ASX growth shares can be a little more volatile than the market as a whole. They often experience considerable swings in value created largely by market sentiment. However, I believe it's important to focus more on business fundamentals rather than short-term share price movements. This is because in the short term, a company's share price is often not representative of the value of its underlying business. However, I believe this changes over longer-term holding periods.

With this in mind, following are 2 ASX growth shares I currently own but would be happy to double down on next week, based on today's prices.

The Nearmap Ltd (ASX: NEA) share price

Despite Nearmap being one of the 10 most shorted shares in June, I would still place this ASX growth share on my buy list. The Nearmap share price has soared more than 150% since its March lows. This is despite it recently pulling back along with the rest of the S&P/ASX 200 Index (ASX: XJO) amid concerns over a second wave of coronavirus.  

In fact, the Nearmap share price has been on a crazy rollercoaster over the last two years. However, its business has been growing strongly. Both here in Australia and New Zealand (ANZ), as well as in North America (NA). The company's NA market includes both the United States and Canada. Not only has Nearmap's subscription base been growing at an 11% compound annual growth rate, but its average revenue per subscription (ARPS) has also been growing at a compound annual growth rate of 22% in NA and 12% for the more mature ANZ region. Combining these for its most recent half, the group achieved growth in its annualised contract value of 23% over the prior corresponding period. 

In addition, the company has recently launched 'Nearmap AI' which should help to drive ARPS growth in the future. It also has a massive total addressable market (TAM). Nearmap's TAM is estimated to be around $1.6 billion to $2.75 billion. Moreover, these figures only represent markets the company currently operates in. On this note, Nearmap's CEO Rob Newman has expressed a desire to become a global leader and believes the company's unique business model has the potential to scale to multiple geographies around the world.

I believe Nearmap's business model has proven itself in ANZ and shown scalability in the NA market. Additionally it is on track to reach cash flow breakeven by the end of June 2020. Nearmap's closing cash balance is expected to be between $32 million and $35 million by the financial year's end. I believe the company will continue to grow in its current markets and push into new ones. In my eyes, this makes today's Nearmap share price a very compelling buy. 

The Medical Developments International Ltd (ASX: MVP) share price

You've probably heard of Medical Developments' flagship product, the 'green whistle'. The green whistle is used by medical practitioners, paramedics, life savers and others to administer emergency pain relief. It contains the drug Penthrox and is advocated by many as superior to other pain relief medications. This is thanks to it being fast-acting, non-addictive and able to be self-administered. Uptake of the green whistle has exploded, with the number of countries around the world selling it rapidly increasing over the past decade. This is reflected in the company's sales which have increased 42% for its UK market and 35% for the European market for H1FY20.

However the Medical Developments business doesn't start and end with the green whistle. In fact, the green whistle only accounts for a little over half its revenue. A stat which may soon change. The remaining majority of the company's revenue comes from its medical devices segment, followed by a much smaller veterinary segment. The medical devices segment includes space chambers, masks and other devices and was the company's fastest growing segment in H1FY20. Total sales in this segment grew 49% compared to the prior corresponding period, with US sales up 49% and UK/Europe sales climbing by 73%.

Medical Developments also noted an increase in R&D investment. I believe this should also bode well for this ASX growth share's future. While I don't think today's prices are necessarily 'cheap', thanks to its future growth prospects as it increases sales and enters more markets, I would be happy making a long term investment in Medical Developments next week.

The post Why the Nearmap share price and one other are on my buy list appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
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• Here are the top 10 ASX 200 shares today
• Higher for longer? Why the ASX 200 just turned negative

Michael Tonon owns shares of Medical Developments International Limited and Nearmap Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Medical Developments International Limited and Nearmap Ltd. The Motley Fool Australia has recommended Medical Developments International Limited and Nearmap 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.

A long-term investing strategy has a number of benefits. For instance, trading costs will be considerably lower and, as I will demonstrate, this can have a significant impact on portfolio returns. Especially as compounding takes hold. Additionally, holding shares for longer than 12 months means you are eligible for a capital gains tax (CGT) discount. So, instead of paying your marginal tax rate on 100% of your capital gains, if you hold the shares for more than 12 months, you'll only pay tax on 50% of the gain.

Lastly, the CGT is paid upon each sale of a company. This means the amount you can reinvest is lower due to the tax that has been paid, which hurts your portfolio's compounding ability.

These few advantages may not appear to be overly significant, however let's look at a couple of scenarios to show just how much of a difference long-term investing can make.

Long-term investing versus short-term investing

For this exercise, we will compare 2 portfolios, both containing a starting investment of $30,000 evenly spread across 15 shares. In addition, we'll assume an annual return of 10% and brokerage fee of $15 per trade. Lastly we'll apply a marginal tax rate of 32.5% to calculate the CGT. This rate is applicable for a taxable income between $37,001 – $90,000.

Portfolio 1 – short-term investing

For our short-term investing portfolio, we will assume an average holding period of 6 months. This means that the whole portfolio will be turned over every 6 months.

The drawbacks of this frequent trading are paying CGT on 100% of the returns and the large brokerage costs of $900 per year.

Frequent trading often occurs as a result of emotional trading. That is, trading in and out of positions frequently based on company news and market sentiment. Instead, I believe looking beyond market sentiment and sticking with companies through volatile periods can be a great way to reduce costs and, therefore, boost returns.

Portfolio 2 – long-term investing

For our long-term investing portfolio, we will assume that only 1 out of the 15 companies is sold and replaced each year.

This strategy benefits from lower CGT, only $30 in brokerage fees annually and that tax free compounding effect we get from a low turnover.

This chart shows the above 2 portfolios' growth over a 20 year period, and the effects can be sobering. The long-term investing portfolio has delivered a return 167% greater than that of the short-term. This is despite both portfolios achieving the same, 10% average annual return. See how significant the effects of all the additional trading and CGT can be on your returns?

Chart by author

Foolish takeaway

Here at Motley Fool, we are long-term investors through and through. We believe the compounding effect and overall benefits of long-term investing make it the single greatest way to build wealth over time. A few ASX shares I'm holding for the long term are ResMed Inc (ASX: RMD), Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and Cleanaway Waste Management Ltd (ASX: CWY). I believe all 3 of these companies have exciting futures and, as such, I plan to hold them for the next decade.

The post Here's why long term investing can outperform shorter holding periods appeared first on The Motley Fool Australia.

More reading

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• 3 excellent ASX shares I would buy and hold for 10 years or more

Motley Fool contributor Michael Tonon owns shares of Cleanaway Waste Management Ltd, ResMed Inc., and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended ResMed Inc. 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.

I generally prefer to invest in ASX growth shares rather than their dividend-paying cousins. As a long-term shareholder, ASX growth shares enable me to benefit from tax-free compounding over many years. With dividend shares, however, you are required to pay tax every time you receive a dividend. So even if those dividends are reinvested, this occurs using after-tax dollars.

With this in mind, below are 3 exciting ASX growth shares I believe to be buys next week.

Avita Medical Ltd (ASX: AVH)

Avita Medical develops and markets a range of respiratory and regenerative medical products. The first product Avita brought to market was a spray-on skin treatment used for burns victims named 'Recell'. In addition to being TGA approved in Australia, Recell is FDA approved in the USA and CE-marked in Europe.

Avita recently released results for the March quarter, which were its strongest since launching in the US. This quarter saw its total revenue jump 67% over the prior corresponding period. This is boosted to an 84% revenue increase when the time frame is extended to the 9 month period ending 31 March 2020.

Avita has largely been insulated from the coronavirus-led economic fallout. This is predominantly because treatment for burns patients tends to be neither elective or deferrable. Furthermore, the company is looking to use the Recell system to treat vitiligo and has plans to submit an application to the FDA in June 2020.

Nearmap Ltd (ASX: NEA)

I can't go past Nearmap when it come to ASX growth shares. The Aussie aerial imagery and data insights company has been consistently growing its subscriber base, particularly across its North American segment. It has also been steadily improving its average revenue per subscription. Furthermore, the company recently launched another new product with Nearmap AI.

On Tuesday this week, I wrote that I believed Nearmap's shares were still a buy, despite having risen more than 100% over the past 2 months. Since then, they have jumped again following a positive market update. The update stated that the company's churn had dropped and its annualised contract value (ACV) has continued to grow. Nearmap's ACV now exceeds $102 million. Additionally the company advised it is on track to be cash flow breakeven by the end of June. No doubt, all this good news put some investors' fears to rest. This resulted in Nearmap's share price surging by a further 16.67% on Thursday. 

Despite the current price gains, I still see the potential for ongoing value with Nearmap shares. The world is a big place, and I believe Nearmap has plenty of runway to expand its current market segments and break into new ones.

Audinate Group Ltd (ASX: AD8)

My 3rd pick of ASX growth shares to buy next week is Audinate. This company develops an audio-visual, industry-leading, media networking solution, called Dante. A mouth-full, I know! But what Dante allows audio professionals to do is use standard Ethernet networks to deliver uncompressed, multi-channel, low-latency audio. This removes the need for expensive cabling and more rigid and complicated networks.

The solution's wide-spread adoption by manufacturers has meant that more and more Dante devices are now able to be connected together. Additionally, a Dante network offers superior flexibility, with changes able to be made with the touch of a button.

As social distancing restrictions were implemented throughout the world, Audinate was wary of possible impacts to its revenue resulting from reduced demand. However, the company's strong balance sheet and recent revenue growth have ensured its resilience through the worst of the pandemic's economic fallout so far. As economies around the world begin to open up, I believe strong demand for Audinate's product will deliver continued company and share price growth.

The post 3 exciting ASX growth shares to buy next week appeared first on The Motley Fool Australia.

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Michael Tonon owns shares of Nearmap Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited. The Motley Fool Australia owns shares of and has recommended AUDINATEGL FPO and Nearmap Ltd. The Motley Fool Australia has recommended Avita Medical 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.

Investing in the ASX has been a great tool to build wealth over time. To show just how powerful a tool it can be, rather than examining a specific company, we're going to look at a hypothetical case. Just how much would a $50,000 investment 10 years ago be worth today if it followed the returns of the S&P/ASX 200 Index (ASX: XJO)?

An investment in the ASX 200 

An investment 10 years ago that tracked the ASX 200 would have returned approximately 30% today. So your hypothetical $50,000 investment would now be worth $65,000. Are you feeling a little underwhelmed? Then I suggest you continue reading, because that's not the full story.

This return is despite the ASX 200 having just surged out of the global financial crisis lows. Not to mention the index is currently sitting around 19% below its February high. However, and more importantly, this does not include the return and reinvestment of dividends, which is a significant proportion of the total return for the ASX 200.

If we also include dividend return and reinvestments from the ASX 200, we see a return of around 96% across the past decade. This means your $50,000 investment would now be worth $98,000 – a gain of $48,000. This clearly shows how important dividends are when considering the total return. It's the reinvestment of these dividends where we see the wonder of compounding at work.

In fact, if we were to go back even further, we would get an even better idea of just how powerful the compounding effect is.

Going back 15 years, the ASX 200 with reinvested dividends has increased 172%. This size of return would turn your $50,000 into $136,000, giving you a capital gain of $86,000. That's a significant additional gain when we only added 5 years to the time period.

To highlight the benefit of dividend return and reinvestment, the chart below covering the last 15 years of ASX 200 growth clearly shows the advantage of compounding as the return 'gap' widens.

Data from Investing.com. Chart by author

Can you do even better investing in ASX shares?

The above hypothetical returns are fantastic, particularly considering not much thought is required if you simply wanted to track the returns of the ASX 200. There are a number of ETFs such as BetaShares Australia 200 ETF (ASX: A200), which make this task easy. However, it is possible to do even better if you manage to choose a company or group of companies that can outperform the market over the long term. 

Even outperforming the ASX 200 by 1% or 2% each year can have a dramatic effect when these returns are compounded over a decade or two. The difference between an 8% annual return and a 10% annual return when compounded over 15 years is 100% – an 8% average return will increase your portfolio by 3.17 times and a 10% average return will increase your portfolio 4.17 times.

That means if you can consistently beat the market by 2% a year, then after 15 years your investment of $50,000 would be $50,000 better off than the market. Well worth pursuing the extra few percent I would say!

A couple of ASX shares to potentially invest in which I believe will outperform the market in the coming decade are Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and Nearmap Ltd (ASX: NEA).

The post What would $50,000 invested in the ASX 200 a decade ago be worth today? appeared first on The Motley Fool Australia.

More reading

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• Here are the top 10 ASX 200 shares today

Motley Fool contributor Michael Tonon owns shares of Nearmap Ltd. and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. and Washington H. Soul Pattinson and Company 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 S&P/ASX 200 Index (ASX: XJO) is up around 25% from its March lows. Nearmap Ltd (ASX: NEA), however has far outpaced the index, increasing by more than 125% over the same period. So are Nearmap shares still a buy at their current price?

Nearmap at a glance

Nearmap is an aerial imagery company which uses a subscription as a service model. It provides imagery which is much higher in resolution than satellite imagery and shows changes over time. It has a multi-year advantage over its closest competitors with a profitable Australia and New Zealand (ANZ) segment as well as a fast growing North America (NA) segment. The NA segment also includes Nearmap's newest market addition, Canada.

Supplementing the imagery, Nearmap's software provides a range of product features including orthogonal (2D) imagery, oblique cardinal direction imagery and 3D online and AI content. Its customer base is diverse, as shown below, with the product's primary appeal being the cost and time savings delivered through reduced reliance on site visits.

Data Source: Nearmap 1H FY20 analyst pack. Chart by author.

The market opportunity

Nearmap has a number of leavers to pull for growth. By expanding into new markets, growing its average revenue per subscription (ARPS), increasing gross margins and of course by growing its number of subscriptions. It appears there is a huge runaway potential.

The growth Nearmap is experiencing in its NA segment has accelerated past that of its more mature ANZ market. The NA portfolio offers a denser and larger market with an ARPS around double that of ANZ. However, the NA segment is not yet profitable since the company is still investing strongly there for future growth. Consequently, this means the company's current gross margin is only 17% for its NA segment. Compare this to the ANZ segment which delivered a gross margin of 88% for 1H20.

Nearmap's share price now

Nearmap's share price began dropping lower mid last year and was also heavily sold off prior to the market crash after updating its guidance. In addition, along with most growth shares, it was again significantly sold off during the coronavirus-led market crash. This left it sitting almost 80% lower within 12 months. Putting the recent 125% rise in perspective, it would still need to gain 120% to reach last year's high. 

With so many events contributing to Nearmap's share price decline, its tough to decipher just how much of this fall has been justified. Pleasingly, the current trading conditions appear not to be materially impacting Nearmap. The company is also continuing to invest in growth initiatives. 

In addition to annual contract value growth and segment performance, I will be looking to see a reduction in churn when Nearmap next updates the market. This has historically been low but recently doubled after the company lost a couple of significant customers in the autonomous vehicle industry. Nearmap has noted, however, potential future upside as the industry recovers.

Foolish takeaway

I like Nearmap shares and have been an owner for a number of years, holding through the crazy ride it has been of late. I believe in the company's future and can see Nearmap's NA segment following the same path its profitable ANZ segment took. Not to mention the potential for continued global growth Nearmap has cited. Think Singapore, the UK, Asia and Europe. Who knows where this ASX 200 tech could be in 5 or 10 years. I would be happy being a buyer today, provided you have the stomach to hold on and find out.

The post Up over 100% in 2 months. Are Nearmap shares still a buy at current prices? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
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• Here are the top 10 ASX 200 shares today
• Higher for longer? Why the ASX 200 just turned negative

Motley Fool contributor Michael Tonon owns shares of Nearmap Ltd. The Motley Fool Australia owns shares of and has recommended Nearmap 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.

Medical Developments International Ltd (ASX: MVP)

Familiarity is a great place to start when looking at what shares to buy. On the other hand, investing in an esoteric business can make you feel disconnected from the company. This can easily lead to a panic sale from a bump in the road. While Medical Developments may not be a household name, there's a chance you've either used or heard of its products.

Medical Developments' flagship product is the 'green whistle'. Less commonly known as the drug Penthrox. Penthrox has been reining superior over other pain relief drugs as it's fast-acting, non-addictive and self-administered. Its growth has, therefore, exploded in Australia and overseas, being used by paramedics, medical practitioner the defence force and more.

Medical Developments announced that it expects any negative impact caused by COVID-19 to be limited. In the last month alone it announced the approval for the sale of Penthrox in Thailand, Netherlands, Bosnia-Herzegovina and Hungary.

The list of countries where Penthrox is sold is growing fast, while sales are continuing to grow strongly in its first market, Australia. However, Penthorx only accounts for a little over half its revenue with the remaining coming from its medical devices segment. This segment accounts for medical devices including Space Chambers, masks and Breath-Alert Peak-Flow meters. These are also growing strongly in Australia with 1H20 up by approximately 45% compared to the prior corresponding period.

Its share price has rebounded strongly over the past two months following the market low at the end of March. However, it still has some 39% to go to reach its share price high prior to the market crash.

Aristocrat Leisure Limited (ASX: ALL)

Aristocrat Leisure is a gaming technology company which operates in over 90 countries. Its land-based business serving a range of products including electronic gaming machines and casino management systems saw revenue fall 6% in its recent half-year results. However, its digital portfolio which offers a range of apps is still growing strongly and was up 19% for the 6 months to 31 March 2020.

Aristocrat's shares are trading at just over half of what they were in February. This is after another fall following the release of results which were short of consensus expectations. However, North America and New Zealand venues plan to open again through a phased approach in May and June while the larger Australian states look to re-open in July.

The steady re-opening will see its land-based businesses begin to return to somewhat normal. Although, there's no knowing how long this may take. While this plays out, I believe Aristocrat's digital business can continue to grow strongly, making this, in my eyes, a great time to buy shares and open a position in the company.

The post 2 ASX shares to buy with $5000 today appeared first on The Motley Fool Australia.

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Michael Tonon owns shares of Medical Developments International Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Medical Developments International Limited. The Motley Fool Australia has recommended Medical Developments International 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.

To see how, we will start by looking at a persons total economic wealth, showing how they can move into the retirement phase from the accumulation phase more quickly.

Total economic wealth

At any time in a person's life, total economic wealth is represented as the sum of their financial capital and human capital.

What is financial capital?

Financial capital is basically the sum of all your assets minus your debts.To calculate your financial capital, add up all your savings, share portfolio, superannuation, properties etc, and subtract any debts such as mortgages or student loans you may have.

Obviously financial capital is lower for most people when they are younger as they have not yet had the time to grow their wealth. However, this is where people who are more responsible with their money can see it grow much faster as the effects of compounding take hold. This will help push them closer to their retirement phase.

What is human capital?

Human capital can be thought of as the present value of a person's expected income from employment throughout their entire life. As you enter the workforce, your human capital is at a maximum since you have the greatest number of years left to work until retirement. Hence as you age and work, your human capital decreases.

So what does this mean?

Roughly speaking, human capital and financial capital are inverse to each other. This can be seen through the chart below.

Chart by author

As a working person ages, their human capital begins to reduce as part of their future earnings are realised. A portion of this income will be saved and often used to pay down a mortgage. In addition, their superannuation will increase as it is paid by their employer. All of these items will increase their financial capital. This continues through the accumulation phase until enough financial capital has been raised to support them through retirement. 

So it appears that the solution to being able to retire early is by growing your financial capital as quickly as possible. This doesn't mean through risky investments, but instead by starting early and investing regularly. Which is where I believe ASX shares should come into the picture.

How to grow your financial capital

ASX shares have been a phenomenal tool for people to grow their financial capital. This is something I don't believe will change any time soon. In fact, looking into the majority of  superannuation funds, you will see large allocations to shares – both Australian and international.

Your superannuation in designed to support you during retirement, while our goal is to bring retirement forward. This means investing outside of your superannuation, regularly.

Growing a large portfolio to replace your income prior to retirement may sound daunting. However, one of my fellow writers has shown here that by investing just $1,000 a month you can achieve a share portfolio of $1,000,000 in less than 24 years. Breaking it down into monthly goals is a great way to make the process more achievable.

Of course the sooner you start the better, and I believe now is a great time when you're focusing on 10, 20 or 30 years down the road.

I would consider investments today in shares like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE) and BetaShares NASDAQ 100 ETF (ASX: NDQ).

The post How to retire early using ASX shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Michael Tonon owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and Washington H. Soul Pattinson and Company 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 basic idea

In November 2019, the Australian Bureau of Statistics found that an employee's average weekly total earnings was $1,256.20. Rounding this slightly we will work with an average annual income of $65,000. Meaning, to work part-time we would need to offset around half of this, or $32,500.

The basic idea is to initially invest consistently in growth-orientated shares. Building a large enough portfolio which can then be focused on dividend shares to generate a passive income of $32,500.

When chasing an income from ASX shares, I believe it pays to be prudent. This means not just choosing the shares with the highest yields, but instead looking into the future to see how sustainable those yields are. For this reason, despite a  number of shares offering dividend yields of up to 10%, I believe a more reliable and achievable yield would be around 5% to 7% when we consider franking credits. So let's take the middle ground and base our calculations on a 6% dividend yield for the portfolio.

This means, in order to generate $32,500 from a yield of 6%, we would need to grow a starting portfolio of $541,667.

Growing your portfolio

This is where the journey begins.

Growing a portfolio to $541,667 may initially sound a little like a fantasy. However, you may be surprised how quickly this could be achieved through consistent investing. 

In fact, if you were to invest just $1,000 a month and earn a market average return of roughly 10% per year, it would take just over 17 years to amass $541,667.

However, if you do your research well (and dare I say with a little luck) and manage to invest in growth companies which outperform the market, you could be working part-time much, much sooner. For example, if you had made investments into companies such as Altium Limited (ASX: ALU), A2 Milk Company Ltd (ASX: A2M) or even Macquarie Group Ltd (ASX: MQG) you would have significantly reduced the growing time.

Earning income from your portfolio

Once your portfolio has reached its capital goal ($541,667 in our average example) it will be time to slowly alter its holdings to dividend-focused shares. You may even have found that some of your growth shares are now paying meaningful dividends and can remain in the portfolio. However, to achieve your average 6% dividend return you will likely need to sell some of your growth shares and invest that capital into reliable dividend payers.

A few great ASX shares I would suggest to look at today when building an income-focused portfolio are Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Rural Funds Group (ASX: RFF), Dicker Data Ltd (ASX: DDR), and Vanguard Australian Shares High Yield ETF (ASX: VHY).

Foolish takeaway

Finding the right combination of shares to achieve your desired income may be a little tricky at first. Additionally, the income from your portfolio will be 'lumpy' as most companies pay dividends twice a year. However, over time and by choosing the right dividend shares, your income will also hopefully grow.

It may sound like a lot to take in. But, remember, this is the big picture. A great way to start will be by breaking it down into your monthly investments.

The post How to reduce your work to part-time using ASX shares appeared first on The Motley Fool Australia.

More reading

• How much do I need to retire on $120,000 a year at 55?
• Here are the top 10 ASX 200 shares today
• How I'd use ASX shares to build a second source of wealth
• VGS vs VHY: Which Vanguard ETF comes out on top?
• 3 ASX shares I'd buy if I were a beginner today

Motley Fool contributor Michael Tonon owns shares of Macquarie Group Limited, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited, Macquarie Group Limited, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of A2 Milk and Altium. 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.

Unless you watch the share market and have been investing for a while, you are probably looking for a 'set and forget' investment. In other words, you want to buy shares in a company that doesn't require you to constantly keep up to date with its reports. You want something that can be a consistent grower but is on the safer side of the risk profile.

For these reasons, I would start by looking within the S&P/ASX 200 Index (ASX: XJO). In fact, I would start by looking at the below companies as I believe they make great candidates if you're looking to invest today on your children's behalf.

Washington H. Soul Pattinson and Co Ltd (ASX: SOL)

I would be hard-pressed not to recommend an investment house like 'Soul Patts' as a candidate for a child's portfolio. It has been listed and paying dividends for over 100 years.

Additionally, it has far outperformed the All Ordinaries (ASX: XAO) since 2000. Soul Patts' managing director, Todd Barlow, recently commented: "Over the last 20 years to 31 January 2020, an investment in WHSP with dividends reinvested has increased by 11.1 times while the Index has increased just 4.2 times."

Soul Patts makes its money through a diverse range of investments – from stakes in ASX shares such as TPG Telecom Ltd (ASX: TPM), coal miner New Hope Corporation Limited (ASX: NHC) and building supplies manufacturer Brickworks Limited (ASX: BKW), to investments in unlisted equity, real estate and credit.

If there was a downside, it would be that Soul Patts does not currently offer a dividend reinvestment plan. This would mean, depending on the size of the investment, you would have to manually reinvest the dividend payments periodically (if you're so inclined).

Altium Limited (ASX: ALU)

Altium is a bit more of a growth story when compared to Soul Patts. It does currently pay a small dividend, however, which will likely increase long term. But its return is likely to be more skewed towards capital growth, which I think is ideal when trying to grow a portfolio long term as you are not required to pay any capital gains tax until the shares are sold. 

Altium has grown strongly recently, pushing it well into the ASX 200. The demand for its software has been growing and it is currently aiming to achieve 100,000 Altium Designer subscribers by 2025.

In addition, Altium recently noted that it is "operationally and commercially well positioned, with electronic design anticipated to be relatively resilient to weather the prevailing and unfolding market conditions". This gives me confidence in the short term, with a tailwind provided by the Internet of Things boom and its growing market share giving me confidence for the longer term.

Foolish takeaway

I would be happy to purchase both of these companies for a child's portfolio with a long-term view. Alternatively, if you're looking for something requiring less 'thought', an investment in the BetaShares Australia 200 ETF (ASX: A200) is an option. This gives you a portion of each of the largest 200 ASX-listed companies and has a dividend reinvestment plan.

The post Buy these ASX 200 shares for your kids today appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Why is the ASX 200 falling to a 4-day low today?
• 5 things to watch on the ASX 200 on Thursday
• How much do I need to retire on $120,000 a year at 55?
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Michael Tonon owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Altium. 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.

So, are you looking for a few great dividend investments and have a spare $1,000 to invest in each? Below are 3 ASX shares I believe are attractively priced and paying a strong yield. 

Tassal Group Limited (ASX: TGR)

Tassal group recently announced that it is favourably viewing changing market trends brought on by the coronavirus. Australia's largest salmon farmer believes a trend towards healthy eating, home cooking and food traceability to be a positive for Tassal's outlook. It has also noted that overall market dynamics for salmon are remaining positive, with further investment in both salmon and prawn operations to continue in order to drive long-term growth.

Tassal is on track to grow its second-half harvest and sales after announcing a new strategy. This strategy is to hold and grow fish longer, with larger fish generating larger margins.

For these reasons, I think Tassal currently offers an exciting dividend future. Coupled with its lower share price today, I believe it provides an attractive entry point and offers investors a grossed-up 5.3% trailing dividend yield.

WAM Global Ltd (ASX: WGB)

WAM Global is a listed investment company (LIC) from Wilson Asset Management. It targets compelling undervalued growth companies from outside of Australia. 

Its last investor update in March noted close to 60% of its holdings were in the US and that it had a portfolio cash weighting of 19.5%. This cash weighting is up from 10.5% in the month prior, consequently making it look like management has been increasing its cash holding to be able to take advantage of beaten-down asset prices. Time will tell.

I like WAM Global for its diversified exposure outside of Australia. Being a LIC, it also has additional control in its dividend payments with an ability to 'smooth' payments even as profits fluctuate.

WAM Global's most recent dividend of 3 cents per share was an increase of 50% over its prior payment. This gives it an annualised grossed-up dividend yield of 4.46%.

Dicker Data Ltd (ASX: DDR)

Dicker Data is a distributor of computer hardware, software and cloud solutions. Recently, it has been performing strongly thanks to the growth in employees working from home.

In fact, March was reported as its strongest month to date and saw the company plan to grow its dividend by 31% in FY2020. Of course, the Dicker Data share price jumped at the news, but that doesn't mean it's too late for income-orientated investors to get excited. 

Dicker Data offers investors a grossed-up, forward dividend yield of 7.12%, which it pays out quarterly via 3 interim and 1 larger final dividend. It also has a company policy to pay out 100% of after-tax profits to shareholders. This equates to increasing dividends if management can continue its strong performance in profit growth.

On this note, I believe the coronavirus may have acted as a catalyst for employers. As they begin realise some of the benefits from remote working, I believe demand for Dicker Data's products can continue to grow from here.

Additionally, despite the recent strong performance, Dicker Data announced a capital raising this week. The proceeds will be used to provide balance sheet flexibility and support long-term growth objectives. In contrast to the many ASX shares currently raising capital at beaten-down share prices, Dicker Data's share price has been performing well recently, with capital being raised at $6.70 per share.

Using this capital to support long-term growth, Dicker Data should be able to continue growing profits, with dividend growth following suit.

The post Do you have $3,000 to invest in these 3 top ASX dividend shares? appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor Michael Tonon owns shares of Tassal Group Limited and WAMGLOBAL FPO. 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.

While it is quite easy to open a brokerage account online, transfer money into it and purchase shares, the way you structure your portfolio is very important and should be your first consideration. After all, it can be difficult and expensive to change it down the road.

Your portfolio from a distance

I would suggest a well-diversified portfolio ranging across a variety of sectors and global economies. But don't panic. Gaining exposure to global economies is easy on the ASX through the use of exchange-traded funds (ETFs) and listed investment companies (LICs). Both ETFs and LICs trade each day on the exchange just like normal shares.

Just as there are many ways to skin a cat, there are many ways to structure a portfolio. This is highly dependent on personal needs and other assets owned by the investor, such as real estate. However, I believe the below portfolio structure would provide a great entry point for the average new investor. 

This example portfolio has 60% allocated to individual company shares and 40% allocated to the 'base layer' which consists of ETFs and LICs. Within this base layer allocation, 32% of the portfolio is weighted to international shares and 8% to domestic shares.

Buying ASX shares

The 'base layer'

I would start by building your 'base layer'. I like the idea of a base layer. It gives the portfolio a strong foundation of sector diversification and global exposure, shielding it from any significant shocks delivered by individual companies.

ETFs and LICs can provide investors access to a large number of companies through a single trade and usually track a particular index, sector, country or region. Therefore, this makes them great options for building international exposure and diversification into your portfolio.

Here are some ETFs and LICs I like which might be worth a closer look:

• BetaShares NASDAQ 100 ETF (ASX: NDQ) provides investors exposure to many of the largest tech companies in the world which are listed on the American Nasdaq exchange.
• WAM Global Ltd (ASX: WGB) invests in quality, undervalued international shares and is currently trading at a decent discount to its net tangible assets.
• BetaShares Asia Technology Tigers ETF (ASX: ASIA) invests in some of the largest tech companies in Asia, excluding Japan.

Individual company shares

This is the part of the portfolio which I think is the most exciting due to the potential for large company returns. However, it can be easy to get lost down the rabbit hole. So I think it's important for investors to do their own research and choose companies they can understand. Additionally, I believe a long-term focus is paramount and the source of truly great returns.

Your risk tolerance is another important consideration when buying ASX shares. Here you could steer your investments towards larger 'blue-chip' shares for lower risk tolerance, or add a few small to mid-cap companies with higher growth potential for a greater risk/reward trade-off. Either way, it's important to understand your financial needs and risk tolerance prior to making any of these investments.

Initially, I would suggest investing in at least 8-10 individual companies in addition to the 'base layer', with plans to grow this number and add more in the future.

You should also still try to aim for diversification between your individual companies. The below chart shows the 11 sectors and their respective weightings in the S&P/ASX 200 Index (ASX: XJO). Here you can see that the ASX is heavily skewed towards financials, and I wouldn't suggest trying to structure your portfolio to match these weightings.

Rather, the chart does show the different ASX sectors to consider making investments in. And while I don't think you need to stress over finding an investment in all of them, I would suggest aiming for at least half.

Additionally, I would suggest not choosing too many companies in any single sector, but instead maybe choosing 2 or 3 of your favourite investment ideas from each sector you are investing in.

A few companies I currently like for the long term are Challenger Ltd (ASX: CGF), Audinate Group Ltd (ASX: AD8), Altium Limited (ASX: ALU) and Nearmap Ltd (ASX: NEA).

Foolish takeaway

Structuring your portfolio in this way provides it with strong diversification, while also giving you a chance to outperform the market by allocating over half of it to individual companies you believe will outperform in the long term.

While I would suggest checking in on your portfolio company and sector weightings from time to time, I wouldn't suggest trimming or readjusting too frequently. Instead, allow your winners to keep winning. This can lead to oversized returns and save on brokerage fees.

If you've decided that you want to start share market investing, take a look at the Fool's beginner's guide to investing in ASX shares.

The post How to build your first ASX share portfolio appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Why is the ASX 200 falling to a 4-day low today?
• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• Higher for longer? Why the ASX 200 just turned negative

Motley Fool contributor Michael Tonon owns shares of BetaShares Asia Technology Tigers ETF, Challenger Limited, Nearmap Ltd., and WAMGLOBAL FPO. The Motley Fool Australia owns shares of and has recommended AUDINATEGL FPO, BETANASDAQ ETF UNITS, BetaShares Asia Technology Tigers ETF, Challenger Limited, and Nearmap Ltd. The Motley Fool Australia owns shares of Altium. 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.

Even just 1 ASX share with a return of 1,000% or more is enough to supercharge the returns of your share portfolio. To see this, consider the following example of 2 simple $10,000 portfolios containing shares in 10 companies. 

The example

For simplicity, assume both portfolios contain equal $1,000 amounts in each of the 10 shares. 

Portfolio 1

For portfolio 1, assume an annual return of 10% per year. This gives us the following portfolio value after 5 years:

Portfolio Value = $10,000 x [(1.1)^5] = $16,105

Portfolio 2

For portfolio 2, also assume an annual return of 10%. However, this will only be for 9 shares in the portfolio, with the 10th share returning 1,000% over the 5 years – or a compounding annual return of 61.54%. After 5 years, the value of the portfolio would be:

Portfolio Value = $9,000 x [(1.1)^5] + $1,000 x [(1.6154)^5] = $25,495

Portfolio Comparison

As you can easily see in the chart below, just finding one of these '11 baggers', or shares returning 1,000%, is enough to significantly boost your portfolio returns. By a difference of an amazing 58% in just 5 years in the above example.

2 ASX shares returning 1,000% over the last 5 years

While there would have been a number of companies reaching this coveted return over the last 5 years, most would be unknown to the majority of investors. However, I'm sure many people have heard of A2 Milk Company Ltd (ASX: A2M) and/or Altium Limited (ASX: ALU). Both of these companies have given investors the chance at a 1,000% return in the past 5 years.

a2 Milk

a2 Milk shares listed on the ASX just over 5 years ago, selling for just 56 cents per share. However, a couple of months later in May 2015, the shares closed for just 47 cents. At the time of writing, a2 Milk shares are trading today, 5 years later, at a staggering $18.37 each. This is an astonishing 39 bagger in just 5 years. Or a return of 3,800%.

Altium

If you were lucky enough to pick up shares in the PCB software company in August 2015 at $3.71, you would've been sitting on a return of 1,049% in February this year prior to the market crash. However, even despite this crash, the return today would be a massive 857% or a '9 and a half bagger'. But only if you had managed not to sell the shares in the meantime.

Foolish takeaway

As shown above, managing to find and invest in just a single company with these returns can have dramatic results for your portfolio's performance.

Of course, shares like these are not easy to come across, and often even harder to hold onto during the often volatile ride to a 1,000% turn. Both a2 Milk and Altium experienced significant drops along the way.

However, finding growth companies early, within a large expanding industry, and spreading your funds over multiple candidates for the long term is one way to increase your chances of owning one in your portfolio.

The post 2 ASX shares returning over 1,000% in 5 years appeared first on The Motley Fool Australia.

More reading

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• Are A2 Milk shares a buy, hold or sell following results?

Motley Fool contributor Michael Tonon has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk and Altium. 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.

In saying this, I still buy and hold dividend paying companies. My portfolio just has a skew towards those offering growth. I believe there are many great options offered by the ASX right now, however the 2 below are among my favourites to buy this week.

Nearmap Ltd (ASX: NEA)

Nearmap provides aerial imagery to broad business sectors including construction, engineering, solar and government. Despite the loss of 2 large enterprise customers in 1H20, it still managed to grow its annualised contract value (ACV) by 23%. This growth was delivered thanks to an 8% increase in subscriptions and 14% growth in the average revenue per subscription (ARPS).

Nearmap shares have jumped recently off the back of a positive announcement to the market. However, I still think they offer long term investors a great risk/reward trade off. Its announcement noted that it has not seen a material impact on its current trading conditions due to the coronavirus crisis. In addition, it is taking cost management initiatives to maintain a strong balance sheet, with the intention of reaching cash flow break-even by the end of FY 2020. 

After its strong domestic growth, Nearmap's business has also grown strongly in the US market. The larger, more densely populated US market offers significantly higher ARPS, meaning the runaway for its US portfolio is far greater than that of its domestic one. In addition, as Nearmap looks to expand globally in the future, these more favourable market dynamics should help to bolster its growth. I'm certainly excited to see where it will be in 5 and 10 years time.

Megaport Ltd (ASX: MP1)

Megaport provides 'elastic interconnection services' to companies around the world. Its unique network-as-a-service (NaaS) offering allows customers an elastic capacity, with flexible terms where you only pay for what you use. This is in stark contrast to traditional fixed network capacity, with lock-in, long-term contracts and expensive pricing models.

It already has a growing global network across 21 countries with major customers including Tesla, Amazon, Disney, and Ramsay Health Care Limited (ASX: RHC).

Megaport recently announced a 19% increase in its monthly recurring revenue. This was driven by a lift in customer numbers and an increase in the total number of services. Its path to profitability remains firmly on track, thanks to continued execution, network expansion and operational goals. This path is evident through its significantly improving earnings before interest, tax, depreciation and amortisation margin.

After recently completing a capital raising, Megaport plans to use the proceeds for accelerating growth. The funds will drive an expansion of the sales team, increased software and product development, an expanding footprint, upgrades to its core network and also provide a source of funds for strategic opportunities.

Megaport provides an exciting opportunity to customers through its platform – excitement that I believe is mirrored for shareholders who are willing to hold on for a long ride.

The post 2 top ASX growth shares to buy this week appeared first on The Motley Fool Australia.

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Michael Tonon owns shares of Nearmap Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of MEGAPORT FPO. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. The Motley Fool Australia has recommended MEGAPORT FPO and Ramsay Health Care 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 certainty and frequency of your previous paycheck certainly helps to organise your expenditures. While you could place your retirement savings into an annuity to provide a fixed and periodic payment, the returns often leave much to be desired. 

However, there is an alternative. I believe ASX shares can offer retirees a relatively reliable and frequent income through dividend payments. Despite most companies paying dividends twice a year, there are some which spread out dividend payments even further, offering quarterly dividend payments.

Below are 3 ASX shares which I believe currently offer attractive quarterly dividend payments. 

Rural Funds Group (ASX: RFF)

Rural Funds is one of my favourite dividend-paying ASX shares. It owns and leases a diversified portfolio of agricultural farmland and feedlots which are geographically diversified across Australia.

Most of its leases are from quality listed and corporate entities such as Select Harvests Limited (ASX: SHV) and Treasury Wine Estates Ltd (ASX: TWE). In addition, its leases have a weighted average lease expiry of 11.5 years and are structured to include rental growth. This gives management the ability to consistently increase its dividend payments – something it has done every year since listing in 2014, even recently during the coronavirus pandemic.

Another benefit is its quarterly dividend. Rural Funds' dividend is paid on the last day of January, April, July and October. At the time of writing, Rural Funds shares have a forward dividend yield of 5.8%.

Dicker Data Ltd (ASX: DDR)

The Dicker Data share price has performed strongly recently. After making a positive announcement to the market on Wednesday, its shares are up over 10% just this week. 

With so many Australians currently working from home, Dicker Data has been benefiting from the spike in demand for remote working solutions. In fact, it even recorded its highest-ever revenue in March – when coronavirus panic was peaking. At this stage, the company intends to pay a full-year dividend of 35.5 cents per share, which represents a 31.5% increase over FY19.

Dicker Data pays its shareholders quarterly distributions in the months of March, June, September and December. It has a policy of paying 100% of after-tax profits to shareholders in dividends. While this may make its distributions more erratic than others, it has done a great job in the past of growing its payments.

Dicker Data currently offers an FY20 grossed-up dividend yield of 7.3% (at the time of writing).

Vanguard Australian Shares High Yield ETF (ASX: VHY)

Another great dividend option on the ASX, one which offers a diversified yield paid 4 times a year, is the Vanguard Australian Shares High Yield ETF. This ETF provides exposure to a range of high-yielding dividend shares. BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA) and Telstra Corporation Ltd (ASX: TLS) are all part of its top 10 holdings. 

This is a great diversified option as its dividend payments are financed by a group of high-yielding ASX shares, with no more than 40% of the total ETF invested in any one industry.

Paid in January, April, July and October, this ETF currently trades with a forecast grossed-up dividend yield of 7.0%.

Foolish takeaway

Each of the above ASX shares offers quarterly dividends, further spreading your income throughout the year. However, the trick is how you group them. Look to combine them with other ASX shares which pay out dividends at different times, in different months. By combining a basket of the right dividend-paying shares, you could build yourself a portfolio that provides an income every 2-4 weeks. 

For an example of combining 4 companies to provide a monthly income, check out my article: How to earn $5,000 every month from ASX shares.

The post How to earn more frequent retirement income from ASX shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Michael Tonon owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited, RURALFUNDS STAPLED, Telstra Limited, and Treasury Wine Estates 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.

I think if you were to ask most investors when the best time to start investing is, they would tell you 'now'. Not necessarily now as in May 1, 2020. But now in the timeless sense. In other words, 'now' would be the answer to this question regardless of when it was asked.

I would also be one of those investors to answer 'now' if asked. Generally, the sooner you commence your investing journey, the better off you are in the long run. There's plenty of evidence out there to back this up.

Waiting for the market to fall?

Sitting on the sidelines trying to time an investment can easily see you missing out on that investment and its future returns. This happens to people waiting for the share price to drop just a little lower, with an arbitrary purchase price anchored in their mind. Or maybe they're waiting until the uncertainty of COVID-19 clears. Or when the likely recession is over. But by that time, the sentiment will already be reflected in the higher share prices.

Don't think that will happen to you? You're not alone. But emotions take over and soon shadow the logical thinking part of your brain. Often without you realising.

Not buying the shares today because they have risen 10% or 20% in the last couple of weeks can often lead you to not buying the shares at all. I've been there. Falling victim to my emotions. However, I'm slowly learning to control them. Learn to listen to your logical mind instead, and hold firm to the convictions it's made. It knows better than your impulsive, emotional mind. Strengthen your mind's 'system 2' if you're familiar with Nobel laureate Daniel Kahneman.

Many investors anchor their purchase price to a recent low the shares have traded at. Hoping to be able to buy the shares at that price, but usually not having bought them when they actually traded at that price. Thinking next time the shares drop back down (if it happens) they will pile in. But next time is always different, and a crashing share price can be scary to buy.

Nonetheless, remember you're buying a business. A business which probably didn't materially change over that short period of share price volatility.

The 1st of May

So 'now' just so happens to be May 1, 2020. However, I believe it to be the best time to start investing for an additional reason.

Looking back at any share market crash, investors who continued to invest throughout it have been strongly rewarded. 

The All Ordinaries (ASX: XAO) is down 23% and the S&P/ASX 200 Index (ASX: XJO) is down 22% from highs back in February, along with many great Australian businesses. Some are down further. Sure they were sitting even lower in March and may drop to those levels again, or even further.

No one knows, and I believe they're fooling themselves if they think they do. Don't let them fool you too. The one thing I know is that I don't want to be caught on the sidelines.

The post Is May the month to start investing in ASX shares? appeared first on The Motley Fool Australia.

More reading

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• Higher for longer? Why the ASX 200 just turned negative

Motley Fool contributor Michael Tonon 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.

Amongst the myriad of capital raisings, dividend cuts and earnings downgrades caused by COVID-19, there are some ASX shares which look set to benefit from changing trends.

A positive update released this morning in relation to COVID-19 by Australian salmon farmer Tassal Group Limited (ASX: TGR) has seen its shares jump 3%. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is up 0.3%.

How has COVID-19 changed Tassal's market?

Recently, the majority of Australians have needed to change the way they live. This has been brought about by the government restrictions imposed in an attempt to stop the spread of COVID-19. However, when people's daily habits are changed, new habits and trends start to form.

The majority of new trends have created a negative economic impact for most companies. Think fewer people spending money thanks to shops and restaurants being closed, less travel and a growing unemployment rate. However, early trends regarding the behaviour of Tassal's customers have been noted as a positive.

Consumers are currently forced to spend more time at home. This means more home-cooked meals and less eating out, which creates a strong demand for Tassal's domestic retail market. 

In addition to this, consumer confidence is currently low. Meaning, consumers are currently more careful on how they spend their money. Therefore, choosing a home-cooked meal becomes more likely than ordering takeaway or eating out at a restaurant when the option returns.

Tassal also noted a rise in consumer demand for sustainable products that have open traceability, with Australian made/grown produce they can trust being important to customers.

The company also considers itself to be a beneficiary from the increase in online traffic, with online delivery becoming the new 'norm'. As a result, late adopters of online shopping will become more comfortable with the process, leading to a long-term benefit from an increase in eCommerce and home delivery. Consequently, this also supports Tassal's domestic retail market – a market which has a greater value when compared to its export market.

FY20 outlook

Tassal's first-half results released in mid-February noted a strategy to drive growth in its harvest and sales for 2H20 and beyond. Today, the company reaffirmed its forecast for a material increase to its live biomass for FY20 compared to the prior corresponding period. This will be driven by a focus on sustainable farming and fish health practices, with bigger salmon generating larger margins.

In addition, Tassal has increased its forecasted prawns harvest by around 4%, with further growth expected in FY21 and beyond. The company cited a staged expansion of its farming operations to provide the growth.

Should you buy Tassal shares?

I like Tassal shares for its mix of growth and income and somewhat defensive earnings. In 1H20, it reported basic earnings per share of 20.62 cents while paying 9 cents of this out to shareholders as an interim dividend. This gives Tassal shares a tidy grossed-up trailing yield of 5.2% on current prices. However, this means that it still reinvested the majority of its earnings (the other 11.62 cents per share) into the company to provide future growth.

If we annualise its first-half earnings, we see that Tassal currently trades on a price-to-earnings (P/E) ratio of 10.77. However, I believe Tassal's P/E to be lower than this thanks to its forecast for strong harvest and sales in the second half.

Considering its yield and future growth, I believe this makes Tassal shares attractive today and would be happy to make an investment.

The post COVID-19 is changing the way Australians eat: How is this ASX 200 salmon farmer benefiting? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Why is the ASX 200 falling to a 4-day low today?
• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• Higher for longer? Why the ASX 200 just turned negative

Motley Fool contributor Michael Tonon owns shares of Tassal Group Limited. 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.

I believe ASX dividend shares offer retirees the most valuable source of income. True, share prices can be volatile. And many have been due to the recent coronavirus bear market.

But many are still paying out dividends to investors despite lower share prices. This shows that dividends typically tend to be 'smoother' over the long term when compared to a company's share price. And it is this dividend which is so valuable to retirees as a source of income for living expenses.

In addition, I can't fathom the enormous sum of money you would require to be able to live of bank interest. The future is not much brighter in this regard as economists at Westpac Banking Corp (ASX: WBC) expect the cash rate to remain at 0.25% until at least the end of 2023.

With that in mind, below are 3 quality ASX shares which I believe offer a great source of income for retirees.

Dicker Data Ltd (ASX: DDR)

Dicker Data is a leading distributor in Australia for technology hardware, software and cloud solutions. Its shares have seen consistent insider buying over the past few months with a number of directors increasing their holdings. This is seen as a bullish sign as directors would be thought to know the company better than most.

Dicker Data has also seen strong growth recently, with demand for its products increasing over the past few years. In fact, revenue in FY19 grew by 17.9%, net profit after tax (NPAT) was up 67.3% and its ordinary dividend increased by 38.6%.

The company has a policy to pay out 100% of after-tax profits as dividends. On current prices, Dicker Data has a trailing grossed-up dividend yield of 6.6%, not including a special dividend which was also paid during FY19.

Telstra Corporation Ltd (ASX: TLS)

Retirees have included Telstra as part of an income portfolio for many years. I believe the telco's defensive and recurring revenue should help it to maintain paying dividends to shareholders during the current market crisis. Additionally, analysts at Goldman Sachs believe Telstra shares to be undervalued, recently retaining their buy rating and $4.20 price target.

Telstra cut its dividend at the beginning of 2019. This was thanks to a decline in profit which was largely blamed on the impact of the NBN. However, with Telstra now paying a lower dividend, and given the defensive nature of its revenues and cost-cutting strategies, its current dividend appears relatively safe in my view. Telstra currently offers investors a grossed-up trailing dividend yield of 7.5% (inclusive of NBN special dividends).

Tassal Group Limited (ASX: TGR)

Tassal Group is Australia's largest salmon farmer and has recently included prawns into its portfolio. Prawn sales to Coles Group Limited (ASX: COL) commenced in February, with prawns having a higher $/kg yield when compared to Tassal's traditional salmon sales.

Tassal Group is also forecasting a stronger second half and earnings growth in FY20 and beyond. However, this outlook was provided in mid-February and no updates have been provided since in relation to COVID-19.

Tassal shares have not been protected from the recent share market declines and have been sold off along with the broader market. However, I believe it to offer more defensive earnings than many companies since we all still need to eat. As such, I think Tassal shares offer great value today and provide a grossed-up trailing dividend yield of 5.3% on current prices.

The post 3 ASX dividend shares to own in retirement appeared first on The Motley Fool Australia.

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• Would I buy Telstra shares with $5,000 as they near a 52-week low?

Motley Fool contributor Michael Tonon owns shares of Tassal Group Limited. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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.

Earning an income from ASX shares every month of the year can certainly help you to organise your money. After all, this is easier to do when you have a steady income throughout the year as opposed to a couple of large lump sums paid 6 months apart. 

However, many ASX shares pay their dividends around the same time as each other. This can make it difficult to find an income source for the remaining months of the year. 

Luckily, I've done some digging and found a combination of quality ASX shares which solves this problem. And with the right investment amount, you could earn a $5,000 income every month of the year by investing in these ASX shares (subject to the dividend payments being maintained, of course).

$5,000 income for January, April, July and October

Most companies on the ASX only pay a dividend every 6 months. However, some offer dividends paid out quarterly.

The Vanguard Australian Shares High Yield ETF (ASX: VHY) provides exposure to a range of high-yielding dividend shares on the ASX. This diverse group includes large miners, telcos and of course, the big banks. 

Although many of these companies are likely to cut their dividends in the short term, as evidenced by VHY's reduced April 2020 payment, I would still estimate this ETF being capable of providing a forward yield of around 5.2%, not including franking credits. 

This would mean that to earn $5,000 for each of these 4 months (a total of $20,000), you'd need to make an investment of $384,615 into the ETF on current prices.

$5,000 income for February, May, August and November

Rural Funds Group (ASX: RFF) is another company to offer quarterly dividends. Although it pays a dividend on the last day of the previous month to those listed above, I'm still happy to include this in our list for these months' income. After all, what is 1 day?

Rural Funds has historically provided reliable income to shareholders, even recently increasing its dividend after reaffirming guidance last month.

This means its shares now offer a forward yield of approximately 5.8% on current prices. So, an investment of $344,828 today would give you an income of $5,000 for each of these 4 months based on this forward yield.

$5,000 income for March and September

Income for the months of March and September can be provided by Telstra Corporation Ltd (ASX: TLS). Telstra is one of Australia's largest companies with a relatively defensive nature. Historically, it has been a strong dividend payer despite semi-recent cuts being made thanks to a decline in profit due to the impact of the NBN.

Despite those dividend cuts, I believe the company's defensive nature and cost-cutting strategies positions it for continued dividend payments. Telstra shares currently trade on a trailing dividend yield of 5.3% (inclusive of the NBN special dividend). So, an investment of $188,679 would be required to earn $5,000 in income for both March and September based on this trailing yield.

$5,000 income for June and December

Westpac Banking Corp (ASX: WBC) pays shareholder dividends in June and December. There has recently been a lot of uncertainty surrounding the dividend future of the big 4 banks. However, while the RBA is encouraging a reduction, it is comfortable for the banks to continue paying dividends.

If we assume the broker consensus estimate for FY21 dividends of $1.42, Westpac shares currently trade with a forward dividend yield of 9.2%. Meaning, an investment in Westpac of $108,696 would be required to receive $5,000 in both June and December – assuming the consensus estimates and dividends are equally split across the 2 months.

Foolish takeaway

Putting all of these investments together would require an initial investment of $1,026,818. A substantial amount to be sure, but it would provide you with $5,000 of income every month based on current prices and dividend estimates. Plus a strong chance of these dividends growing over time.

Of course, you'll be able to find higher-yielding ASX shares to buy right now. But they may run a greater risk of experiencing dividend cuts or provide an unevenly distributed income. In any case, it's important to remember that dividend payments are in no way guaranteed, especially in the current highly uncertain environment.

The 4 ASX shares (and amounts) above are just 1 example. And ideally, you would diversify each month's income even further, with a number of different shares providing the income.

Nonetheless, I believe these 4 are relatively well-diversified from each other and provide an evenly spread stream of income, which could help you to manage your cash flow.

The post How to earn $5,000 every month from ASX shares appeared first on The Motley Fool Australia.

More reading

• Another RBA interest rate hike could be just weeks away. Here's what the big banks think
• How much superannuation is needed to target a $50,000 annual passive income?
• How much do I need to retire on $120,000 a year at 55?
• Would I buy Telstra shares with $5,000 as they near a 52-week low?
• CBA vs Westpac shares: Which is the best buy?

Motley Fool contributor Michael Tonon owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and 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.

If you are currently in your 50s, I'm sure you are looking forward to retirement. You may be considering putting together a share portfolio of dividend-paying companies to help fund your retirement, but you're worried time is running out.

Obviously you have less time than if you were 10 years younger. But there's a quote I wish to paraphrase: "The best time to invest is 10 years ago. The second best is today".

Besides, being in your 50s may give you an investment period of around 10 years before retirement. A decent stretch to experience the effects of compounding. Not to mention the time during retirement.

You probably already have a super fund, but depending on its size you may want to supplement this to improve your retirement lifestyle. Or to even help you retire early. That's where dividend-paying ASX shares come into the story.

What to look for on the ASX

During retirement, since you are living off the proceeds from your share portfolio, I believe your primary concern would be its dividend payments, with capital appreciation or preservation likely being a secondary concern. Simply put, would you be as concerned with your portfolio dropping 20% over the short term if its dividend payments are still maintained?

So, in my view, you want to look for companies which have a strong history of dividend payments. And also a strong history of dividend growth.

Consider Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). 'Soul Patts' has paid a dividend every year since 1903, with an ordinary dividend compound annual growth rate of around 11% since 2000.

At the time of writing, Soul Patts has a grossed-up dividend yield of 4.8%. And if it were to sustain its 11% dividend growth rate over the next 10 years until your retirement, its effective dividend yield would grow to 13.6%.

Putting this simply, an investment of $100,000 today could yield you almost $14,000 (including franking tax credits) in your first year of retirement. And if Soul Patts' dividend record remains intact, this payment would grow and continue to be paid every year. All from that initial $100,000 investment. Not to mention the opportunity for capital growth, where Soul Patts has outperformed the All Ordinaries (ASX: XAO) by an average of 2.6% per annum over the past 15 years.

Other ASX dividend shares to buy

If you're planning on buying dividend shares to fund or subsidise your retirement, I would recommend buying a minimum of around 8 to 10 different companies. After all, if one company begins to struggle economically, you don't want to lose your entire living allowance.

Macquarie Group Ltd (ASX: MQG) also boasts a strong dividend history with a compound annual dividend growth rate of 13% since inception in 1996. This is despite dividend cuts during the GFC.

A more stable dividend option might be Rural Funds Group (ASX: RFF). Rural Funds recently confirmed its 4% dividend increase despite current economic conditions. This is an increase it plans to implement every year over the long term thanks to its long-term lease agreements.

Listed Investment Companies (LICs) can also be a great way to receive dividend income. Aside from the obvious diversification benefits, they also have the ability to 'smooth' dividend payments. This is because they can payout both capital gains and dividends received as distributions to shareholders, holding onto extra profit in one period to pay it out in another. With WAM Leaders Ltd (ASX: WLE) holding some of Australia's largest public companies, I believe it will be a great dividend-payer over the coming years.

The post In your 50s? Here's why it's not too late to start an ASX share portfolio for retirement appeared first on The Motley Fool Australia.

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Motley Fool contributor Michael Tonon owns shares of Macquarie Group Limited, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company 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.

It's easy to feel lost when stepping into the confusing world of investing. This feeling can make you uncomfortable about putting your money into the market. And rightfully so. Using your savings to buy shares in a company you don't really understand can leave you sleepless at night wondering if it will go broke. 

But it doesn't need to be this stressful.

The S&P/ASX 200 Index (ASX: XJO) is home to many large and fantastically-run Australian businesses, with many being household names and simple to understand. Investing in these businesses should help you become more comfortable with the process. After all, when it comes to investing, it's important to know what you own and why you own it.

Being comfortable with your investments should help you to remain invested for the long term – which is when the real magic of compounding happens. Not to mention the extra sleep you'll get.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

One way I believe it's possible to keep investing simple and stress-free is through an investment in Washington H. Soul Pattinson, or 'Soul Patts'.

Soul Patts is an investment house which owns a diversified portfolio of investments. So, investing in Soul Patts basically means you are gaining instant exposure to a broad range of companies and industries. These include stakes in ASX-listed companies, private companies, real estate and fixed income.

Another way of looking at it is making an investment in the management team at Soul Patts. Investing in their expertise to make investments which have outperformed the All Ordinaries (ASX: XAO) by an average of 2.6% per annum over the past 15 years. 

You can also sleep well at night knowing that Soul Patts has been listed on the ASX since 1903. And in this time, has never failed to pay a dividend.

Transurban Group (ASX: TCL)

Transurban is Australia's largest toll road operator and also has tollways in the US and Canada. This is a relatively simple business to understand, and one which until recently was seeing a steady increase in demand.

Since Transurban collects revenue from road users, this was steadily rising thanks to increasing traffic conditions and the completion of projects. However, due to the current lockdowns and restrictions on travel, the company has seen recent traffic volumes almost halve.

This dramatic fall in traffic will lead to lower revenues and subsequently, unfortunately for income investors, a reduced dividend. At the beginning of April, Transurban withdrew its dividend guidance for FY20, instead advising that it expects to pay a distribution in line with free cash, excluding capital releases.

Nonetheless, the market is forward-looking by nature, pricing a company's future earnings potential into its share price. So although the short term will be painful for Transurban, I believe its current share price reflects this outlook.

Additionally, Transurban has advised it has sufficient liquidity to meet its capital and debt requirements until the end of FY 2021. This means the company looks to be in a comfortable position until it sees a return in traffic volumes. Not to mention a large pipeline of future projects to help grow future earnings.

BHP Group Ltd (ASX: BHP)

The metals and mining sector is home to over 700 public companies, the most compared to any other sector on the ASX. However, I would class many of these as wildly speculative investments, with enormous share price volatility leading to a more stressful investment.

But with that being said, some of these companies are Australia's largest and oldest, such as BHP.

In 1885, BHP listed on the (now) ASX. It was established by a syndicate of 7 men from the Mt Gipps sheep station and became The Broken Hill Proprietary Company Ltd. 

BHP has diverse operations extracting and processing minerals, oils and gas in many countries around the world. It has relatively low costs of extraction and its diversified nature provides it with some protection from a price drop in any single commodity.

I believe the reliance on its products will be high for a long time to come, meaning BHP would make a great 'set and forget' investment in my eyes.

The post Keep investing simple: 3 ASX 200 shares to buy today appeared first on The Motley Fool Australia.

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Motley Fool contributor Michael Tonon owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Transurban Group. 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.