The S&P/ASX 50 index isn’t as well-known as the S&P/ASX 200 Index (ASX: XJO), but it is arguably just as important.
The index is home to 50 of the largest companies on the Australian share market.
While not all the shares on the index are ones that I would recommend investors buy, there certainly are some quality options.
Two ASX 50 shares that I rate highly are as follows:
CSL Limited (ASX: CSL)
The first ASX 50 share I would buy is CSL. I think the biotherapeutics giant is a great long term investment option due to the quality of its CSL Behring and Seqirus businesses. CSL Behring is the biotech business behind immunoglobulins products such as Privgen and Hizentra, and haemophilia products Idelvion and Afstyla. Whereas the Seqirus business is the second-largest player in the influenza vaccines industry and is assisting with the development and manufacture of a COVID-19 vaccine.
Although the pandemic is causing headwinds for plasma collections and thus increasing the production costs of immunoglobulins, strong demand for flu vaccines looks set to offset this. So much so, CSL recently revised its FY 2021 earnings growth guidance range higher.
Beyond this year, I believe CSL is in a strong position for growth thanks to its current product portfolio and its significant investment in research and development. In FY 2021, for example, CSL is expecting to invest approximately US$1 billion in its R&D activities. I expect this to ensure its pipeline remains full of potentially lucrative therapies and keeps the company at the top of the game over the long term. Overall, I think this makes it a must-buy for investors today.
Telstra Corporation Ltd (ASX: TLS)
The second ASX 50 share that I would buy is Telstra. After several disappointing years due to the NBN rollout, Telstra’s outlook is becoming increasingly positive. This is being underpinned by its T22 strategy, which is stripping out costs and simplifying its business.
Another big positive is the status of the aforementioned NBN rollout. While the rollout still has a bit longer to go, the headwinds it is causing are now peaking. In light of this, a return to growth doesn’t appear far away. Especially given rational competition in the industry and the arrival of 5G internet. The latter should be a big boost to the average revenue per user metric in its key Mobile segment.
Finally, with the Telstra board intending to do what it can to maintain its dividend, the company’s shares look set to yield very generous dividends in the coming years. Based on the current Telstra share price, I estimate that it offers investors a 5.8% fully franked dividend yield.
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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 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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