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With the outlook for interest rates in Australia incredibly bleak, I suspect that dividend shares will remain the best way to earn a passive income for some time to come.

But which ASX dividend shares should you buy today? I think these are the ones to snap up right now:

Dicker Data Ltd (ASX: DDR)

I think Dicker Data is a great option for income investors. It is a leading wholesale distributor of computer hardware and software. Despite the pandemic, Dicker Data has been a very positive performer in FY 2020 and recently released a strong half year result. During the six months, the company delivered an 18.1% increase in revenue to $1,006.1 million and a 23.6% jump in net profit after tax to $29.4 million.

Given its strong market position and favourable industry tailwinds, I believe it is well-placed to continue its growth over the coming years. For now, the company is expecting to pay a 35.5 cents per share dividend for the full year. Based on the current Dicker Data share price, it offers a fully franked forward 4.8% dividend yield.

National Storage REIT (ASX: NSR)

Another option I would suggest investors consider buying is this self-storage operator. I believe it could be a great long term option due to its strong position in a fragmented market and its growth through acquisition strategy. As with Dicker Data, National Storage was a positive performer in FY 2020 despite the pandemic. It delivered a 9% increase in underlying earnings to $67.7 million over the 12 months.

Looking ahead, FY 2021 is expected to be tougher and management has warned that its earnings could be flat. However, this is a lot better than what many other companies will achieve in FY 2021 and still implies a very attractive yield. It expects to deliver earnings of 7.7 cents to 8.3 cents per share. After which, it will pay out 90% to 100% of this to its shareholders. The middle of this range (8 cents earnings per share and a 95% payout ratio) would be a 7.6 cents per share distribution. Based on the current National Storage share price, this represents a generous 4.1% yield.

More reading

• Top ASX dividend shares to buy in September 2020
• Smash low interest rates with these ASX dividend shares
• Why I would buy Coles (ASX:COL) and this ASX dividend share
• Why I would buy these quality ASX dividend shares in September
• 3 ASX shares for growth, income, and value investors to buy right now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data 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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On Monday the S&P/ASX 200 Index (ASX: XJO) started the week on a very positive note. The benchmark index climbed 0.7% to 5,899.5 points.

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

ASX 200 expected to edge lower.

The ASX 200 index looks set to edge lower today despite a very strong start to the week on Wall Street. According to the latest SPI futures, the benchmark index is poised to open the day 8 points or 0.15% lower. On Wall Street the Dow Jones rose 1.2%, the S&P 500 climbed 1.3%, and the Nasdaq jumped 1.9% higher.

Is the tech rout over?

A very positive night of trade on the tech-heavy Nasdaq index could be a sign that the tech rout is finally over. The Nasdaq index stormed higher overnight thanks to strong gains by the likes of Apple and Nvidia. This could be good news for local tech shares such as Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO), which have been struggling in recent weeks.

Oil prices lower.

Energy shares such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) will be on watch after oil prices softened again. According to Bloomberg, the WTI crude oil price is down slightly to US$37.30 a barrel and the Brent crude oil price is down 0.4% to US$39.67 a barrel. Oil prices slipped amid concerns over a stalled global economic recovery. In addition to this, news that Libya is poised to resume production weighed on sentiment.

Gold price jumps.

It could be a good day for gold miners such as Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Limited (ASX: NCM) after the gold price jumped higher overnight. According to CNBC, the spot gold price jumped 1% to US$1,966.9 an ounce on Monday night. This was driven by a weaker U.S. dollar amid dovish Federal Reserve hopes.

Shares going ex-dividend.

A handful of ASX 200 shares are going ex-dividend this morning and could drop lower. This includes poultry company Inghams Group Ltd (ASX: ING), media giant News Corp (ASX: NWS), and essential network services company Service Stream Limited (ASX: SSM).

More reading

• Buy Afterpay (ASX:APT) and these ASX shares before the tech rebound
• Investing $1,000 into these ASX shares could be a very smart move
• ASX 200 rises by 0.7%, Cleanaway (ASX:CWY) shares dumped
• Flexigroup (ASX:FXL) launches humm in New Zealand
• The best ASX stocks to buy for the COVID-19 recovery play

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Service Stream 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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If you’re looking to invest in the share market, the good news is there are a lot of quality options to choose from.

Three ASX shares that I think would be smart choices are listed below. Here’s why I like them:

BetaShares NASDAQ 100 ETF (ASX: NDQ)

The first option to consider is actually an exchange traded fund. And arguably the best exchange traded fund out there – the BetaShares NASDAQ 100 ETF. Through just a single investment, this fund gives investors a piece of the 100 largest non-financial companies listed on the NASDAQ exchange. Among its holdings are the likes of Amazon, Apple, Facebook, Microsoft, Netflix, and Google parent company, Alphabet. As the majority of these 100 companies have very bright futures ahead of them, I believe the BetaShares NASDAQ 100 ETF has the potential to outperform over the next decade and beyond.

NEXTDC Ltd (ASX: NXT)

Another top ASX share for smart investors to invest $1,000 into is NEXTDC. It is a growing data centre operator which owns a collection of world class centres in key locations across Australia. I’ve been very impressed with the company’s performance over the last few years and particularly in FY 2020. For the 12 months ended 30 June 2020, NEXTDC delivered a 23% increase in EBITDA to $104.6 million. This was driven by strong demand for its data centre services thanks to the ongoing shift to the cloud. Pleasingly, with the shift to the cloud accelerating and still having a long way to go, I believe NEXTDC is perfectly positioned for growth over the 2020s. 

Xero Limited (ASX: XRO)

A final option for smart investors to look at investing $1,000 into is Xero. I think the leading cloud-based business and accounting software provider would be a great option. This is due to the quality of its platform, its high retention rates, and its large global market opportunity. At the end of July, Xero’s total subscribers had reached 2.38 million. While this is certainly a large number, it is still only a small slice of the global market. I expect the company to win a growing slice of this market over the next decade. Especially given the way it is evolving into a complete solution for small businesses.

More reading

• How the China rift could spur these ASX tech share prices to new records
• How to tell if this is the end of the ASX bull market
• 3 five-star ASX stocks to buy right now
• 3 ways Aussies can buy Tesla (NASDAQ:TSLA) shares
• 3 exotic ASX tech ETFs you might want to add to your portfolio today

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS and Xero. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS. 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 S&P/ASX 200 Index (ASX:XJO) rose by 0.7% to 5,900 points.

Cleanaway Waste Management Ltd (ASX: CWY)

The Cleanaway share price was the worst performer in the ASX 200 today, it dropped 7.1%.

The company has announced its response to reports of misconduct after claims of workplace behaviour involving CEO Vik Bansal. The company did an independent investigation.

Cleanaway has implemented a range of measures after the investigation including executive leadership monitoring, enhanced reporting and monitoring of the CEO’s conduct.

Cleanaway said that Mr Bansal has acknowledged that his behaviour should have been better and expressed contrition. The company said he has discussed this openly with the board and with his colleagues and has embraced changes in his approach.

Mark Chellew, Cleanaway Chair, said: “Mr Bansal had some issues with overly-assertive behaviour in the workplace and has acknowledged that he needed to address them. The board is disappointed in the circumstances but has taken appropriate action. We have noted the committed and sincere manner in which Mr Bansal has responded. The board will not tolerate any further instances of unacceptable conduct.”

The ASX 200 business also announced the retirement of its CFO, Brendan Gill. Paul Binfield will become the new CFO.

Citadel Group Ltd (ASX: CGL)

The Citadel share price rocketed higher by 40% today after news of a takeover announcement.

Pacific Equity Partners are proposing to buy Citadel for a cash offer of $5.70 per share, reduced by any special dividend. That’s a 43.2% premium to the last closing price and a 51.4% premium to the 3-month volume weighted average price.

Citadel’s board intends to declare a fully franked special dividend of up to 15 cents per share to enable shareholders to receive up to 6.4 cents per share of franking credits.

The ASX share’s board has unanimously recommended that shareholders vote in favour of the scheme assuming an independent expert thinks it’s a good idea and unless a better offer comes in.

Citadel Chair Peter Leahy said: “The scheme is an attractive transaction which provides an all-cash option for Citadel shareholders. The Citadel board has unanimously concluded that the scheme represents a compelling outcome for our shareholders, customers, suppliers and staff.

“The price is a very tangible measure of the value and quality of Citadel’s industry leading expertise in specialist software and critical secure information management…At a significant premium to the current trading price, PEP’s offer provides Citadel shareholders with certainty of value and the opportunity to realise their investment in full for cash.”

Macquarie Group Ltd (ASX: MQG)

Macquarie announced an update for its FY21 first half profit expectations.

The ASX 200 investment bank business said that COVID-19 is causing significant and unprecedented uncertainty, which makes short-term forecasting extremely difficult.

Macquarie said it’s unable to provide meaningful earnings guidance for FY21. However, for the first half of FY21 it’s expecting profit to be down by 35% compared to the first half of FY20 and down 25% on the second half of FY20.

The business said it continues to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions the business well for the current environment.

Monadelphous Group Ltd (ASX: MND)

The Monadelphous Group share price went up 3% after the company won some contracts from commodity giant BHP Group Ltd (ASX: BHP).

The ASX 200 engineering business said that the construction and maintenance contracts have a combined value of approximately $120 million.

One of the contracts is to provide structural, mechanical and electrical upgrades at the Newman Hub site in Pilbara. Another contract is for the dewatering of surplus water at the Jimblebar mine site in Western Australia.

More reading

• Where I’d invest $20,000 into ASX shares right now
• The best ASX stocks to buy for the COVID-19 recovery play
• Citadel (ASX:CGL) share price rockets 39% higher on $450 million takeover offer
• Cleanaway (ASX:CWY) share price plummets 7% today. Time to buy?
• The latest ASX 200 stocks that top brokers just upgraded to “buy”

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Citadel Group Ltd. 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 there are plenty of investment opportunities with ASX shares right now with $20,000.

Regular readers would know that one of my favourite ideas over recent weeks has been Citadel Group Ltd (ASX: CGL), which has just received a large takeover offer. It would have been a pick today for me at last week’s prices.

Now that Citadel isn’t really an option, I think these top ASX growth shares could be worth buying instead:

Pushpay Holdings Ltd (ASX: PPH) – $8,000

Pushpay is an electronic donation payment business. It facilitates digital donations to sectors such as the large and medium church sector in the US.

Management believe there is a large, long-term opportunity, the company is aiming for annual revenue of US$1 billion per year. It has plenty of growth potential because in FY20 it ‘only’ generated US$129.6 million of revenue (up 32% from the prior year) with the huge level of donations given to churches each year. 

I think it’s the ASX shares with long-term revenue growth potential and rising profit margins that are likely to deliver outsized returns to investors.

Pushpay is very scalable. Over the 12 months of FY20 it grew its gross profit margin from 60% to 65%. That suggests its gross profit margin could be materially higher as it reaches milestones like US$250 million and US$500 million of revenue.

As a long-term bonus, the ASX share could grow into new countries or new industries (such as other religions) to further increase its addressable market in the future.

At the current Pushpay share price it’s trading at 33x FY21’s estimated earnings. I don’t think the market yet appreciates how much Pushpay’s profit could grow over the next five years.

Bubs Australia Ltd (ASX: BUB) – $5,000

Bubs is a business that could really take off if it manages to capture good market share of the infant formula market in Asia.

The company produces and sells a variety of nutritional products, with a focus on goat milk items like infant formula.

The FY20 result was solid from the ASX share with full year revenue growth of 32% to $62 million, infant formula sales increasing by 58% to $30 million, direct Chinese sales growing by 32% to $13 million and the normalised gross margin improving from 21% to 24%.

What particularly impressed me was that export revenue outside of China grew by five times, and represented 10% of total revenue.

China is a higher-risk country for consumer product exporters at the moment – just look at what’s happening with Treasury Wine Estates Ltd (ASX: TWE). Shifting to China-made Bubs products could be a way to de-risk its Chinese division whilst still reaching Chinese customers. I like the move to buy a stake in the Beingmate Chinese manufacturing facility.

However, I would feel (even) better about Bubs if it can grow its ex-China export revenue, as places like Vietnam are large markets that the ASX share can tap into, with less regulatory risk.

In five years I think Bubs could be a much bigger business. At the current Bubs share price of $0.79, I think the potential rewards are worth the risks.

City Chic Collective Ltd (ASX: CCX) – $7,000

I think City Chic has proven itself to be a formidable ASX retail share during this COVID-19 period.

The company managed to grow revenue by 31% to $194.5 million during FY20 thanks to its strategy of having a strong online offering as well as its targeted acquisitions.

City Chic, which is a retailer of plus-size women’s apparel, accessories and footwear, saw online website growth of 113.5% over FY20. Online sales made up 65% of total sales, compared to 44% in FY19. I think this shows the business can thrive in the 2020s despite COVID-19 impacts and the disruption caused by store closures.

US retail is having a tough time at the moment. So it’s a great time for City Chic to use its capital raising money to buy competitors at cheap prices and turn them into online-only offerings by utilising City Chic’s e-commerce abilities. Online sales also come with lower operating costs. 

At the current City Chic share price it’s trading at 22x FY22’s estimated earnings. I think that looks very reasonable. I think it could generate good shareholder returns over the shorter-term and longer-term, particularly as it could start paying a good dividend by FY22.

More reading

• Buy and hold these stellar ASX growth shares for 10 years
• Citadel (ASX:CGL) share price rockets 39% higher on $450 million takeover offer
• 3 ASX shares for beginners to buy
• Buy these ASX growth shares after the market selloff
• 3 personal finance tips to help strong investing

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 PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO and Treasury Wine Estates Limited. The Motley Fool Australia has recommended Citadel Group Ltd and PUSHPAY FPO NZX. 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 Federal Court has ordered two wealth management businesses in National Australia Bank Ltd (ASX: NAB) to pay $57.5 million penalties.

The court found MLC Nominees and NULIS had contravened fees-for-no-service laws.

The breaches included making false and misleading communications to superannuation members about how the bank charges fees and when the clients are obliged to pay it.

The NAB businesses were also found to have failed to ensure their services were provided “efficiently, honestly and fairly”.

MLC Nominees will pay a $49.5 million penalty while NULIS was fined $8 million. 

The Motley Fool has contacted NAB for comment.

Biggest ever penalty

The massive penalty is the largest ever imposed in a case started by the Australian Securities and Investments Commission (ASIC).

“Fees-for-no-service conduct is particularly egregious, having resulted in substantial financial loss for thousands of unsuspecting consumers,” said ASIC deputy chair Daniel Crennan QC.

“The penalty imposed by the court reflects the very serious contraventions by MLC Nominees and NULIS.”

MLC Nominees and NULIS both admitted liability, with the judge taking the confession into account in determining the fine.

How much were clients ripped off?

MLC Nominees grabbed $33.6 million in fees from about 220,000 members of MasterKey Business Super and MasterKey Personal Super who didn’t even have a financial advisor. 

This went on for almost 4 years between 2012 and 2016.

MLC Nominees and NULIS also deducted about $71.9 million in fees off roughly 457,000 MasterKey Personal Super customers who did have an advisor but received no service.

That money spinner endured for more than 6 years from 2012 to 2018.

Justice Yates described the breaches as “very serious” and set the fines to match the large scale of the businesses.

The legal action started in September 2018, before the Royal Commission into the finance industry had started. However, NULIS’ behaviour was a case study during the famous enquiry.

More reading

• ASX 200 up 0.4%: Macquarie guidance disappoints, Cleanaway sinks on CEO behaviour reports
• Afterpay (ASX:APT) share price facing new competitive pressure
• Is the Zip (ASX:Z1P) share price a buy in the tech crash?
• Tech shares lead ASX rebound but Afterpay (ASX:APT) faces mounting competition
• ASX 200 up 0.7%: Nearmap (ASX:NEA) launches capital raising, Afterpay (ASX:APT) rebounds

Motley Fool contributor Tony Yoo 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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The Flexigroup Limited (ASX: FXL) share price has been relatively stagnant today, despite an announcement about the launch of its ‘humm’ product in the New Zealand market.

The Flexigroup share price reached an intra-day high of $1.12 before closing at $1.09, up 0.9% for the day.

What does Flexigroup do?

Flexigroup is a diversified financial services group. It provides a range of innovative finance products to consumers and businesses through a large partner network. The buy now, pay later (BNPL) company currently services 2.2 million customers.

Humm landing in New Zealand

Flexigroup advised the market it has launched its humm product in New Zealand, following the success of its BNPL brand Oxipay. Through humm, the BNPL company is the first to offer terms of up to NZ$10,000 and is targeting new market segments.

The larger transactions are expected to help Kiwis with purchases such as solar, home furnishing, renovations, luxury retailing, fertility and healthcare. Flexigroup advised that retailers such as VIVO, The Cosmetic Clinic, Insulmax, MyBed, Beaurepaires and others will join the 2,400 businesses that are on the existing roster.

The launch of humm replaces Oxipay as Flexgroup’s BNPL brand in New Zealand. The company will migrate its existing customer database and distribution network to humm.

As the company seeks to unify all products, a name change will be put to a shareholder vote at the FY20 annual general meeting later this year.

Management commentary

Flexigroup New Zealand CEO and deputy group CEO Chris Lamers was enthusiastic about the new prospects on offer:

Our customers told us they love BNPL but were frustrated they couldn’t use it for purchases more than NZD1,000, or extend the payment terms. humm solves that problem. As well as meeting the needs of our current customers, it will appeal to families and homeowners more than traditional BNPL does. We have also made significant investments in our technology to ensure it provides the simplicity and functionality our retail partners need to drive sales and attract new customers.

Flexigroup CEO Rebecca James added that there is no other product in New Zealand that offers the same level of purchasing power and flexibility:

Humm was designed with a clearly differentiated proposition of financing larger transactions above NZ$1,000. While we are strongly leveraging our eCommerce capabilities, we are also focused on building and solidifying our in-store network for larger purchases, a key strength of humm which is difficult to replicate.

About the Flexigroup share price

The Flexigroup share price has not seen the same skyrocketing performance as some of the other BNPL players such as Afterpay Ltd(ASX: APT) and Zip Co Ltd (ASX: Z1P). Instead, it has steadily declined since 2013, losing almost 80%.

However things appear to be turning around. The Flexigroup share price has started to gain ground recently, up 286% from its 52-week low of 38 cents in March this year.

More reading

• How this new red tape could send the Afterpay share price tumbling
• Why Cleanaway, De Grey, Macquarie, & Zip shares are dropping lower
• Here are the 10 most shorted ASX shares
• How to position your ASX share portfolio for a downturn
• Is another stock market crash coming?

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended FlexiGroup 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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Are you looking to add some growth shares to your portfolio this week? Then you might want to consider buying the ones listed below.

I believe all three have the potential to deliver strong earnings growth over the next decade, which could make them long term market beaters.

Here’s why I would buy and hold these ASX growth shares for at least 10 years:

Bravura Solutions Ltd (ASX: BVS)

The first ASX growth share to consider buying is Bravura. The shares of the provider of software products and services to the wealth management and funds administration industries have come under pressure recently following its subdued guidance for FY 2021. While the warning that its earnings could be flat in FY 2021 because of the pandemic was disappointing, I believe the share price weakness has been severely overdone. Especially given its portfolio of quality software solutions, strong recurring revenues, massive market opportunity, and strong long term growth potential. I think these make the Bravura share price great value at under 20x earnings.

Kogan.com Ltd (ASX: KGN)

Another ASX growth share I would consider buying is this ecommerce company. The Kogan share price has been an exceptionally strong performer in 2020. And while this means it isn’t the bargain buy that it was a few months ago, I still see value in its shares for long term investors. I believe Kogan is well-placed to continue its strong sales and earnings growth over the next decade thanks to the growing popularity of its website, more spending online, and its acquisition opportunities.

Pushpay Holdings Group Ltd (ASX: PPH)

A third ASX growth share to buy is Pushpay. I think the fast-growing donor management platform provider for the faith sector is one of the best options on the share market right now. This is due to its leadership position in a niche but very lucrative market. In FY 2021 Pushpay expects to more than double its operating earnings once again. Pleasingly, I don’t expect its rapid growth to end any time soon. Nor does management. It is targeting a 50% share of the medium to large church market in the future. This represents a US$1 billion opportunity and compares to FY 2020’s revenue of US$127.5 million.

More reading

• Where I’d invest $20,000 into ASX shares right now
• Leading brokers name 3 ASX shares to buy today
• Forget day trading and get rich with these top ASX shares
• Buy these ASX growth shares after the market selloff
• 3 personal finance tips to help strong investing

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 Kogan.com ltd and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia has recommended Kogan.com ltd and PUSHPAY FPO NZX. 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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A dividend yield of 6.45% is rare on the ASX share market these days. Very rare indeed. Some of the big four ASX bank shares used to offer dividend yields in this ballpark. But that was before 2020 pummeled the global banking sector. Today, you’d be lucky to get a 3% yield from a bank share.

Even an exchange-traded fund (ETF) which focuses on holding the ASX’s best dividend shares can’t match this yield. The Vanguard Australian Shares High Yield ETF (ASX: VHY) currently anticipates a 3.3% forward dividend, as an example.

So where would we find this monstrous 6.45% yield today? The iShares J.P. Morgan USD Emerging Markets Bond ETF (ASX: IHEB), that’s where.

This ETF is a little different as it actually doesn’t hold shares at all. Instead, this fund holds fixed-interest investments instead, otherwise known as bonds.

Now, I’ve made my views on the role of bonds in a 2020 portfolio clear in previous articles. Long story short, I have said investors should avoid holding bonds for almost any reason in 2020.

But the bonds that I was discussing then are government bonds issued by the Australian Government. The bonds that IHEB holds are a whole different kettle of fish.

Bond vs bond

IHEB also holds a collection of government bonds. But instead of being issued by governments of advanced economies like Australia or the United States, IHEB holds bonds from governments in ’emerging markets’ countries. The top issuers of the bonds held in this ETF are instead from Uruguay, Russia, Argentina, Peru, Kuwait and Ecuador, among others.

These kinds of countries are not viewed as ‘safe’ as a country like Australia or the US for investing purposes, even if they are priced in US dollars. Thus, these bonds don’t benefit from the ‘risk-free’ perception that Australia and the US enjoy. While that does mean investors get to enjoy far higher interest rates on their loaned capital, it also increases the risk for that investor.

For example, it’s unthinkable to us Aussies that our government could ‘default’ on its debt, which has never occurred anyway. That makes lending money to the government a very sleep-friendly activity. But take Argentina instead. This is a country that has defaulted on its sovereign debt multiple times of the past 100 years. And when a borrower defaults, it’s not good news for the creditor.

That explains why an ETF tracking Australian government bonds like the Vanguard Australian Government Bond Index ETF (ASX: VGB) currently offers a running yield of 2.78%, wheres IHEB is offering 6.45%.

Should you ignore a 6.45% yield?

Whilst I think IHEB is an interesting option to consider for dividend income, I think investors should be very cautious with this investment. There’s a small chance that any of the countries that issue the bonds that make up this ETF could default on their debts or otherwise have other difficulties funding their bond obligations. And that could in turn result in a permanent capital loss.

If income is an important investing objective of your portfolio, I think there’s a good case for a small allocation to this ETF. But I wouldn’t be putting any capital in that you can’t afford to lose either.

More reading

• Why ASX income investors need to consider these dividend ETFs in 2020
• 2 ASX ETFs that can solve your income needs
• Forget Westpac’s term deposits and buy these ASX dividend shares
• How to earn a passive income of $50,000 with ASX dividend shares
• 2 quality ASX dividend shares for income investors to buy today

Motley Fool contributor Sebastian Bowen owns shares of Vanguard Australian Shares High Yield Etf. 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 Ecograf Ltd (ASX: EGR) share price soared higher today. Shares were up a phenomenal 51% by the closing bell after hitting intraday gains of more than 75%.

Today’s big surge puts the battery material supplier’s share price well into the green in 2020, up 56% since 2 January. For comparison the All Ordinaries Index (ASX: XAO) is down 11% year-to-date.

That’s a remarkable gain for Ecograf’s share price, considering it wasn’t spared the carnage that ensnared most ASX shares following the COVID-19 panic selling. From 31 January through to 2 April the share price tumbled 67%. Since that low shares are up 317%, owing much to today’s big bounce.

At the current price of 12 cents per share, Ecograf has a market cap of $43 million.

What does Ecograf do?

Ecograf aims to become a key player in supplying environmentally friendly natural flake and battery (spherical) graphite products to its customers. Those include the established (refractory, recarburiser, lubricant) and the emerging (lithium-ion battery) global markets.

EcoGraf plans to operate a diversified graphite portfolio, supplying high-quality Tanzanian natural flake graphite products. Working with TanzGraphite, Ecograf is targeting established markets in Asia and Europe. The company’s multi-hub development is commencing in Kwinana, Western Australia to supply environmentally responsible battery graphite for lithium-ion batteries.

How did Ecograf respond to the ASX query?

When a company’s share price rises at a blistering pace, the ASX tends to take notice. Today it requested an explanation from Ecograf in the form of a price query.

The company promptly responded, stating, “EGR is not aware of any information concerning it that has not been announced to the market which, if known by some in the market, could explain the recent trading in its securities.”

So is there any other reason that Ecograf’s share price may have shot higher today, alongside a large surge in the volume of shares traded?

According to Ecograf: “EGR notes an improved sentiment for battery mineral markets as increased production of electric vehicles and lithium-ion batteries are considered a key support for global COVID-19 economic recovery plans.”

The company also mentioned the Aussie government’s increased focus to secure supplies of critical resources, like battery graphite, outside of China. It also stated: “EGR notes today’s articles from the Age and the Sydney Morning Herald that reflect this sentiment and quote EGR’s Managing Director, Andrew Spinks.”

Ecograf had no other explanation and noted that improved sentiment was beyond its control.

Following today’s 51% leap, the Ecograf share price will be one to watch.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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