfolio are: BTC Health Ltd (ASX: BTC), Saunders International Ltd (ASX: SND) and Experience Co Ltd (ASX: EXP).

Naos tries to invest for the long-term and it sticks to the industrial sector. The LIC ignores the index, so over the shorter-term its performance can be quite different to the index. Since inception in February 2013, its investment portfolio (after operating expenses) has outperformed the S&P/ASX Small Ordinaries Accumulation Index by an average of 5.45% per annum.

The benefit of a LIC structure is that it can generate investment returns from growth shares and then pay out a reliable and consistent dividend from those returns.

Naos Emerging Opportunities Company has increased or maintained its dividend every year since FY13. That’s a good record considering its dividend yield is so large.

At the current Naos Emerging Opportunities share price it offers a trailing grossed-up dividend yield of 10.5%.

Foolish takeaway

Both of these ASX dividend shares seem like good options to grow your income in my opinion. Naos offers high-conviction diversification. There are some great companies that are valued at under $250 million.

However, my pick for income would be Pacific because of its potential growth over the next few years, which could lead to a rising share price and a growing dividend. I think it could grow its FUM strongly during FY21, particularly if COVID-19 impacts start subsiding.

More reading

• Get paid huge amounts of cash to own these ASX dividend shares
• 3 LICs with high dividend yields of over 6.5%
• Give yourself a payrise, buy these 3 ASX dividend shares
• 2 top ASX shares to buy for income and growth
• 3 ASX dividend shares I’d buy with $3,000 today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Market optimism may be on the rise, but short-sellers have been increasing their bearish bets on these three ASX stocks.

Short-sellers are traders who borrow stock to sell on market with the aim of buying it back later at a lower price to profit from the difference.

While the S&P/ASX 200 Index (Index:^AXJO) closed at a seven-month high on Tuesday, short-sellers believe some ASX stocks are poised to fall.

It pays to keep an eye on what this group of traders are doing as they tend to be more sophisticated than the average punter.

Short-sellers invading this Galaxy

The stock that has seen the biggest increase in short bets over the past month is the Galaxy Resources Limited (ASX: GXY) share price.

The latest ASIC data to 7 October (the data is always a week behind) showed 285 basis point increase in short interest over period. The total percentage of Galaxy’s shares that have been short sold stands at 9.13%.

This is probably due to Tesla Inc (NASDAQ: TSLA) Battery Day event three weeks ago. This was where its founder Elon Musk outlined plans to use less lithium and more recycled inputs to build the next generation of batteries for its electric vehicles.

The news couldn’t have come at a worst time as the lithium market is already oversupplied.

Acquisition risks catching the eye of short-sellers

The second most attacked stock is the Uniti Group Ltd (ASX: UWL) share price. Short interest in the telecom services group surged 247 basis points – taking the total percentage of its shares being shorted to 4.77%.

Short-sellers are probably targeting the stock as it goes into a bidding war for OptiComm Ltd (ASX: OPC).

Uniti put an initial bid in to acquire the network provider but First State Super made a counteroffer for OptiComm.

History shows M&A creates value for shareholders in the target and destroys value for the acquirer. A bidding war only increases the probability that Uniti will overpay.

Drug development setback

Finally, the Mesoblast limited (ASX: MSB) share price experienced the third largest increase in shorts for the month in question. The level of shorts jumped 241 basis points to just over 8% of the total MSB shares on issue.

Short-sellers are increasing their bets against the stock as the biotech suffered a setback with the US Food and Drugs Administration (FDA).

The news was a shock to the market as investors were expecting smooth sailing its remestemcel-L drug, but the FDA asked it to undertake another randomise test.

More reading

• ASX 200 jumps more than 1%, big ASX banks rise
• Top brokers are urging you to buy these ASX stocks today
• 3 ASX 200 growth shares to buy today
• The Unibail (ASX:URW) share price is climbing today. Here’s why.
• Zip and Estrella Resources were among the most traded shares on the ASX last week

Brendon Lau 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 Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Telstra Corporation Ltd (ASX: TLS) share price has had a fantastic day today, soaring 4.32% to $2.90 per share by market close. It’s a welcome turnaround for Telstra shareholders. They have had to watch the telco’s share price drift lower and lower over the past two months, culminating in a new 52-week low of $2.76 that was hit just last week. But even after today’s decisive move, the Telstra share price remains a long way from its 52-week high of $3.94. So why are Telstra shares jumping today? And more importantly, is the telco a buy right now?

Why the Telstra share price surged today

Well, in my view, we can comfortably assume it was all because of the annual general meeting (AGM) notes Telstra released to the market today. The company held its AGM this morning and provided investors with some much-needed certainty around its cherished dividend. 

Telstra is a favourite of ASX dividend investors due to its steady cash flow and relatively high annual payouts. Its 2020 dividends amount to 16 cents per share (cps). That, on current prices, gives Telstra a trailing dividend yield of 5.52% – or 7.89% grossed-up with Telstra’s full franking credits.

In Telstra’s earnings report for the 2020 financial year that was released in August, the company appeared to cast doubt over whether the 16cps payout would be maintained in FY2021. That’s because Telstra has a ‘payout ratio’ policy of aiming to pay out between 70% to 90% of its earnings every year as dividends. In the FY20 earnings report, Telstra forecast that its FY2021 earnings would be insufficient to cover a 16cps dividend. This led investors to sell off Telstra shares ever since in the belief the company would deliver a dividend cut next year.

Dividend back on the table

However, in its AGM notes, Telstra appeared to backtrack on this position. Here’s some of what Telstra Chair, John Mullen, had to say this morning on the topic:

The board clearly understands the importance of the dividend and if necessary is prepared to temporarily exceed our capital management framework principle of paying an ordinary dividend of 70-90% of underlying earnings to maintain a 16c dividend.

In short, this is good news for dividend investors, and why I believe the Telstra share price pushed higher today.

Are Telstra shares a buy today?

I think this position taken by Telstra’s management is extremely good news for Telstra shareholders. In my opinion, it means that dividend investors should reconsider Telstra today. Telstra is still going through some painful restructuring, which has, in large part, been caused by the ongoing NBN rollout.

However, I think the company’s next-generation 5G plans are very exciting. 5G should open up some lucrative growth avenues over the next decade. In the meantime, Telstra’s defensive earnings base should be able to cover a 16cps dividend well into the future. Especially considering what the company has said today. Thus, if a near 8% grossed-up dividend is important for your investing goals, I think Telstra is indeed a solid buy today.

More reading

• ASX 200 jumps more than 1%, big ASX banks rise
• ASX 200 up 0.9%: Telstra dividend update, Afterpay & Xero hit record highs
• Why Afterpay, HUB24, NEXTDC, & Telstra shares are storming higher
• Telstra (ASX:TLS) share price in focus after AGM dividend update
• Telstra share price and 1 other ASX telecom trading near all time lows

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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