It sounds like every income investor's dream. A stock with a dividend yield over 8% that also pays monthly dividends? I'm sure that sounds about as real as the Easter Bunny, right? Well, as it turns out, dreams really do come true on the ASX.

Allow me to introduce you to the Metrics Master Income Trust (ASX: MXT).

Let's get LIT

MXT is a Listed Investment Trust ('LIT'). Similar to a managed fund, an LIT takes the money it raises from its shareholders (or, in this case, 'unitholders') and invests it in a pool of assets. An LIT could invest its money in all sorts of different asset classes, from local and international shares to property, commodities, and fixed-income securities.

However, unlike most traditional investment funds, it trades on a stock market (like the ASX). This means investors can buy and sell units in the LIT just like shares in a company. So, there's no lengthy application process or minimum investment requirements (as is often the case with unlisted managed funds).

What does the Metrics Master Income Trust do?

MXT invests in fixed-income securities. As the name suggests, these are assets where the timing and amount of the repayments are fixed and known in advance. Think government and corporate bonds – or even a term deposit held with a bank.

When you purchase one of these securities, you know exactly how much interest you will be paid (and when), and you'll also know the amount you'll be repaid when the investment matures.

This is in contrast to shares, which aren't obliged to pay you a dividend, and can vary wildly in price. This is one key reason why fixed-income investments are generally considered lower risk than stocks.

What sort of things does MXT invest in?

MXT is quite unique because it provides investors with direct exposure to the corporate lending market. The Trust takes the money it raises from investors and lends it to large corporates operating across a range of industries. The goal is for its lending portfolio to earn a return that beats the Reserve Bank of Australia (RBA)'s annual cash rate by at least 3.25%.

MXT is a great option for investors seeking to diversify their portfolios. The corporate lending market is usually reserved only for the major banks, and MXT provides direct exposure to these returns right here on the ASX.

As of its 31 December 2024 half-year report, MXT held a little over $2.1 billion in financial assets and raked in a little over $88 million in total investment income.

How much does MXT return as dividends?

Over the past year, MXT has paid out 12 dividends (one, as promised, every single month), worth a total of 16.03 cents per share. At current prices, this gives it a trailing dividend yield of close to 8.3%.

Based on this performance, a $10,000 investment in MXT could earn you over $800 a year. And, if you make use of the Trust's dividend reinvestment plan, you could grow your wealth even faster by harnessing the magic of compound returns.

Are there other ASX stocks that pay monthly dividends?

Surprisingly, yes!

Two other options for investors seeking monthly income are the BetaShares Dividend Harvester Active ETF (ASX: HVST) and Plato Income Maximiser Ltd (ASX: PL8). Unlike MXT, these offer investors exposure to dividend-paying ASX stocks, but they still both come with juicy dividend yields.

The post An 8 percent dividend stock paying cash every month appeared first on The Motley Fool Australia.

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• Metrics Master Income Trust announces March 2026 distribution
• Passive income investors: This ASX stock has an 8% yield and monthly payouts

Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX financial services company Challenger Ltd (ASX: CGF) is expected to grow earnings at a decent clip. In a recent note published by UBS, the broker forecast that Challenger's net profit and dividends could increase by 10% in each of the next two financial years.

So far, Challenger is proving UBS right. In its first half FY25 financial results, released in February, Challenger reported 12% growth in normalised net profit after tax ('NPAT') and reaffirmed its full-year guidance for a 10% uplift in normalised NPAT.

And yet, despite all this good news, the Challenger share price is down almost 11% year-to-date. Its performance over the past 12 months is even worse – shedding close to 20% of its market cap.

Shareholders in the company must be left wondering what more it has to do to get the market's attention.

How does Challenger make money?

Challenger is a financial services company that sells annuities.

Annuities are financial products that provide a source of regular income in retirement. Retirees can use their superannuation or other savings to purchase an annuity, which guarantees regular payments over the term of the product (which can be either a set number of years or the rest of the purchaser's life). Annuities can help retirees maintain their quality of life throughout retirement, knowing they will be supported in their old age.

Challenger makes a profit by investing the money it gets from its customers. If it can generate a higher return from its investments than it needs to pay to fulfil its annuity obligations, it pockets the difference.

What about the financials?

Despite a 12% fall in annuity sales (to $4.6 billion), normalised NPAT was up 12% to $225 million. Assets under management increased 3% during the half to $131 billion, which allowed the company to grow revenues despite lower sales. Challenger was also able to control its costs very well during the half, increasing its bottom line.

Statutory NPAT – which includes the effects of significant one-off items and accounting valuation changes – rose a whopping 28% to $72 million. The company performed particularly well in Japan, where annuity sales were up 78% to $616 million.

Based on this strong set of results, management reaffirmed its guidance for a full-year normalised NPAT of between $440 million and $480 million. It also declared a fully franked interim dividend of 14.5 cents per share, up 12% from the prior year.

Population demographics are also on Challenger's side. Australia's aging population and robust superannuation industry will provide ongoing tailwinds for Challenger into the future.

Should you invest?

Given its recent performance and strong outlook, it's something of a mystery why Challenger shares have been sold off so heavily recently. Not only does it have growth potential, but it also pays a reliable, fully franked dividend. Based on its current price of $5.38, the stock's dividend yield is an attractive 5.20%.

If you're a value investor, the recent dip in price could present you with a stellar buying opportunity. The market sell-off may now mean that Challenger's stock price doesn't accurately reflect the strength of its underlying fundamentals.

This could present you with an opportunity to profit if the share price increases in line with its intrinsic value. But remember, nothing is guaranteed in the world of share market investing! Always consider the risks associated with any stock before you choose to invest in it.

The post Forecast earnings growth of 10% a year but down 11%, is now the time for me to consider this ASX 200 high-flyer? appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Challenger. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Under-the-radar ASX 300 financial services company Helia Group Ltd (ASX: HLI) could be one of the market's true hidden gems. Not only has its share price shot up over 30% in the past six months alone, but it also pays a juicy 6.1% dividend yield.

This is a rare combination. Typically, growth stocks see their dividend yields shrink the more rapidly they grow, while quality dividend shares tend to have relatively stable prices. But Helia has somehow managed the unique feat of both maintaining a dividend yield in the upper echelon of ASX dividend stocks and keeping pace with some of the leading ASX growth stocks.

So, how has Helia done it? And, more importantly, can it keep it up?

What's a Helia, anyway?

Helia is a leading Australian provider of Lender's Mortgage Insurance (LMI).

Typically, when you take out a home loan with a lender, you need to put up a deposit of at least 20% of the property's value before you'll be approved. So, if your property costs a cool $1 million, you need to cough up $200,000 on the spot as a deposit, and the lender will loan you the other $800,000.

The reason for the minimum deposit is pretty intuitive: the more money you can put up yourself as a deposit, the lower the risk you pose to the lender.

However, with LMI, you can often get a loan with a deposit as low as 5%. Instead of putting up the rest of the cash for the deposit, you can buy LMI, which insures the lender against the increased risk that you'll default on your loan.

It's a good arrangement for everyone. The lender is happy because they hedged their risk, you're happy because you only had to put up $50,000 for your $1 million home, and Helia is happy because you're paying them insurance premiums.

Speaking of premiums, what are Helia's financials like?

Glad you asked.

Surprisingly, given its recent gains, Helia's recent financial performance hasn't been that spectacular. In its first-half FY24 financial results, for the six months ending 30 June 2024, Helia reported net profit after tax (NPAT) of $97 million, down 34% versus the prior comparative period.

Its underlying performance wasn't much better, down 22% to $106.5 million, after excluding accounting noise like unrealised losses on its bond portfolio resulting from higher interest rates. In a rising rate environment, newer bonds are issued at higher yields, effectively devaluing older, lower-yielding bonds held in the company's investment portfolio.

Management blamed the decline in underlying earnings on the economic environment, with high interest rates discouraging buyers from taking out high loan-to-value ratio mortgages.

On the positive side, high employment and growth in real wages meant there was only a "modest" increase in mortgage arrears despite cost-of-living pressures. This suggests the Australian property market remains resilient.

So why is its stock price up 30%?

Basically, great capital management.

The company holds large capital reserves, including over $800 million in retained earnings. It uses this war chest to pay dividends to shareholders and conduct on-market buybacks.

A buyback occurs when a company repurchases its own shares from the market, effectively reducing the number of shares on issue. This supports the share price by reducing supply, and it also increases the company's dividend per share, as any future dividends will be spread over fewer shares.

Including transaction costs, Helia spent more than $42 million on share buybacks in 1H24, and distributed almost $135 million in dividends.

Is Helia right for you?

Helia has the capital reserves available to both maintain its dividends and conduct ongoing share buybacks for years to come. It currently holds 2.08 times its prescribed capital amount, and it wants to reduce this to a target range of between 1.4 to 1.6 times.

The company has done well managing a particularly difficult economic environment. This could make it a surprisingly safe defensive stock to add to your portfolio. It will be intriguing to see how it performs when it releases its 2024 financial results on 25 February 2025.

The post 6% dividend yield and up 30% in the last 6 months! Is this the perfect stock for growth and income investors? appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Based on current prices, New Zealand-based telco Spark New Zealand Ltd (ASX: SPK) pays a dividend yield of 9.59%. By my count, that's the second highest out of all the stocks comprising the S&P/ASX 200 Index (ASX: XJO) – behind only mining giant Fortescue Ltd (ASX: FMG).

An ASX 200 stock with a dividend yield approaching 10% is bona fide catnip for income-seeking investors. But beware – a high dividend yield can sometimes also indicate a weakening stock price.

And if the declining stock price is driven by lower profits, it's likely that future dividend payments will also decrease. So, the income you actually wind up earning from your investment may not turn out to be what you'd originally hoped for.

In this article, we'll take a look at the reasons behind Spark's eye-watering dividend yield, so that you can decide whether it's the right investment for you.

What does Spark do?

First, let's take a quick look under the hood.

Spark is the largest telecommunications and digital services company in New Zealand. Most of its revenues comes from mobile, broadband and IT services, although revenues from data and high-tech (which includes artificial intelligence and the Internet of Things) are growing fast – up 30% in FY24.

Telcos are traditionally viewed as good defensive shares to hold in a diversified portfolio. The consensus opinion is that mobile and internet services are essential these days – which means companies in this industry should still be profitable even when the rest of the economy goes belly-up.

This has historically made stocks like Telstra Group Ltd (ASX: TLS) the favourites of 'set and forget' income investors.

However, this hasn't exactly proved true in the case of Spark – at least not recently. Headwinds from higher interest rates and a sluggish New Zealand economy weighed on Spark's FY24 performance, with adjusted net earnings down 21% year-on-year to NZ$342 million.

The company was also recently forced to reduce its FY25 earnings guidance by NZ$45 million, or 4%, due to weak consumer spending and subdued business investment. This also impacted its dividend forecast, which decreased from NZ 27.5 cents per share to NZ 25 cents per share.

How does Spark pay such a monster dividend yield?

Remember when I said a high dividend yield can sometimes indicate a weakening stock price? Well, that.

Spark's financial struggles have translated into a much lower share price over the past 12 months. Its stock price has fallen a whopping 46%, from almost $5 to just $2.62, as at the time of writing.

However, despite lower profits in FY24, Spark still managed to up its dividend by 1.9% to NZ 27.5 cents. A higher dividend coupled with a tumbling stock price caused its dividend yield to shoot upwards.

This suggests that the real driver behind Spark's eyewatering dividend yield is actually its lacklustre financial performance.

So, you're saying Spark is a lemon?

Well, let's not be too hasty.

Admittedly, Spark has had its struggles recently, but its share price performance may not be a fair reflection of its underlying business. In fact, I think you could make a pretty decent argument that the market has unfairly punished it, which could make it a target for value investors.

For example, you may have noticed that I referred to a 21% drop in adjusted net earnings before. The drop in reported net earnings was 72%, but that number includes a NZ $583 million net gain on the sale of its mobile tower assets in FY23, which contributed to abnormally high (unadjusted) profits in the prior comparative period.

Still, at first glance, this could give the impression that Spark is performing far worse than it actually is.

Also, keep in mind that its lower dividend guidance for FY25 still implies a dividend yield of roughly 8.7% based on current prices – which is nothing to sneeze at! That would still put it firmly in the top tier of ASX dividend shares.

Ultimately, whether Spark is the right stock for you will depend on your personal risk tolerance and investment objectives. Ongoing economic uncertainty in New Zealand makes Spark a higher-risk investment right now, but if things start to improve, Spark could offer investors both income and growth in years to come.

The post 9.6% yield! Is the second largest dividend on the ASX 200 one to consider snapping up today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Every growth investor's dream is to get in on the ground floor of the next explosive stock. Just ask any veteran investor – they'll happily talk your ear off about that one ASX growth stock they had faith in that netted them a fortune (or, more likely, the one that got away). And people say finance isn't romantic!

Growth investing comes with significantly higher risk than other strategies, like value investing or dividend investing. When buying growth stocks, you're looking for the companies you think have the greatest future potential, and not necessarily the best historical performance. Many of these companies probably aren't even profitable yet – but if they promise to fill a gap in the market, big profits could be on the way.

Of course, the future is famously unpredictable, and nothing is ever guaranteed. It's a sad fact of life that not every company that promises the world is going to deliver. But the ones that do could net their loyal shareholders some astounding returns.

So, if you're searching for an ASX growth stock that could be the next diamond in the rough, you're in luck. Because in this article I'm going to reveal one company I think could be due for significant growth in years to come.

Plenti Group Limited (ASX: PLT)

Plenti is an Australian fintech that offers personalised consumer loans. It finances its lending activities by borrowing money from everyday investors and, in return, it pays them regular interest. While this might sound suspiciously like a bank, Plenti goes to great lengths to assure you that it is not a bank.

Instead, Plenti is a peer-to-peer lending platform. It offers loans of up to $65,000 to borrowers with strong credit ratings, with a focus on automative, renewable energy, and personal loans. Borrowers provide Plenti with details about their credit history and financial situation, and the platform offers them a personalised interest rate estimate within minutes, and funding within 24 hours.

On the other side of the ledger, Plenti borrows money from investors in order to write new loans. It offers them very generous returns depending on the term of their investment – if the investor is willing to commit to a longer term (say 3 to 7 years), Plenti rewards them with a higher interest rate (as high as 9% per annum).

So, in theory, everybody wins! Creditworthy borrowers get cheap financing on personal loans and investors can earn a healthy return. Plus, because Plenti relies on its own proprietary technology platform, it has significantly lower overheads than a big bank, allowing it to grow at scale.

What about the financials?

The company reported strong first-half FY25 results for the six months ending 30 September 2024. Loan originations were steady versus the prior comparative period, at $627 million. Revenues were up 28% to $124.2 million and cash net profit after tax (NPAT) surged 260% to $5.5 million.

This adds to an impressive string of half-yearly results, where revenues have grown at a compound annual growth rate (CAGR) of 49%, stretching back to the first half of FY22. And remember how I mentioned growing at scale? Well, its cost-to-income ratio for the half was just 24%, down from 29% in the first half of FY24.

But the biggest recent news out of Plenti is its strategic partnership with National Australia Bank Ltd (ASX: NAB). Under the arrangement – originally announced back in November 2023 – NAB markets and promotes the automotive and electric vehicle loan products that are provided via Plenti's lending platform.

Dubbed 'NAB powered by Plenti', the agreement is a significant endorsement of Plenti's technology platform by one of the country's largest banks. The partnership also gives NAB the right to purchase up to 15% of Plenti's share capital (another sign that the bank is impressed by Plenti's business model).

The first car and electric vehicle loans under the partnership were launched to NAB's personal banking customers in September 2024, however volumes are expected to remain moderate over the next six months as the product offering and customer experience are further refined. But significant sales growth could be on the horizon!

Plenti share price snapshot

Despite its solid recent financial performance and the launch of its first car loan products with NAB, the Plenti share price is still hovering around $0.67 (as at the time of writing). In fact, its share price has remained relatively unchanged since surging on the NAB partnership news back in late November 2023 – which means this year could be when this ASX growth stock finally breaks out!

The post Could this be a millionaire-maker ASX growth stock at 67 cents? appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

My pick for a great share to buy in 2025 is ASX penny stock Mach7 Technologies Ltd (ASX: M7T).

Wait, wait – before you stop reading, hear me out!

Sure, the company's share price is down over 50% this year. And yes, the company posted a net loss of $8 million in FY24. I'll admit, on paper, things don't look great.

But this is a company in transition, and if it can deliver on its strategy in 2025, I think it could reward investors with a little faith.

What does Mach7 do?

Mach7 is a medical imaging company that provides services to hospitals, research facilities, and other medical institutions. The company's imaging platform is capable of integrating, standardising, and even interpreting data from many different sources. The aim is to give doctors and other healthcare professionals all the information they need to make optimal medical decisions for their patients.

How have Mach7 shares performed this year?

It's fair to say that Mach7 hasn't had the greatest 2024. At the time of writing, it looks likely that the stock price will end the year at least 50% lower. However, it has also been a transformative period for the company.

Over the past few years, Mach7 has been switching to a subscription-based business model. From a long-term perspective, this makes sense because the revenue the company generates from these contracts is actually higher. However, because it is recognised over the lifetime of the contract rather than upfront, the change dampens short-term revenues.

And that's exactly what happened in the company's FY24 results. Despite generating record numbers of new sales orders, year-on-year revenues were down 3%, and the company reported a net loss of $8 million. Frustrated shareholders—unassured by the company's insistence that the subscription-based strategy was working—decided to jump ship.

The Mach7 share price took a further hammering after the company released its first quarter FY25 business update on 31 October 2024. Although the company reaffirmed its outlook for revenue growth of 15% to 25% for FY25, investors were unimpressed with the company's sluggish first-quarter performance.

Why could 2025 be a breakout year for Mach7 shares?

A subscription-based business model can be better for both the business and its shareholders. It means the business has more confidence in its future revenues, making it easier for it to do things like budget, grow, and even pay dividends.

In FY24, recurring revenues from subscription contracts made up 72% of total revenues, a significant uplift from the 52% they contributed in FY23. This trend held up in the first quarter of FY25, where 65% of sales orders were from subscription, maintenance and other recurring fees.

If Mach7 can deliver on its revenue growth target for FY25, and if the majority of that comes from recurring revenues, this could make the company a much safer investment in years to come.

That's why, in a few years' time, I think we might all look back on 2025 as the year everything changed for Mach7.

What are the risks?

Mach7 is a small-cap growth stock, which makes it a higher-risk investment.

Because growth stocks are often junior companies with no track record of success, most of their current value depends on investors' expectations about their future profitability. Any changes to those expectations—especially those caused by changes in inflation or interest rate projections—can have an outsized impact on the prices of growth shares. This can make the share prices particularly volatile, making them suitable only for investors with a high-risk tolerance.

However, one advantage Mach7 has over other junior growth stocks is that it is debt-free. Junior companies are often highly leveraged—until they get their business off the ground, they usually have to borrow money to sustain their operations. This makes them particularly vulnerable to interest rate rises because it means they have to pay more to service that debt. For this reason, an investment in Mach7 may possibly be a little safer than other ASX growth stocks, given there is still plenty of uncertainty around what rates will look like next year.

The post 2025 could be a breakthrough year for Mach7 shares: Here's why appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Mach7 Technologies. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If you find yourself with a bit of extra cash in your Christmas stocking this year, you might be thinking about some undervalued ASX stocks to add to your portfolio.

Here are two of my current favourites. One is a leading Aussie tech stock tapping into emerging AI trends by providing data storage solutions. The other is a former market darling down on its luck after releasing an underwhelming outlook for FY25.

NextDC Ltd (ASX: NXT)

NextDC has been one of my favourite ASX tech shares to own for years now. However, as more companies incorporate artificial intelligence (AI) technology into their everyday operations, the bull case for NextDC only becomes more compelling.

NextDC is one of Australia's leading operators of data centres, which are physical facilities that store companies' data and other digital assets. NextDC's data centres are colocation facilities, which means multiple clients can rent space in the data centre at once. This allows companies to outsource their data storage needs so that they don't have to spend a fortune building their own technology infrastructure.

I think NextDC is a great share to buy right now because of how rapidly AI, automation, and digitisation are being adopted by large corporations. All this new data needs to be stored somewhere, which could drive a massive surge in demand for data centre space.

This is already starting to play out in the company's financials. Revenues were up 12% year-on-year to $404.3 million for the financial year ended 30 June 2024, while underlying earnings before interest, tax, depreciation and amortisation expenses (EBITDA) came in above the company's guidance at $204.3 million.

Audinate Group Ltd (ASX: AD8)

After surging to a 52-week high of $23.51 back in March, Audinate shares have since plunged almost 70% to just $7.31 at the time of writing. However, I think the market has unfairly punished Audinate shares, and they could offer investors an excellent buying opportunity at these prices.

Audinate is a growth stock aiming to disrupt the audiovisual (AV) technology industry. Its flagship product, called Dante, is designed to replace all the complicated audio and video connections of outdated analogue systems with a digital computer network. It simplifies complex AV systems without compromising sound or image quality, making them far easier to manage. Its customers include hospitality venues, sports and entertainment events, and even churches and other places of worship.

There are several good reasons to invest in Audinate. The company is an industry leader with significant intellectual property (IP) behind it, which makes it very difficult for new entrants to take away any of its market share. This gives it a considerable economic moat – something investors normally go gaga for.

Plus, Audinate's FY24 results (for the year ended 30 June 2024) were pretty strong. Revenues were up 28.4% year-on-year to $91.5 million, and EBITDA was a record $20.4 million.

However, investors were concerned about Audinate's near-term outlook. The company identified a number of headwinds that could negatively impact revenues in FY25, including shorter order lead times, higher inventory levels, and a slowdown in demand after the post-COVID recovery.

While the company did flag that it expected things to rebound in FY26, many investors decided they didn't want to wait that long and dumped their shares. But this mass sell-off could be a great buying opportunity for those who are still bullish about Audinate's long-term growth potential.

Speaking at the time of the results, Audinate CEO Aidan Williams said:

Whilst we expect FY25 to be a transitional year, the long-term strategic thesis for Audinate remains unchanged. With the challenges of the last few years behind us, we will redouble our efforts to drive audio & video unit growth, a key building block in our long-term strategy.

The post My 2 favourite ASX shares to buy right now appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has positions in Audinate Group and Nextdc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Audinate Group. The Motley Fool Australia has positions in and has recommended Audinate Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

With 2024 quickly coming to an end, it's time to start looking ahead at what we want our portfolio to look like next year and beyond. Investors with a long investment time horizon (and a healthy risk tolerance!) might be looking for the shares with the biggest growth potential.

If that sounds like you, then you're in luck. In this article, I'm taking a closer look at three of my current favourite ASX growth stocks. These are all companies that had a bumper FY24 and already look set to back it up again in FY25.

Santa, if you're reading this, here are three shares I'd love to find in my stocking on Christmas morning.

SKS Technologies Group (ASX: SKS)

The first company on my list is SKS Technologies. It's a Melbourne-based audiovisual and information technology company.

SKS helps its clients design and install audiovisual solutions, communications networks, and other electrical technologies, like data centres. Notable recent projects include audiovisual and information technology systems for the State Library of Victoria and a unified communications network for the Eminence, a boutique commercial building in Brisbane.

This was a banner year for SKS. For the 12 months ended 30 June 2024, SKS raked in revenues of $136.5 million and generated net profit after tax (NPAT) of $6.62 million, a whopping ten-fold increase versus the $0.63 million profit it reported in FY23. Its shares are also among the biggest gainers on the ASX so far this year, up an eye-watering 553%!

But next year could be even better. Thanks to some recent data centre contract wins, the company is forecasting revenues of $260 million and net profit before tax of $17 million for FY25.

Nuix Ltd (ASX: NXL)

Nuix is an Australian data analytics company headquartered in Sydney. But it isn't your typical data analysis company – Nuix specialises in investigative analytics. Its software combs through massive data sets looking for signs of fraud and other crimes – even child exploitation and online grooming. The company's motto is A Force for Good.

And being good has paid off handsomely for Nuix this year. In its FY24 results (covering the year ended 30 June), Nuix reported revenue growth of almost 21% year-on-year to $220.6 million. The company also controlled its costs well throughout FY24, resulting in NPAT of $5 million – a significant turnaround versus the net loss of $5.6 million it posted in the prior year.

Speaking at the time of the result, Nuix CEO Jonathan Rubinsztein sounded confident in the company's future growth potential. "In the coming financial year we will continue to invest in our technology, further evolving our offering in line with our strategic vision. The technology and financial base established in FY24 provides a solid foundation for growth in FY25 and beyond."

As of the time of writing, Nuix shares are up a whopping 245% year-to-date at $6.66.

Austin Engineering Ltd (ASX: ANG)

The last share on my Christmas list is Austin Engineering. It designs and manufactures digging, hauling, and other specialised equipment for the mining industry.

Although based in Western Australia, Austin is very much a global company, with a significant chunk of its earnings coming from across the Asia Pacific, North America, and South America. In fact, in FY24, North America was its fastest-growing revenue segment.

The company's FY24 results – for the year ended 30 June 2024 – were impressive. Revenues were up 21% year-on-year to $313.2 million, and statutory NPAT skyrocketed 318% to $29.7 million.

Speaking at the time, company CEO David Singleton attributed the company's strong performance to its revamped operational strategy.

"Our improved financial performance has been driven by a series of initiatives designed to enhance operating efficiencies and lower costs across our business units, which has led to a continued growth in margins," Singleton said.

The outlook for FY25 is also bullish, with earnings before interest and tax expected to grow by 30% to around $50 million. Austin has already made a strong start to FY25: in October, it announced that more than 100 new orders for truck trays (valued at around $35 million) were placed with its business in Chile.

The post 3 ASX growth stocks I want in my Christmas stocking this year appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has positions in Nuix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Austin Engineering, Nuix, and Sks Technologies Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

When most people think about how to profit from investing in the share market, they likely focus on capital appreciation. In other words, the best way to make money from share investing is to find the company with the most explosive growth potential and hope its share price blows up in the next few years, netting a massive gain.

However, share investing doesn't have to be all about capital gains. Stock dividends can also provide a great source of passive income.

What's so great about dividends?

There are many benefits to dividend investing. While stock-picking investing strategies like growth investing or value investing are more hands-on and higher-risk, dividend investing is much more likely to suit 'set and forget' investors. There's no need to constantly check your share portfolio or closely follow the latest market news – just find a dependable dividend stock, kick back, and collect your dividend payments every six months.

And who doesn't like a little extra income in their pockets? It could supplement the income you receive from your day job, allowing you to work less and spend more time doing the things you love. Or, you could use it to save for a holiday, or even stick it in your emergency fund so you have the peace of mind that you can handle any unexpected expenses.

Plus, there are the tax benefits. Many ASX dividend shares come with franking credits which reduce the amount you have to pay at tax time.  

One of the best ASX dividend stocks

Mining services company GR Engineering Services Ltd (ASX: GNG) pays some of the juiciest dividends on the ASX.

In the last financial year, GR Engineering paid out a total of 19 cents per share to its shareholders as dividends (consistent with the prior year). Based on its current share price of $2.11, that's a dividend yield of 9% – grossed up for franking credits, you're looking at a yield of almost 13%!

This means that if you picked up 5,000 shares in GR Engineering (at a total cost of about $10,550), you could essentially be earning $113 in passive income a month – or $1,357 a year. That's the return airfare for your next international holiday right there!

What does GR Engineering do?

Headquartered in Perth, GR Engineering is a global engineering and consulting firm that services the mining and mineral processing industries. It helps mining companies design and build mineral processing plants and other related facilities.

While most of its major projects have been for mining companies in Western Australia, GR Engineering has also worked with clients in diverse locations such as the Solomon Islands, Türkiye, and Saudi Arabia.

Most recently, it was awarded a $25.7 million contract to design and construct the Woodlawn copper-zinc project in New South Wales, which is owned by ASX mining company Develop Global Ltd (ASX: DVP).

What about the risks?

With a total market capitalisation of just over $350 million, GR Engineering is a higher-risk investment than more established blue-chip dividend stocks like Transurban Group (ASX: TCL). This means its share price is probably going to be more volatile. But it does pay almost twice the dividend yield!

GR Engineering also relies on a healthy commodities market for its business. However, it isn't overly exposed to the price of any one resource – in the way that, say, Northern Star Resources Ltd (ASX: NST) is a pure play on the price of gold.

For example, if the gold price slumps, there might be less demand for new gold processing plants. However, if the price of copper goes up at the same time, there will be more demand for copper plants. Because it works with clients across the mining sector, GR Engineering's diversified customer base helps lower its business risk, ensuring it can earn consistent revenues over time.

However, the biggest near-term risk for the entire mining industry is the impending Trump presidency. If the incoming US president is true to his word and slaps substantial tariffs on all foreign imports, that could dampen local production industry-wide.

The worst outcome for Australian miners would be if the situation escalates into a major trade war with China and causes a significant slowdown in the Chinese economy.

As the largest buyer of Australian iron ore, gold, and copper, China is integral to the success of the local mining industry – so a drop-off in demand from China could signal tough times ahead for the whole sector, including companies like GR Engineering.

The post Buy 5,000 shares of this top ASX dividend stock for $100 per month in passive income appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has positions in Northern Star Resources. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group. The Motley Fool Australia has recommended Gr Engineering Services. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If you tend to be more risk-averse than the average investor, the stock market can sometimes feel like a scary place. Market volatility can cause big swings in the value of your portfolio, which can make checking your investment account a nerve-wracking experience.

However, there are also plenty of safer options available on the ASX that can reduce your volatility and help you grow your wealth over the long term. In this article, we look at three ASX blue chips that have proven themselves to be high-quality investments over time.

Transurban Group (ASX: TCL)

Toll operator Transurban is one of the safest dividend stocks on the ASX – and with a market cap of $39 billion, it's also one of the largest. It currently pays a healthy dividend yield of close to 5%, and for the past few years, its shares have consistently traded within a band of about $12 to $14 with relatively low volatility. This makes Transurban an ideal 'set and forget' income earner to add to your portfolio.

The reason Transurban is such a safe buy is the consistency of its earnings. Regardless of broader economic trends and downturns, people still need to get from A to B, and Transurban's toll roads help them do just that. It owns and operates several major toll roads around the world – notably CityLink in Melbourne and the Cross City tunnel in Sydney.  

Transurban generated revenues of over $4 billion in each of the last two financial years, and proportional earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 7.5% year-on-year to $2.63 billion in FY24.

Coles Group Ltd (ASX: COL)

As one of Australia's two largest supermarket chains, Coles is another great defensive share to add to your portfolio this November. Primarily a retailer of consumer staples, Coles is also able to generate consistent revenues in just about any economic environment.

Its recent financial performance was particularly impressive. The company raked in over $43 billion in revenues in FY24, and underlying net profit after tax (NPAT) jumped 4% year-on-year to $1.21 billion.

Leading broker Bell Potter also recently slapped a buy rating on Coles shares with a 12-month price target of $21.55. Considering Coles shares currently trade for $17.71, that's a potential upside of over 20%.

It should be noted that an investment in Coles doesn't come without risk. Coles and Woolworths Group Ltd (ASX: WOW) have both found themselves in hot water with the ACCC recently over allegations that they misled shoppers with bogus price discount promotions. The Coles share price took a significant hit as a result, and it's still down about 8% since the ACCC made its allegations public in late September.

If proved true, these allegations could result in reputational damage and hefty fines for both grocery chains. But it doesn't really change the underlying business fundamentals that (in my opinion, at least) still make Coles a great, safe stock to buy and hold for the long term.

REA Group Ltd (ASX: REA)

REA owns realestate.com.au, Australia's leading residential property listing website. Its strong market position gives it significant pricing power and a strong economic moat. Broker Goldman Sachs even recently went so far as to say that REA is one of the 'highest quality names' among the ASX stocks they cover.  

Unlike Coles or Transurban, REA has been a genuine growth stock to hold over the past five years, with its share price more than doubling in that timeframe (versus +16% for Coles and -13% for Transurban). However, due to its competitive advantage, it is also a relatively safe stock to put your money in.

Its recent financial performance has been very strong, with revenues up 23% year-on-year to $1.45 billion for FY24 and NPAT (excluding significant non-recurring items) up 24% to $461 million. And, despite the impacts of higher interest rates on the property market, management remains bullish about the future, with CEO Owen Wilson (not the Hollywood actor) commenting that "REA enters FY 2025 in a strong position and with a clear strategy to drive growth."

The post 3 ASX shares I think are a safe buy in November appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has positions in REA Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group, REA Group, and Transurban Group. The Motley Fool Australia has positions in and has recommended Coles Group. The Motley Fool Australia has recommended REA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX retail stock Shaver Shop Group Ltd (ASX: SSG) isn't the first name people usually think of when it comes to high dividend yield. It's a small-cap share, which means many investors might instinctively consider it too risky to add to their portfolio. Plus, it's operating in a retail sector that's recently been beaten down by inflation, high interest rates, and lower consumer confidence.

And yet, despite all this, Shaver Shop raked in an annual net profit of $15.1 million in FY24 (for the 12 months ended 30 June). It also paid out fully franked dividends of 10.2 cents per share for the year – consistent with FY23. Given its share price is currently around $1.225, this means it has a trailing dividend yield of more than 8.2%.

That's significantly higher than many of the more well-known ASX blue-chips investors typically buy for income. For example, global mining giant Rio Tinto Ltd (ASX: RIO) has a yield of 5.1%, leading insurance company QBE Insurance Group Ltd (ASX: QBE) has a yield of 4.4%, and big four bank Commonwealth Bank of Australia (ASX: CBA) has a yield of 3.5%.

So, how is a little retail stock like Shaver Shop able to pay a higher yield than these mature large-cap companies? And why is it a stock I'm thinking of holding for decades to come?

How does Shaver Shop have such a higher dividend yield?

Shaver Shop pays a very high portion of its net profits out to shareholders as dividends. In FY24, it had a dividend payout ratio of about 88% (meaning it paid out 88% of its net profit as dividends and retained 12%).

For some context, Rio Tinto has a practice of paying out 50% of its earnings as dividends to shareholders. This should give you an indication of just how high Shaver Shop's payout ratio is!

Of course, paying such a high proportion of revenues to shareholders as dividends has a drawback — it means the business retains less earnings as cash to fund future growth opportunities.

However, this doesn't seem to have hurt Shaver Shop too much. Its cash position has improved significantly versus pre-COVID.

In FY19, Shaver Shop had net debt of $6.4 million on its balance sheet, whereas it now has cash of $13.1 million and no debt. And this came despite its dividends increasing by 126% over the same timeframe!

This should give shareholders faith that Shaver Shop can continue to sustain dividends at this level for many years to come. And, the company was even able to accumulate a small war chest to invest in growth opportunities, despite its high payout ratio.

How about the financials?

Shaver Shop generated $15.1 million in net profit from $219.4 million in sales in FY24. While that net profit figure was admittedly 10% lower year-on-year, it was delivered despite particularly challenging retail market conditions.

The business underperformance was also weighted heavily towards the first half, with sales in the fourth quarter of FY24 up 0.8% versus the same quarter in FY23. This suggests that the business has stronger momentum heading into FY25.

One of the other notable takeaways from Shaver Shop's FY24 results was how well the company managed its expenses. Despite inflationary pressures, Shaver Shop kept year-on-year cost growth to just 0.7%.

Employee costs rose with inflation – however, Shaver Shop was able to offset these increases by tightly controlling its marketing and advertising expenses.

Why I'd hold Shaver Shop stock for decades

With a market capitalisation of just $130 million, Shaver Shop is still only a small-cap stock. Generally speaking, small-cap stocks are classified as high-risk and tend to have particularly volatile share prices.

However, the Shaver Shop share price has remained remarkably consistent over the past few years – and there are plenty of good reasons to argue that it's actually lower risk than your typical small-cap growth stock. Despite its small market cap, this makes it a dividend share income-seeking investors should still look closely at.

For one, Shaver Shop was founded all the way back in 1986. It's not some up-and-coming tech stock that's yet to post a profit. This is a company that has delivered consistent profits and has been operating for almost 40 years.

It's also a market leader in men's and women's grooming products with a significant presence. It has a retail network of 123 stores located across Australia and New Zealand.

And, it has no debt on its balance sheet, which means that it isn't financially exposed to interest rate hikes – another reason that it was able to manage its costs so effectively in an inflationary environment.

The post 8% dividend yield! I'm buying this ASX stock and holding for decades appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has positions in Commonwealth Bank Of Australia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Shaver Shop Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX chemicals company DGL Group Ltd (ASX: DGL) has had a rough year. Its share price has plunged more than 45% so far in 2024 and last week sank to a new 52-week low of just 44 cents. At the close on Friday, it had recovered (but only very slightly) to 45 cents.

DGL stock climbed as high as $1.10 back in February, but it quickly nosedived after the company released underwhelming financial results for the first half of FY24. However, I think investors unfairly punished DGL, and its shares could be due for a rebound as market conditions improve.

If I'm right, it means this underappreciated ASX penny stock is currently going for a steal.

What does DGL do?

DGL is an industrial chemicals company operating in Australia and New Zealand. It has three core divisions: manufacturing, logistics, and environmental.

Manufacturing produces chemicals and industrial products, mainly for customers in the mining, automotive and agricultural sectors.

Logistics ensures the safe transport, storage and delivery of hazardous materials like toxic and corrosive chemicals. DGL serves clients across a diverse range of industries – think any company that needs chemicals at any point in its supply chain, from airlines and miners to cosmetics and pharmaceutical companies (and even pet food producers!).

Finally, the environmental division helps clients safely dispose of chemical and industrial waste. DGL works with environmental regulators to develop sustainable, environmentally friendly waste management solutions.

What caused the massive drop in the DGL share price?

DGL shares really fell off a cliff back in February after the company released its first-half FY24 results (for the six months ended 31 December 2023). Sales revenues were roughly on par with first-half FY23, but significantly higher expenses caused net profit to drop a staggering 43% to $5.9 million.

Almost 41% of the company's market cap was wiped out on the day of its results, and DGL shares have never recovered. In fact, the DGL stock price has only slid lower in the intervening months, with a stronger financial performance in the second half of FY24 doing little to win back investors.

Why DGL shares could be a bargain right now

I think FY25 will be a return to form for DGL, which could also signal a swift rebound in its share price. This means that lucky investors who snap up DGL shares at current prices could be laughing all the way to the bank this time next year.

To start with, expenses should be less of a concern for DGL in FY25.

Due to wage inflation and higher headcount, 'people costs' were a significant contributor to DGL's expense uplift in FY24.

However, both these impacts might only be transitory.

As inflation cools and labour markets soften, the negative impacts from wage uplifts should start to ease.

The higher headcount was driven by a series of acquisitions DGL has made over the past few years. The company has been on something of a buying spree recently – in FY23, it snapped up 11 companies and then added a further five to its stable in FY24.

These acquisitions added $90 million to DGL's FY24 revenues, but they also added significant people and property costs. However, these should decline as DGL generates efficiencies by fully integrating these businesses into its operating model.

Not only should cost pressures decline, but sales volumes should increase, too.

In the trading update that accompanied its FY24 financial results, DGL said it was seeing higher sales of pesticides (a significant part of its manufacturing division) as agricultural growing conditions improved in Australia.

The combined effect of higher revenues and lower costs is higher profits – and possibly a higher share price.

Should you invest in DGL?

As with any penny stock, an investment in DGL comes with heightened risks. Its share price is likely to be much more volatile than a mature blue chip and will also be much more sensitive to a bad piece of market news, which can compound your losses in a bear market.

And while I might be feeling bullish about DGL, the future remains very uncertain.

Unfortunately, global geopolitical tensions show no signs of abating, and DGL relies on international supply chains for much of its business.

If you're thinking about investing in DGL, make sure to fully consider all the potential risks involved – and don't invest more than you can afford to lose.

The post Why I think this ASX penny stock is a bargain at its 52-week low appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Aussie electronics store JB H-Fi Ltd (ASX: JBH) has been one of the best-performing ASX retail stocks to own this year. While competitors like Harvey Norman Holdings Limited (ASX: HVN) and Kogan.com Ltd (ASX: KGN) have struggled in 2024, JB Hi-Fi shares have soared over 40% higher year to date.

Earlier this month they even set a new record high price of $83.30 (as at the timing of writing, JBH shares have fallen back down to a little under $79).

Those returns are especially impressive considering that higher living costs have forced households to cut back on discretionary spending.

You'd think a retailer that stocks mostly big-screen TVs and high-end home audio equipment would struggle in this sort of market, but JB Hi-Fi seems to only be going from strength to strength.

So, why have investors been so desperate to snap up shares in JB Hi-Fi this year? And, if you're a JBH shareholder yourself, is now the time to think about taking some of your profits off the table?

Why the surge in the JB Hi-Fi share price?

On the face of it, JB Hi-Fi's FY24 financial results weren't that great. Revenues were basically flat year on year at $9.6 billion, but higher costs (particularly from sales and marketing) put increased pressure on the company's bottom line, ultimately causing net profit to plunge 16.4% to $438.8 million.

However, investors focused on the green shoots. Along with its annual results, JB Hi-Fi provided a trading update for July 2024, in which it reported that all operating segments were performing strongly. Growth in Australia was particularly noteworthy – sales were up 5.6% in July versus just 1% for the whole of FY24.

At the time, JB Hi-Fi CEO Terry Smart commented that it was "pleasing to see sales momentum in Australia continue into July."

Perhaps it was a sign that the economy – and JB Hi-Fi's sales volumes – were already beginning to rebound.

Plus, there was the announcement that JB Hi-Fi would be paying a juicy special dividend of 80 cents per share. This more than offset the lower final dividend paid out of the company's annual profits. Including the special and interim dividends, distributions to shareholders were 341 cents per share in FY24, up from 312 cents per share in FY23.

It was a narrow tightrope to walk, but JB Hi-Fi management seemed to have done enough to keep both growth-oriented and income-seeking investors happy.

Those looking for growth could point to the Group's strong July performance as evidence that FY25 could be another banner year for the company. At the same time, income investors were placated by that bumper special dividend.

Is it time to sell?

JB Hi-Fi seems to have defied the odds this year. High interest rates and high inflation should usually sound the death knell for consumer discretionary stocks. But somehow, despite sluggish sales and a hefty drop in overall profits, JB Hi-Fi has managed to come out on top.

Although that shouldn't really come as much of a surprise – JB Hi-Fi has been coming out on top for years. If you're a long-term shareholder, it's very likely you're up a lot more than just the 40% that the stock has risen so far in 2024.

A little over five years ago, JB Hi-Fi shares were trading at around $30 a pop, and now they're pushing $80. That's a gain of more than 160% – despite a pandemic, runaway inflation, rapid interest rate hikes, and arguably the worst geopolitical tensions in decades.

If anything, this recent performance has shown just how resilient JB Hi-Fi really is. With a total market cap of a bit over $8.6 billion, it isn't far off being one of the ASX's top 50 largest companies and a genuine blue-chip. It has a mature business model and a stable dividend, propped up by a strong balance sheet.

It's understandable if you want to take some profit off the table – but the combination of growth and income offered by JB Hi-Fi still makes it one of the best ASX retail stocks to hold for many years to come, in my opinion.

The post Up 40% in 2024, is it time to sell JB Hi-Fi shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has positions in Kogan.com. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Kogan.com. The Motley Fool Australia has positions in and has recommended Harvey Norman. The Motley Fool Australia has recommended Jb Hi-Fi and Kogan.com. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The share price of ASX penny stock Mach7 Technologies Ltd (ASX: M7T) has plunged more than 30% in the past year.

Shares of the ASX health tech company closed on Friday at a new 52-week low of just 53 cents apiece. Long-term investors will be especially disappointed with the stock's continued poor performance. As recently as 2021, their shares were selling for over $1.50 a pop.

The market clearly wasn't impressed by the company's most recent financial results released last Wednesday. The company reported a net loss of $8 million for the year, and the Mach7 share price has dropped 12% since then.

But, if you take a closer look at the numbers, there are some hints that Mach7's new subscription-based business strategy could finally be starting to pay off.

If I'm right, Mach7 could soon be due for a rebound – which means its shares might be going for a bargain right now.

What does Mach7 do?

Mach7 develops medical imaging technology solutions for hospitals and other medical institutions, including universities and research facilities.

Its software integrates imaging data from different sources, providing doctors and other medical professionals with a central platform to view patient data. It connects different databases, standardises different data formats, and even helps healthcare providers interpret images to make diagnostic decisions.

The goal is to give doctors quick and easy access to the information they need to improve patient outcomes.

What's caused the drop in the Mach7 share price?

Over the past few years, Mach7 has been increasingly transitioning to a subscription-based business model.

Under this model, the revenue Mach7 earns per contract is actually higher, but it is delivered over the lifetime of the contract rather than upfront. This means that, as the company transitions, year-on-year revenues are likely to fall — at least until it starts making enough revenue from new subscriptions to offset the loss of upfront fees.

This was borne out in the company's most recent financial results. FY24 revenues were down 3% versus FY23, while the company's net loss increased a whopping 660% to almost $8 million.

But the interesting thing is that although its revenues were lower, Mach7 actually took in record numbers of new sales orders. It's just that 83% of them were subscription-based, versus 58% in FY23.

Mach7 points to these stats as evidence that its strategy is succeeding. However, many shareholders frustrated with the company's short-term financial performance are jumping ship, forcing the share price lower.

Why could Mach7 shares be a bargain right now?

The recurring revenues generated by a subscription-based model provide Mach7 – and its shareholders – with greater confidence about the company's future earnings. But, as we've explained, transitioning to this model can mean a hit to short-term revenues.

The good thing for Mach7 is that it seems to be nearing the end of its transition period. Just 6% of orders came from capital software sales in FY23, and recurring revenues increased 29% year-on-year to $21 million (out of total revenues of $29 million).

The company's outlook for FY25 is getting much rosier. It is targeting revenue growth of between 15% and 25%, which would be a significant turnaround versus this year's performance.

Delivering on these targets could restore investors' faith in the management over at Mach7 and quickly drive up its share price.

As with any penny stock, the risks from investing in Mach7 are high – but they might be worth it for growth-oriented investors.

The post Why I think this ASX penny stock is a bargain at its 52-week low appeared first on The Motley Fool Australia.

More reading

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• Where to invest $500 in ASX shares right now
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• Expert names 1 ASX ETF to buy, 1 to hold, and 1 to sell
• Why this $5 billion ASX financial stock is slipping today

Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Mach7 Technologies. The Motley Fool Australia has recommended Mach7 Technologies. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX tech stock Brainchip Holdings Ltd (ASX: BRN) has had a rocky 12 months.

After falling to a 52-week low of $0.14 a share back in October 2023, it traded mostly sideways until February, when it quickly shot up to a 52-week high of $0.54. Since then, it's pulled back again and is currently trading at just $0.22.

Overall, the Brainchip share price has dropped almost 40% over the past year – but it's been a wild ride getting here. So, what can Brainchip shareholders now expect from this topsy-turvy stock?

What does Brainchip do?

Brainchip is an Australian artificial intelligence (AI) company that specialises in neuromorphic computing.

The phrase 'neuromorphic computing' might sound like something out of a sci-fi novel, but it basically refers to computer systems and processors that are designed to mimic the way the human brain works.

For example, conventional computer processors ingest large amounts of data from many different inputs simultaneously. But, if you think about how the human brain works, it filters out unneeded inputs and focuses just on the most essential. This makes your brain a much more efficient processor of information than a standard computer chip.

Even as you sit rivetted reading this article (as I'm sure you currently are and didn't drift off at the first mention of 'neuromorphic computing'), there are any number of different background noises, visual distractions and other sensory inputs that your brain is ignoring – and it's only once you actively focus on them that your conscious mind becomes aware of them again.

In other words, your brain recognises that the constant background hum of your air conditioner or the sensation of your legs touching the chair you're sitting on aren't important inputs for the task you're currently focussed on.

So it doesn't need to constantly process them. Instead, your brain alerts you to changes in your surroundings and prioritises these inputs – as these could be events you need to respond to.

This is how Brainchip has designed its flagship product, the Akida 'neuromorphic' computer chip. The chip is 'event-based', meaning it responds to changes in the environment in much the same way as the human brain does. This makes it significantly more efficient than standard computer chips, because it processes key information faster and reduces unnecessary power consumption.

What has happened to the Brainchip share price over the past year?

Brainchip shares went on a tear back in February, skyrocketing over 200% in a matter of weeks. The massive jump in its share price even prompted a 'please explain' notice from the ASX, but Brainchip couldn't offer a business reason for the sudden interest in its stock.

In truth, the surge in Brainchip shares could have had more to do with events happening overseas than anything Brainchip had actually done. The sudden rise of American AI company NVIDIA Corp (NASDAQ: NVDA) inspired short-term traders to greedily gobble up shares in other AI companies, hoping to latch onto the next 'big thing' – even if company valuations didn't justify the investment.

Unfortunately for Brainchip, by the end of February, its shares were already in freefall again after it reported a net loss of US$28.9 million for 2023 – an even worse result than its 2022 net loss of US$22.1 million.

So, what's next for Brainchip?

Brainchip is the first company in the world to try to commercialise neuromorphic technology, which comes with both benefits and disadvantages.

On the one hand, Brainchip has a huge addressable market and few viable competitors – which is the ideal scenario for a strong economic moat. If Brainchip can show that neuromorphic technology can be successful, it has the first-mover advantage and can develop a loyal brand following.

On the other hand, it's trying to convince its customers to buy a piece of highly complex technology that they have probably never heard of before. This is a hard thing to do – regardless of how groundbreaking that technology might be.

So far, its financial performance has been less than convincing. For its part, Brainchip blamed its 2023 net loss on a 'transitional year', in which it invested in further developing its technology and expanding its marketing and sales functions. However, it was still hard for investors to look past the whopping 95% year-on-year drop in revenues.

In its 2023 annual report, Brainchip mentioned the 'strong levels of interest' it had received from potential customers and the 'encouraging pipeline' it had built throughout the year. Investors will need to see that translated into real sales (and quickly!) before they can confidently invest in Brainchip shares.

The post Brainchip share price tumbles 40% in the past year. What's next? appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The share price of ASX defence company DroneShield Ltd (ASX: DRO) has been on a tear recently – soaring close to 35% higher in just the last month alone. This continues an impressive run for DroneShield (and its shareholders), with the stock up an eyewatering 440% over the past year.

Investors seemingly can't get their hands on enough DroneShield shares. A recent share purchase plan, announced on 18 April, literally had to close early because of overdemand.

The company was only hoping to raise $5 million from retail investors but received orders for an eye-popping $40 million. The company had to scale back the amount raised to its maximum cap of $15 million and return the remaining funds to investors.

So, what's the big deal about DroneShield? What has got investors so excited – and why has its share price been rising so much this past month?

What does DroneShield do?

DroneShield develops technology to protect military, government, infrastructure and other critical assets against attacks or surveillance by unmanned aerial devices (in other words, drones). Its products include tactical machinery that can be used to detect and disable drone attacks. It also develops software solutions that can analyse and assess drone threats in real time and launch a coordinated response.

Recent military conflicts in Ukraine and the Middle East have demonstrated how prevalent drones have now become in modern warfare. They are cheap and easy to manufacture, which makes them a particularly pernicious threat on the battlefield. So, it's no real surprise that demand for technology that effectively counteracts them has been on the increase.

The financials

This uplift in demand is reflected in DroneShield's recent financial performance. FY23 revenues (for the 12 months ended 31 December 2023) surged 226% higher versus the prior year to a record $55.1 million. DroneShield also reported net profit of $9.3 million for the year — the first time the company has posted an annual profit in its entire history.

And with revenues continuing to trend upwards at such a rapid rate, it's unlikely to be the last.

In its most recent quarterly activities report, for the three-month period ending 31 March 2024, DroneShield stated that revenues were up a mind-blowing 1000% versus 1Q23, to $16.5 million. What makes this result even more eye-catching is that the March quarter is usually DroneShield's weakest in terms of sales — which suggests 2024 is already shaping up to be another bumper year.

DroneShield also maintains a very strong balance sheet, with $56.4 million in cash and no debt (as of 31 March 2024).

Why is the DroneShield share price up over the past month?

DroneShield's share price was buoyed by its 22 May announcement that it had been awarded a $5.7 million repeat contract with a US Government customer – with further 'material orders' expected. The order was for DroneShield's counter-drone ('C-UsX') systems, which are capable of detecting and disabling attacks by unmanned devices on air, land and sea.

And this comes hot on the heals of DroneShield's 17 April announcement that it had been awarded a framework agreement with NATO – the first such agreement awarded in NATO's history. This could increase DroneShield's sales by an 'order of magnitude' over the coming years, according to the company's press release.

What's in store for the future?

Things are going pretty well for DroneShield at the moment, and management is understandably bullish about its near-term outlook.

DroneShield considers the counter-drone market to still be in its infancy. It believes military and security companies are watching conflicts overseas and are realising just how vital counter-drone capabilities are going to be for their ongoing defence. This means spending on counter-drone technology could ramp up even further as militaries around the world bolster their stockpiles. As a global leader in counter-drone technology, DroneShield believes it is well-positioned to take advantage of these emerging trends.

The post Why the DroneShield share price is up 35% in a month appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Appen Ltd (ASX: APX) used to be part of ASX tech royalty. It was a member of the once-vaunted WAAAX group of stocks, along with WiseTech Global Ltd (ASX: WTC), Altium Ltd (ASX: ALU), Afterpay – now owned by Block Inc (ASX: SQ2) – and Xero Ltd (ASX: XRO).

However, whereas the other WAAAX shares suffered through some rocky post-COVID years but have since mostly recovered to even greater highs (with the exception of Afterpay), the Appen share price has lagged far behind.

Like, really far behind.

Since topping out at a share price well above $40 back in August of 2020, Appen has lost close to 99% of its value, and is now trading for just 52 cents a share. Ouch!

A company that once had a market cap of nearly $5 billion, is now sitting at just over $100 million.

So, what went wrong?

To answer that question, let's start by taking a closer look at what Appen actually does.

What is an Appen?

Appen is a tech company that provides high-quality datasets to artificial intelligence (AI) companies. It uses a crowdsourced global workforce to annotate and curate data which it then sells to big tech companies to help 'train' their AI programs.

Large language models, like ChatGPT, work by ingesting huge amounts of data. The AI algorithm searches through this data to identify patterns, correlations, and other connections, to essentially 'learn' how human language is constructed.

Appen supplies the data.

But hold on – isn't AI meant to be a booming industry right now? It's all over the news – and American AI giant Nvidia Corp (NASDAQ: NVDA) even briefly broke through the magical US$3 trillion market cap barrier. That puts it right up alongside tech behemoths Apple Inc and Microsoft Corp as the largest listed companies in America.

So, if AI is booming, and AI programs need data to function, shouldn't this be fertile ground for a massive rally in the Appen share price? So then why isn't Appen following Nvidia to the top of the stock market?

I'm glad you asked.

Concentration risk

Concentration risk is when a company relies too heavily on a small group of large customers to generate its revenues. If those customers cut back on their spending, it leaves a massive hole in the company's income statement.

Unfortunately, that is what happened to Appen.

It has relied heavily on five major customers to generate most of its revenues: Microsoft, Apple, Meta Platforms, Google parent company Alphabet, and Amazon. And while that might seem like an enviable list of clients to have in your rolodex, relying on them too heavily is still risky.

This came to a head back in 2021, when Apple changed the privacy policy on its operating system to limit the ability for digital advertisers to track customer activity across multiple apps. As part of the Apple update, users could now opt out of having their data collected.

This led to a cutback in digital AI advertising spending from Appen's major clients.

As a result, Appen had to issue multiple earnings downgrades over the years, disappointing shareholders. For an indication of how far Appen has now fallen, compare its FY23 annual revenues of US$273.0 million with the record revenues of US$447.3 million it reported in FY21. That's a decline of almost 40% in just two years.

And there was more bad news to come in January 2024, when Google parent company Alphabet announced it would be severing all ties with Appen. To put this in context, Google contributed US$83 million of the US$273 million total revenues Appen reported in FY23.

Can the Appen share price stage a comeback?

Despite what should be favourable macroeconomic conditions, Appen has continued to struggle – and this latest piece of bad news from Google isn't going to help it at all in the near term.

However, if there is some silver lining to all this, it has been Appen's pivot towards new markets – and away from its reliance on the big hitters in Silicon Valley. Appen's Chinese clients delivered record-high quarterly revenue contribution of US$11.1 million in 4Q23. While this certainly won't make up for the loss of Google, if anything is going to rescue Appen's business it's going to be new clients in new markets.

The post Can the Appen share price recover amid AI mania? appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Rhys Brock has positions in Altium, Appen, Block, and WiseTech Global. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Altium, Amazon, Appen, Apple, Block, Meta Platforms, Microsoft, Nvidia, WiseTech Global, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has positions in and has recommended Block, WiseTech Global, and Xero. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Green energy isn't just good for the environment – it could also be big business.

As part of this year's Federal Budget, Australian Treasurer Jim Chalmers announced that the government is planning to invest a whopping $22.7 billion in decarbonisation through its 'Future Made in Australia' package.

Given Australia's abundant sunlight and windswept coastlines, the government believes we could quickly grow into a 'renewable energy superpower'. Now, it wants to light a fuse under our fledgling green energy sector.

But Australia isn't alone – governments all over the world are investing in renewables. According to the World Economic Forum, America has invested an eye-popping US$559 billion in clean energy since 2020, and Germany's not too far behind at US$339 billion.

This could make green energy a real growth sector to invest in over the next decade.

Although – a little surprisingly – when it comes to genuine green energy ASX stocks, there aren't too many Australian companies available to choose from.

Sure, Origin Energy Ltd (ASX: ORG) can talk up its solar and wind energy credentials, but it still owns Eraring, Australia's largest coal-fired power plant. And AGL Energy Limited (ASX: AGL) may offer some renewables, but it's also Australia's biggest carbon emitter.

This might leave investors seeking green energy exposure feeling a little downtrodden. But don't despair – the Kiwis have got us covered. There are not one, not two, but three New Zealand-based 100% green energy companies currently trading on the ASX.

Mercury NZ Ltd (ASX: MCY)

First up is Mercury NZ. It is a diversified utilities company that supplies electricity, as well as broadband and mobile services to its customers. All its electricity comes from renewable sources, including hydro, geothermal, and wind.

In its 1H24 results, covering the six months ended 31 December 2023, total revenues jumped by 23% versus 1H23 to NZ$1.6 billion. However, higher operating expenses, mainly driven by depreciation on its new wind farms at Turitea and Kaiwera Downs and higher borrowing costs, drove net profit after tax (NPAT) 27% lower (to NZ$174 million).

Despite the drop in net income, management remains bullish about the company's growth prospects and is investing heavily in new energy assets. In September 2023, the company committed NZ$220 million to expand its geothermal station at Ngā Tamariki and is also planning to significantly increase capacity at its Kaiwera Downs wind farm.

Meridian Energy Ltd (ASX: MEZ)

Meridian Energy is New Zealand's largest energy producer, and it generates all of its energy from renewable sources.

The company owns and operates six power stations in the Waitaki Hydro Scheme, with a further two owned and operated by Genesis Energy Ltd (ASX: GNE) – yet another New Zealand energy company ASX investors can buy shares in (although it also owns the Huntley Power Station, NZ's largest coal-fired power plant). Together, the eight power stations in the Hydro Scheme supply 16% of New Zealand's electricity.

Meridian also owns and operates the underground Manapouri Power Station, the largest hydropower station in New Zealand. In addition to its hydro assets, Meridian also has a significant number of wind farms – plus, it offers solar energy plans where it buys back excess energy from households and businesses with solar panels installed.

Infratil Ltd (ASX: IFT)

Completing our New Zealand-based trifecta is Infratil. It's an interesting addition to this list as it's actually an investment company that owns a number of green energy assets, along with investments in healthcare, digital infrastructure (like data centres and telecommunications networks), and even Wellington International Airport.

Infratil takes a long-term approach to its investment choices, which makes it a good stock to look at for growth investors. It taps into many emerging growth investing themes, from artificial intelligence to an ageing population to (of course) green energy and decarbonisation.

Infratil has a globally diversified portfolio of renewable energy investments, including a 51% stake in hydroelectricity generator Manawa Energy Ltd (NZE: MNW), a 95% stake in Singapore-based wind and solar energy company Gurīn Energy, and a 40% stake in Swiss-based company Galileo, which has operations all across Europe.

The post Top ASX green energy stocks in June 2024 appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Growth stocks are companies that have potentially significant expansion opportunities ahead of them. Because of their future potential, investors expect that their share prices will rise much more quickly than the market average.

Growth shares are usually junior companies with a fair bit of buzz about them – perhaps they're developing some revolutionary new product or service, or maybe they're closely aligned with emerging global trends, like Artificial Intelligence (AI) or decarbonisation.

Many ASX growth shares are tech companies. Rapid advances in technology mean products and services that weren't even conceivable a few decades ago are now practically ubiquitous (think smartphones, streaming services, and cryptocurrency). This extreme pace of innovation means new tech start-ups can occasionally take off overnight, making their investors rich and striking FOMO into everyone else.

However, growth stocks don't have to be tech shares – it's not unusual to see a junior mining stock's price skyrocket if it uncovers a significant new resource, and even the odd retail stock can make quick gains if it launches into a potentially lucrative new market.

But remember – growth shares are riskier than other types of shares. They are often speculative plays, and not every gamble will pay off. So, only risk what you can afford to lose.

Despite the risk – or perhaps because of it – growth stocks can be very exciting to invest in. And, luckily for us ASX investors, there are plenty of options available for us to choose from. Here are 3 I'd consider buying if I had a spare $5,000.

Audinate Group Ltd (ASX: AD8)

Audinate shares have been on a tear recently. Over the past 12 months, its share price has skyrocketed over 65% – and that's despite a 30% drop from the 52-week high price of $23.51 it hit back in March.

The rise in its share price has come on the back of its strong financial performance. In its 1H24 results – covering the six months ending 31 December 2023 – Audinate's revenues jumped almost 48% versus 1H23 to US$30.4 million. And, after recording a net loss of US$0.4 million in 1H23, Audinate's net profit after tax in 1H24 was US$4.7 million – a pretty impressive turnaround.

Audinate specialises in audiovisual (AV) technology. Its flagship product is called Dante, which replaces old-school analogue cable AV connections with a digital computer network. It has a large variety of applications, from corporate office buildings, broadcast media, and even churches and other places of worship.

Light & Wonder Inc. CDI (ASX: LNW)

Headquartered in Las Vegas, Light & Wonder is a gaming company specialising in poker machines, online casino games, and what it calls 'social games' – essentially mobile and web casino games where you don't play for real money or prizes.

Its share price has soared over 50% higher in the past 12 months – significantly more than established rival Aristocrat Leisure Limited (ASX: ALL) – on the back of strong earnings growth. Quarterly revenue for the 3 months ended 31 March 2024 was up 13% versus the prior comparative period to US$756 million. This revenue uplift – combined with lower depreciation and amortisation expenses – led to a staggering 273% jump in net profit (to US$82 million for the quarter).  

Nextdc Ltd (ASX: NXT)

Although Nextdc is quite an established ASX technology company, it still has significant growth potential ahead of it, which makes it a worthy addition to this list.

Nextdc operates data centres all across Australia, as well as internationally in New Zealand, Japan and Malaysia. This is already a growth sector, given how much of our time nowadays is spent online. All that data we create has to be stored somewhere.

However, rapid advancements in AI could supercharge Nextdc's growth in the next few years. AI, like ChatGPT and other machine learning programs, need enormous amounts of data to function, which could drive up demand for data centres even further. And the company knows it. In April, it launched a capital raise seeking an eyewatering $1.3 billion from investors to help finance its growth pipeline.

The post 3 ASX growth stocks I'd buy with $5,000 appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has positions in Audinate Group and Nextdc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Audinate Group and Light & Wonder. The Motley Fool Australia has positions in and has recommended Audinate Group. The Motley Fool Australia has recommended Light & Wonder. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Artificial intelligence (AI) could be one of the next great megatrends to affect society, potentially as impactful as the Industrial Revolution.

While there is some trepidation about this rapidly developing new technology, there is also an incredible amount of excitement and optimism. AI could upend whole industries and fundamentally change the way we all work. But it also has the capability to massively enrich and improve our lives.

In this article, we take a look at what makes AI such an exciting field to invest in. Then, we'll list some of the ASX stocks best positioned to benefit from the emergence of AI.

What even is AI, anyway?

Our ideas about AI have changed a lot over the past few decades. We used to think of AI as the friendly robots that 'beep-booped' their way around the Star Wars universe.

But nowadays, in the era of ChatGPT and DALL-E 3, we're probably more likely to think of AI as a piece of complex computer software that we interact with on a computer screen than a clunky humanoid robot that follows us around on intergalactic adventures.

As our understanding of AI has changed and evolved, it has become a much more nebulous concept to define. Essentially, it is now an umbrella term that includes just about any computer process designed to simulate the patterns of human thought.

For example, ChatGPT is a large language model that is designed to produce fluent, human-sounding responses to just about any prompt. And, as I'm sure you're already aware, it's pretty convincing.

AI systems like ChatGPT use machine learning, an algorithmically driven process. In this process, the AI program is fed huge amounts of data, which it then analyses for patterns, connections, and correlations.

In the case of ChatGPT, if you give the program enough language data, it will begin to learn how language is constructed. Eventually, the program will be able to simulate that language and even generate its own unique responses to questions.

Why should you invest in it?

Putting all those uncomfortable Blade Runner­-type questions about what it even means to be human anymore to one side, today's AI technology is undoubtedly extremely cool. And it's developing at a rapid pace.

The commercial applications of AI are potentially limitless. Tasks that would normally take a human hours to complete, AI could bash out in mere seconds. It could replace a corporation's whole logistics, accounting and cybersecurity departments.

It could develop marketing campaigns based on a deep analysis of consumer trends, improve medical care, help advance scientific discoveries, and drive our cars for us.

Given its potential, AI could be a great section of the market to focus on for growth-minded investors. It does, of course, come with risks – the fast pace of development means that today's industry leaders might become tomorrow's laggards.

So, be sure to diversify across a few different AI stocks and balance them out in your portfolio with some less risky shares, like defensive stocks and blue chips.

ASX AI shares

Luckily for ASX investors, there are plenty of stocks available on the ASX that tap into the AI trend. Some develop AI technology, while others provide the infrastructure that supports it.

I've selected a bit of a mix below to give you an indication of the different ways you can gain exposure to AI.

NextDC Ltd (ASX: NXT)

AI programs like ChatGPT and other machine learning systems require huge amounts of data to function effectively. And all that data needs to be stored somewhere.

That's where NextDC comes in. It is a leading Australia-based company operating data centres in Australia, New Zealand, Japan and Malaysia. As AI technology continues to develop, demand for data storage will only increase, creating growth opportunities for companies like NextDC.

And the company knows it – it launched a $1.3 billion capital raise back in April to help finance its growth plans.

Telstra Group Ltd (ASX: TLS)

In addition to data storage, AI needs fast and reliable internet connectivity. As the nation's leading telco, Telstra could have the potential to be Australian AI's infrastructure backbone.

According to its website, Telstra's mobile network covers 2.7 million square kilometres of Australia's landmass – about 60% more than its next biggest rival.

Telstra is a good choice for income-seeking investors as it pays a consistent, fully franked dividend. Based on current prices, its dividend yield is a healthy 5%.

BetaShares Global Robotics and Artificial Intelligence ETF (ASX: RBTZ)

Exchange-traded funds (ETFs) are a great option for investors seeking diversified exposure to global AI stocks. When you buy a unit of an ETF like RBTZ, you're really buying a small ownership stake in a portfolio of stocks overseen by a fund manager.

This means that in a single trade, you can gain exposure to an entire industry.

The RBTZ ETF invests in companies worldwide that specialise in robotics, AI, automation, and driverless cars and have a market capitalisation of at least US$100 million.

Currently, the fund's largest holding is American tech company and AI champion NVIDIA Corp (NASDAQ: NVDA), which makes up about 10% of its portfolio,

The post Joining the revolution: How I'd invest in ASX AI shares right now appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock has positions in Nextdc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.