There have been a few interesting pieces regarding ASX shares in the news lately. One of them in The Australian is about companies paying dividends while receiving JobKeeper payments. The payments were to be passed onto employees to preserve their jobs. Thus, helping companies to press pause during the coronavirus pandemic.
In most cases, without the pandemic payments, thousands, if not millions, of people would have lost their jobs before dividends would have been sacrificed. This is part of a director's fiduciary responsibility in Australia, punishable by law. However, and more importantly, it has highlighted just how fragile the economy is, and how close to the precipice we are.
Counter-intuitively, I believe this makes August is a great time to invest, before the subsidy finishes in September. However, investments need to be chosen with care. Consequently, if I were entering the market with $10,000 in August, these would be my carefully targeted choices.
An ASX share for short term credit
Managing cash flow is going to become more important for Australia's small to medium enterprises (SME). As JobKeeper fades away in most parts of Australia, the impact of reduced revenues is likely to bite. While this may see unemployment lines grow, many companies will seek to smooth out cash flow as they return to normal.
One ASX share I have been watching in the short term credit space is CML Group Ltd (ASX: CGR). CML Group provides SME debtor funding via a range of mechanisms. The largest revenue earner for this company is invoice finance. This is where a company takes an invoice as security, and then provides funding for 80-90% of the invoice. It then receives the full amount of the invoice when it is paid.
It has other financing mechanisms, some of which are quite innovative, but this is of greatest interest to me. The company recently acquired a software as a service (SaaS) website, Skippr. This platform allows CML to develop a closer and more long term relationship with its SME customers.
I would invest $2,000 in CML Group. It is a small cap company worth only $76.15 million. At the time of writing it pays a trailing 12 month dividend of 6.86%.
SME Business loans
Another ASX share in a similar space is Tyro Payments Ltd (ASX: TYR). Although Tyro payments is generally known as an EFTPOS provider, it also provides short term credit solutions. The company has a business loan facility for up to $100,000 for first time SME's, and $120,000 for subsequent loans.
Moreover, Tyro has been selected as a loan provider under the SME Guarantee Scheme. This means the government will guarantee 50% of new loans issued by eligible lenders. The initial phase of the scheme remains available until 30 September 2020. Then, the second phase will run until 30 June 2021.
I would invest a further $4,000 in Tyro Payments. The loan capability is only one element of this company. I believe it has a long runway in front of it.
ASX shares in real estate
I have become increasingly focused on REITs to build larger income streams in my portfolio. One of these I have been researching a lot is Abacus Property Group (ASX: ABP). This REIT invests in real estate sectors that fortunately have little exposure to the coronavirus. Moreover, it is likely to remain prosperous as JobKeeper is reduced.
The Abacus portfolio consists of 50.6% in office buildings, 34.4% in storage space, 6.8% in small convenience shopping centres, and about 8.2% in non-core assets. All of these have proven resilient. For example, offices have long leases and are leased by blue chip companies. Furthermore, convenience retail stores largely stayed open during the lock down.
However, it is the self storage sector that I find interesting. Abacus has begun to show a growing interest in accumulating storage assets. Recently it increased its holding in rival ASX share National Storage REIT (ASX: NSR) to 8.09%.
What this means is that it has a more predictable, annuity style revenues. Offices and retail centres always require value adding to retain customers. Self storage does not. This market is dominated by small businesses and lone entrepreneurs. Hence, there is a lot of room for a focused company to consolidate assets.
I would invest the last $4,000 in Abacus Group. With a low price-to-earnings (P/E) ratio of 10.5, the company has the potential to grow further. Moreover, Abacus has a very healthy trailing 12-month dividend yield of 6.8%.
Foolish Takeaway
Now is the time to prepare for a world with diminishing support from JobKeeper. While it will remain in selective circumstances, it will start to be withdrawn. In my view, the ASX shares that will benefit will be those that can stand alone without it, and those providing short-term credit.
