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Here’s why the ASX share price is on fire

The ASX Limited (ASX: ASX) share price printed another record high of $81.34 today despite the operator of the local bourse not releasing any specific news to the market.

Investors are probably bidding the stock higher as the sustainable yield hunt intensifies on the back of the Reserve Bank of Australia’s latest benchmark cash rate cut to just 1.25% with consensus being that more cuts are in the pipeline.

Over the past 12 months ASX Ltd has paid $2.235 cents in fully franked dividends to place it on a trailing yield of 2.75%, which is still well ahead of the 1.8% the Commonwealth Bank of Australia (ASX: CBA) currently offers for a 12-month term deposit. 

Moreover, investors are probably buying ASX shares due to the bourse’s monopoly like position on share trading, settlement, clearing and listing services. ASX Ltd does have a rival in Chi-X but it’s yet to win much business in part due to the very strong network effect and market position of the ASX.

Shares are up around 22% over just the past year not including dividends, although today’s buyers need to remember it’s trading on a trailing price-to-earnings multiple of 33x which means it has plenty of growth baked into the price. As such any slip ups and the shares could take a tumble.

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Motley Fool contributor Tom Richardson 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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