If you find yourself worrying about the fact the CSL Limited (ASX: CSL) share price has fallen 15% in the last 12 months, here's a great way to shift your focus.

Think about how the company might look a decade from now. Yes, ten whole years.

After all, the real magic of investing is finding companies that can relentlessly grow and compound earnings over long periods of time. Thinking about a company's long-term plans can help to put short-term share price movements in perspective.

And CSL actually has a strong vision for how it wants to grow over the next decade. Here are three things we can expect to see from the company over the next ten years:

1. A new manufacturing facility in Australia

In November last year, CSL announced that the company's wholly-owned subsidiary Seqirus will invest more than $800 million in a new manufacturing facility in Melbourne. The facility will produce seasonal and pandemic flu vaccines as well as antivenoms for Australian snakes, spiders and marine creatures.

The new facility is supported by a 10-year supply agreement with the Australian Government and is expected to be operational by mid-2026.

2. Significant investment in R&D

In addition to the new manufacturing facility, CSL has announced some significant plans to continue investing in research and development (R&D). This includes building a brand-new global headquarters in the Parkville Biomedical Precinct in Melbourne. The huge 16-storey building is expected to open in 2024 and will accommodate 800 employees and "expand our R&D footprint" according to CSL.

The company is also undertaking the construction of a special R&D campus in Marburg, Germany which is scheduled for completion in 2022 and will have enough space for around 600 employees.

Innovation is a core principle of CSL's business so investing in R&D is an important driver of future growth. In FY20, CSL invested an incredible US$922 million in R&D across its businesses and expects to invest up to 11% of revenue on R&D in FY21.

3. More digitalisation across the business

One of the core pillars of CSL's strategy over the coming decade is a focus on a digital transformation. Digital investments are often hard to see from the outside of a company. However, digital tools will help with essential areas like improving quality control, supply chain efficiency and regulatory compliance.

For example, the introduction of automated inspection technology can increase the number of vials inspected every minute which means manufacturing operations can accommodate greater demand.

The post 3 things to expect from CSL (ASX:CSL) over the next decade appeared first on The Motley Fool Australia.

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• CSL's collapse deepens. Why this ASX giant can't find a floor
• Prediction: CSL shares could surpass $265 in 2026
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Regan Pearson has no position in any of the stocks mentioned. You can follow him on Twitter @Regan_Invests. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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 Bruce Jackson.

One company that has continued to bloom in the face of the COVID-19 pandemic is cargo logistics software company WiseTech Global Ltd (ASX: WTC). The WiseTech Global share price has risen by almost 80% in the last 12 months as sales have continued to grow.

Last month, WiseTech announced a 16% increase to revenue in the first half of the 2021 financial year, driven by higher user numbers as well as price increases. Pleasingly for investors, the strong result also contributed to a big lift in the interim dividend. Here's what you need to know about the WiseTech dividend.

What is the company's dividend yield?

In its recent half-year results, WiseTech declared an interim dividend of 2.7 cents per share for the six months to 31 December 2020. This was up 59% on the same period in 2019 and gives WiseTech a trailing dividend yield of around 0.15%, fully franked.

OK, so a 0.15% yield probably isn't going to send many hearts aflutter. But WiseTech is still in growth mode and is focused on investing most of its earnings back into the business. This has helped to quickly grow earnings over the last few years, which has resulted in a steady lift in the WiseTech share price, as well as its dividend.

Is the WiseTech dividend growing over time?

WiseTech only listed on the ASX in 2016, but has been a devout dividend payer since. In the chart below we can see that the company has also been fairly consistent in growing its dividend over time. This is in line with the company's dividend policy which targets a payout ratio of up to 20% of net profit after tax (NPAT).

Source: Chart compiled by author using data from WiseTech Global

A 20% payout ratio leaves the majority of earnings free to be reinvested back into the business. In fact, WiseTech reported spending $159 million on product development in FY20 compared to just $11.1 million on dividends paid to investors.

When does WiseTech pay its dividend?

The WiseTech share price will go ex-dividend on Friday 12 March 2021. The 'ex-date' is when the shares start selling without the value of their next dividend payment so an investor needs to own the shares before the ex-date to receive the dividend. The dividend will then be paid on Friday 9 April 2021.

The post What you need to know about the WiseTech (ASX:WTC) dividend appeared first on The Motley Fool Australia.

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• Still down 40% over the past year, how high could WiseTech shares recover?

Motley Fool contributor Regan Pearson has no position in any of the stocks mentioned. You can follow him on Twitter @Regan_Invests. The Motley Fool Australia owns shares of WiseTech Global. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

One of the true stand-out results from last month's reporting season came from medical diagnostic company Sonic Healthcare Limited (ASX: SHL). The company benefitted from the surge in demand resulting from COVID-19 and, in the six months to 31 December 2021, revenue was up 33% over the comparable period, while net profit after tax (NPAT) rocketed 166%.

Importantly for income investors, Sonic Healthcare also announced a 6% increase to its interim dividend, building on a strong history of dividend increases. But is it enough to classify Sonic Healthcare as a 'dividend aristocrat'?

What is a dividend aristocrat?

The term 'dividend aristocrat' is used to describe a company that has increased its dividend consecutively for 25 years. It is an auspicious title in the world of dividend investing because it requires a company to unwaveringly defeat the ups and downs of different business cycles.

Unfortunately, Sonic Healthcare's distribution history doesn't quite crack the 'aristocrat' criteria, although it does come deliciously close.

In fact, if it wasn't for a short period from 2010 to 2012 when the dividend remained flat, Sonic Healthcare would be there. Just have a look at the impressive chart below:

Source: Chart compiled by author using data from Sonic Healthcare.

How much of its earnings does the company pay out?

An important driver of the great chart above is Sonic Healthcare's progressive dividend policy. This is where dividends are increased over time as earnings grow. However, if earnings fall, the company tries to at least maintain the same dividend level. The approach gradually raises the bar each time the distribution is increased.

It also means the company's payout ratio, the percentage of earnings per share (EPS) the company pays out, can fluctuate from year to year, depending on earnings. For example, in 2019 Sonic Healthcare paid out 66.4% of its earnings. However, in 2020 the ratio increased to 76.5% as the dividend increased, but earnings per share dipped. 

What is Sonic Healthcare's dividend yield?

The most recent interim dividend of 36 cents per share for the six months to 31 December 2020 gives the company a trailing dividend yield of 2.7%, based on the current Sonic Healthcare share price. The dividend comes partly franked.

When does Sonic Healthcare pay its dividend?

The Sonic Healthcare share price will go ex-dividend on Tuesday 9 March 2021. The 'ex-date' is when the shares start selling without the value of its next dividend payment. An investor needs to own the shares before the ex-date to receive the dividend. The dividend will then be paid on Wednesday 24 March 2021.

The post Is Sonic Healthcare (ASX:SHL) a dividend aristocrat? appeared first on The Motley Fool Australia.

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Motley Fool contributor Regan Pearson has no position in any of the stocks mentioned. ou can follow him on Twitter @Regan_Invests. The Motley Fool Australia has recommended Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Global hospital group Ramsay Health Care Limited (ASX: RHC) gave investors something to cheer about last week when it released its first-half results for the 2021 financial year. The Ramsay Health Care share price rose 8% as the company announced net profit after tax (NPAT) was up almost 1%, despite the challenges presented by COVID-19. 

Importantly for income investors, the company also announced it would resume paying dividends after not paying a final dividend in 2020. Here's what you need to know.

What is the Ramsay Health Care dividend yield?

Ramsay Health Care declared an interim dividend of 48.5 cents per share for the six months to 31 December 2020. This was down -22.4% on the same period in 2019 and because there was no final dividend paid in 2020 at the current share price of $68.49, Ramsay has a trailing dividend yield of just 0.71%, though it does come fully franked.

OK, so it's not hugely exciting. But, as we can see from the company's dividend history below, there are good reasons to think this may just be a short-term, COVID-19 induced blip.

When does Ramsay Health Care pay its dividend?

The Ramsay Health Care share price will go ex-dividend on Monday, 8 March 2021.  The 'ex-date' is when the shares start selling without the value of their next dividend payment so an investor needs to own the shares before the ex-date to receive the dividend. The dividend will then be paid on Wednesday, 31 March 2021.

What does Ramsay Health Care's dividend history look like?

Ramsay's dividend history over the last decade makes for quite a sight. If there are two things dividend investors love to see it's consistency and growth, both of which Ramsay was delivering hand over fist until COVID-19 hit in 2020.

The chart below shows how the company's dividend had been rising strongly right up until 2020:

Source: Chart compiled by author using data from Ramsay Health Care

When COVID-19 struck, elective surgery dropped in most of Ramsay's key markets and the company pivoted to providing more capacity to the public sector through special government arrangements.

Earnings fell as a result and in the ongoing uncertainty, Ramsay decided not to pay a final dividend in 2020. The company also raised $1.5 billion in equity to strengthen its balance sheet and repay debt. 

How much of its earnings does Ramsay Health Care pay out?

Over the last five years, Ramsay Health Care has typically paid out around 50% of diluted earnings per share in dividends. This was slightly lower (40%) in 2020 as the company held back its final dividend.

By retaining some of its earnings, Ramsay is able to reinvest back into the business, developing new hospitals or paying back debt, which helps to grow earnings and dividends over time. Investors will no doubt hope that continues to be the case so they have something else to cheer about when the company releases its full-year results for 2021.

The post Why investors are cheering for the Ramsay Health Care (ASX:RHC) dividend appeared first on The Motley Fool Australia.

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Motley Fool contributor Regan Pearson has no position in any of the stocks mentioned. You can follow him on Twitter @Regan_Invests The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Last week health insurance provider NIB Holdings Limited (ASX: NHF) released its first-half results for the 2021 financial year. Investors were certainly pleased to see net profit after tax (NPAT) jump by almost 16% as the NIB share price jumped 2.5% on the day.

Importantly for income investors, the company also announced details on its interim dividend. Here's what you need to know.

What is NIB's dividend yield?

In tandem with the half-year results, NIB declared an interim dividend of 10 cents per share for the six months to 31 December 2020. This was in line with the same period last year and means NIB shares have a trailing dividend yield of 2.5%, fully franked, based on the current share price of $5.60.

When does NIB pay its dividend?

The NIB share price will go ex-dividend on Thursday 4 March 2021.  The 'ex-date' is when the shares start selling without the value of its next dividend payment so an investor needs to own the shares before the ex-date to receive the dividend. The dividend will then be paid on Tuesday 6 April 2021.

What does NIB's dividend history look like?

We can learn a lot by looking back at a company's dividend history. For example, we can see how consistent or lumpy dividend distributions are. This can help us better understand the nature of the business and whether it is growing (or not!) over time.

From the chart below, we can see that the NIB dividend had been rising steadily until 2020, when the impacts of COVID-19 contributed to a big drop in the company's profit margins and investment income.

Source: Chart compiled by author using data from NIB.

Did you spot the big spike in 2014? Nice! As part of NIB's capital management plans, the final dividend in 2014 was made up of both an ordinary dividend of 5.75 cents per share, plus a one-off special dividend of 9 cents per share to return extra cash to investors. Ka-ching!

How much of its earnings does NIB pay out?

NIB has typically aimed for a payout ratio of 60% to 70% of the company's normalised net profit after tax (NPAT). True to form, this has been the case over the last five years with an average payout ratio hovering right around 70% of NPAT. A payout ratio of 60% to 70% is more likely to be sustainable over the long term than if the company was to pay out 90% or 100% of its profits.

However, because dividends get paid from cash, not accounting profits, it is also a good idea to check that the company's cash flows from operations are sufficient to cover the dividend being paid out. If the dividend being paid was more than the cash flow the company earned from operations, this could be a warning sign the dividend may not be sustainable.

The post What you need to know about the NIB (ASX:NHF) dividend appeared first on The Motley Fool Australia.

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Motley Fool contributor Regan Pearson has no position in any of the stocks mentioned. You can follow him on Twitter @Regan_Invests. The Motley Fool Australia has recommended NIB Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Last week blood products giant CSL Limited (ASX: CSL) unveiled a huge double-digit growth in sales and profit in its half-year results to 31 December 2021. The company also added over US$1.2 billion in cash and announced an increase to its interim dividend.

If you're considering buying CSL shares for their dividend potential, here are some important things to know.

What is CSL's dividend yield?

In its recent half-year results, CSL declared an interim dividend of US$1.04 per share for the six months to 31 December 2020. This was up 9.5% on the same corresponding period and, based on current exchange rates, suggests CSL has a trailing dividend yield of around 1.0%, unfranked.

When does CSL pay its dividend?

The CSL share price will go ex-dividend on Thursday 4 March 2021.  The 'ex-date' is when the shares start selling without the value of their next dividend payment, so an investor needs to own the shares before the ex-date to receive the dividend. The dividend will then be paid on Thursday 1 April 2021.

What does the company's dividend history look like?

It's interesting to look at how CSL's dividend has performed over the last few years. In fact, as you can see from the chart below, CSL has an impressive track record of growth when it comes to paying annual cash dividends over the last eight and a half years:

Source: chart compiled by the author, data from CSL.

How much of its earnings does CSL payout?

Over the last 12 months, CSL has reported dividends totalling US$2.11 per share, while the company's reported earnings per share (EPS) over the same period were US$5.86. From this, we can see that CSL will be paying out about 36% of its earnings for the last 12 months. This might fluctuate more or less over time. For the full 2020 financial year, CSL actually paid out a slightly higher percentage of around 44% of earnings per share.

If a company is paying out more in dividends than it is earning, this could be a warning sign that the dividend may not be sustainable over the long term.

The post What you need to know about the CSL (ASX:CSL) dividend appeared first on The Motley Fool Australia.

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• CSL's collapse deepens. Why this ASX giant can't find a floor
• Prediction: CSL shares could surpass $265 in 2026
• Are ASX healthcare shares the next to rally?
• 5 oversold ASX shares to buy before the end of April
• 2 ASX healthcare shares I think can beat the market

Regan Pearson has no position in any of the stocks mentioned. You can follow him on Twitter @Regan_Invests. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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 Bruce Jackson.

It has certainly been a rough start to the year for Xero Limited (ASX: XRO) shares. After rocketing 84% higher in 2020, the Xero share price has been steadily drifting back to earth so far in 2021.

In fact, Xero shares have slumped by more than 19% in just two months. This is almost two-thirds as much as the company fell by during the COVID-19 induced panic which bottomed out on 23 March last year.

What's dragging down the Xero share price?

The timing of the slump in the Xero share price does seem odd. Vaccines are being rolled out at a rapid rate and new cases of COVID-19 in the United Kingdom and United States have been plunging. In fact, we have never been closer to an end to the pandemic. Surely this would be good news for Xero's small business customers?

With no material company announcements in 2021, one possible factor dragging down the Xero share price is the prospect of rising interest rates. As economic activity starts to pick up again, we are likely to see some of the emergency measures used to keep the economic heart beating being eased. This means we could be waving good-bye to record low interest rates.

Rising interest rates can be bad news for a company's share price because future earnings get discounted at a higher rate, reducing its fundamental value.

Another possibility for the drift lower is simply that the Xero share price got caught up with the post-COVID tech rally and the market got ahead of itself. This was amplified when Xero was added to the MSCI Global Standard Index late last year, boosting interest in the company.

Should you be worried?

Neither factor, interest rate worries or shifting investor sentiment, is really related to how Xero's business is performing. Is Xero likely to see lower subscriber growth because of COVID-19? Absolutely, but that is not new information.

In the six months to September 2020, Xero announced it had slashed spending on advertising and marketing in response to the pandemic which would slow growth. Even then, Xero added 168,000 new subscribers during the period and grew free cash flow from NZ$4.8 million to NZ$54.3 million.

It's worth remembering too that in the five years to 31 March 2020 Xero was able to grow revenue at a compound annual growth rate of 36%! Xero's full-year FY21 results are due to be released on 13 May 2021 and investors will be paying keen attention to how the company plans to revive growth again for the years ahead.

The post Why is the Xero (ASX:XRO) share price down 19% in 2021? appeared first on The Motley Fool Australia.

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Motley Fool contributor Regan Pearson owns shares of Xero. You can follow him on Twitter @Regan_Invests. The Motley Fool Australia owns shares of Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Brokers across the Tasman have been hard at work picking their top share ideas for 2021.

In a recent article, The New Zealand Herald surveyed six of the country's top share brokers and asked them for their 5 top New Zealand share picks for 2021.

New Zealand's benchmark NZX 50 Index (NZE: NZ50G) had a blinder of a year in 2020, returning 14% to 31 December, compared to precisely 0.1% for the S&P/ASX 200 Index (ASX: XJO). It's a bit unfair to compare the two indexes given they have very different industry compositions, but clearly something good has been happening in NZ that is worth paying attention to. Fortunately, many of the biggest NZ companies are also listed on the ASX.

The survey asked brokers to choose the securities they think will provide best short-term performance over the next 12 months. This means a company's long-term potential is not necessarily considered. The brokers also do not get to review or change their picks throughout the year. 

With that said, here are 3 companies the NZ brokers picked will do well in 2021 that also happen to be listed on the ASX.

EBOS Group Ltd (ASX: EBO)

EBOS Group is Australasia's largest diversified healthcare and veterinary products distributor. The company generates more than $8 billion of revenue per year and grew revenue by 26.5% in the 2020 financial year.

EBOS was picked by no less than four of the six brokers surveyed. The company was picked for its solid growth outlook and robust demand for healthcare products as well as its increasing free cash flow and strong balance sheet. Brokers also noted that the company has a 'defensive growth profile', which means the share price may hold up better than other companies in 2021 if volatility strikes.

Spark New Zealand Ltd (ASX: SPK)

New Zealand telecoms company Spark was also picked by four of the six brokers as a likely winner for 2021. Interestingly, most of the reasons given relate the increasing investor demand for companies like Spark, which has a strong dividend and infrastructure-like defensiveness to earnings. In 2020, Spark's revenue grew 2.5% and net earnings increased by 4.4%.

A2 Milk Company Ltd (ASX: A2M)

Despite a shocking year in 2020, a2 Milk was picked by two of the six brokers. The brokers backing a2 Milk suggest that 2020 could be a speed bump in the company's long-term growth story. In 2021 they expect a2 Milk to continue to diversify its distribution channels away from reliance on the daigou channel (where shoppers buy products on behalf of others and send them back to China).

Other top ASX share picks for 2021

Among the other picks from the brokers to perform well in 2021 was breathing device manufacturer Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) and travel software company Serko Ltd (ASX: SKO).

The Fisher & Paykel Healthcare share price had a huge year in 2020, rocketing 50% with full year revenue growing 18%. Meanwhile the brokers highlighted that the Serko share price may stand to benefit from a recovery in travel demand as vaccines for the COVID-19 virus become more widespread.

The post 3 top ASX share picks for 2021 from NZ brokers appeared first on The Motley Fool Australia.

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Regan Pearson has no position in any of the stocks mentioned. You can follow him on Twitter @Regan_Invests. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Serko Ltd. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia has recommended Serko Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Investing in 2020 was unlike anything we've ever seen.

If we could sum up the year in just 10 quotes to get a sense of what an absolute rollercoaster it was, I think these would do the job well:

1."What would it be like if your biggest holding lost half of its value in just a couple of days?"

– David Gardner, Motley Fool co-founder, 15 January 2020

This is the question asked by Motley Fool co-founder, co-chairman and Chief Rule Breaker David Gardner in January in an episode of the Motley Fool Rule Breaker podcast. The episode simulated that very scenario – a significant market crash. David Gardner and guest host Chris Hill discussed a number of big US listed companies as if they had suffered significant share price falls.

The timing seemed prophetic, however Gardner was careful to note at the start of the episode that "by no means are we predicting or thinking that the market is going to drop any time soon".

2. "Hell is coming"

– Bill Ackman, Pershing Square Capital Management CEO, 18 March 2020

As the COVID-19 virus spread rapidly, share markets started plummeting. By March, even seasoned investors like Bill Ackman, CEO of Pershing Square Capital Management were fearing the worst. Ackman spoke live to CNBC in an emotional interview and issued a stark warning that "a depression era period" could be on its way. As he spoke on 18 March, the big S&P 500 index was plunging as much as -7%. Pershing Square went on to make more than US$2.5 billion in bets against markets.

3. "Australia is closing its borders to all non-citizens and non-residents"

– Prime Minister Scott Morrison, 19 March 2020

To slow the spread of coronavirus and to save lives, the doors to the boarder were slammed shut in March. Airlines were shuttered. Airports turned to ghost towns. The closure of borders around the world will be a defining event of 2020. We may never see it again in our lives.

4. "Tesla stock price is too high imo"

– Elon Musk, Telsa CEO, 2 May 2020

Tesla stock price is too high imo

— Elon Musk (@elonmusk) May 1, 2020

As share markets started to roar back to life, the Tesla (NASDAQ:TSLA) share price went sky-ward. At the time of CEO Elon Musk's tweet the Tesla share price sat at around US$140. Since then the Tesla share price has rocketed by more than 350%, to US$640 per share.

5. "When something like the current pandemic happens, it's hard to factor that in. That's why you never want to use borrowed money, at least in my view, into investments"

– Warren Buffett, Berkshire Hathaway CEO, 2 May 2020

At the same time as Musk's tweet, iconic investor Warren Buffett offered some sage investing advice during Berkshire Hathaway's virtual shareholder's meeting.

 6. "The fundamental outlook may be positive on balance, but with listed security prices where they are, the odds aren't in investors favor"

– Howard Marks, Oaktree Capital CEO, 18 June 2020

In his June memo 'The Anatomy of a Rally', Oaktree Capital's Howard Marks reiterated the thoughts of many of us as share markets bounced back. The S&P/ASX 200 Index (ASX: XJO) had gained around +32% from its March 23 low. Since then share markets have continued to rise merrily, proving Marks' long held maximum that 'You cannot predict. You can prepare'.

7. "Today is a great day for science and humanity"  

– Dr. Albert Bourla – Pfizer Chairman and CEO, 9 November 2020

The world cheered as Pfizer and BioNTech announced a vaccine candidate had proved more than 90% effective against the scourge of COVID-19. People can do incredible things when time and resources are brought to a focus.

8. "If you look at what's transpiring in the current pandemic, similar to what we saw in the 2008 financial crisis, there's this distinct shift away from credit to debit"

– Nick Molnar, Afterpay co-founder, 7 December 2020

The Afterpay Ltd (ASX: APT) share price has had one of the most incredible runs of the year as shoppers moved online. After falling as low as $8 per share in March the Afterpay share price rose over 1,100% to $114 per share in December.

9. "You can't live a successful life without doing some difficult things that go wrong. That's just the nature of the game"

– Charlie Munger, vice chairman of Berkshire Hathaway, 14 December 2020

If you made some investing mistakes in 2020 don't beat yourself up, it was a testing year. As Charlie Munger noted in this webcast interview with California Institute of Technology getting things wrong and learning from it is part of investing.

10. "We are playing the only game that counts; the long-game"

– David Gardner, 15 Jan 2020

To come full circle on 2020 I want to finish with another quote from David Gardner from his January podcast. In so many ways 2020 was a complete shocker. But more than anything it showed why it is so important to keep a long-term view of investing. Markets regularly rise and fall without warning. Having the fortitude to ride out the drops and letting returns compound over many years will likely see you come out a winner.

The post 10 incredible quotes that sum up investing in 2020 appeared first on The Motley Fool Australia.

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Regan Pearson has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

If there is one chart that shows just how crazy it was to be an investor in 2020 it is the one below; the S&P/ASX All Technology Index (INDEXASX: XTX):

To truly appreciate how magnificent this chart is let's keep in mind that the All Technology Index was only launched on 24 February this year.

The data can be back-dated further, which you can have a look at on the S&P Global website here, but it only officially started to track ASX technology-oriented companies in earnest this year.

Source: Google search. Google and the Google logo are registered trademarks of Google LLC, used with permission.

The index is designed to be a comprehensive measure of technology-oriented companies listed on the ASX, but its top five constituents have dominated with absolute blinding returns in 2020:

• Xero Limited (ASX: XRO) +89%
• Afterpay Ltd (ASX: APT) +313%
• SEEK Limited (ASX: SEK) +21%
• REA Group Limited (ASX: REA) +37%

ASX tech shares had the 'Fred Smith' of comebacks in 2020

There are two things in particular that make this chart a wonder. The first is the degree to which markets have moved in such a short period.

After plunging by more than one third in February and March, the All Technology Index has made a phenomenal comeback. The pivot from a decline of -42% to a gain of +46% (at 17 December, 2020) represents a trough-to-peak bounce of almost +145%. It's the Fred Smith of comebacks and something unthinkable just nine months ago.

The second remarkable point is the chasm that has formed between the tech index, which has exploded back, and the relatively ambling recovery of the broader S&P/ASX 200 Index (ASX: XJO).

It's hard to be derogatory about a 48% recovery for the ASX200 index from its low point on 23 March this year. But the tech index fell deeper, and has recovered far stronger, than the broader index as investors swooned over tech companies.

One standout ASX share still floating high 

A true standout of the All Technology Index this year is Redbubble Ltd (ASX: RBL). Redbubble is a marketplace where people can sell prints of their art and graphic designs, but it's worthy of a special mention because of it's incredible 456% return in 2020.

In fact, the Redbubble share price fell as low as 40 cents per share in the COVID-19-led market meltdown, before roaring back with the growth in online shopping.

The company reported a juicy 36% increase in total revenue in the 2020 financial year and at least one analyst remains bullish on the company's prospects going forward.

What can we learn from this 2020 tech explosion?

There is a lot of takeaway from this. First, investing is hard. It is unpredictable and surprising.

That is why an important part of investing is putting money to work for long periods. Long periods of time means we remain invested for the good times and have the resilience to ride out the bad times.

Secondly, we should recognise that the global response to COVID-19 has seen the acceleration of a trend that has been growing for the last decade; software is still eating the world. Lower interest rates and a wave of stimulus has no-doubt added fuel to that fire.

As we head into 2021, a lot of investors will now be watching to see whether this fire is brought quietly under control as vaccines get rolled out. As the chart shows however, we should be prepared for anything.

The post The most crazy ASX chart of 2020 appeared first on The Motley Fool Australia.

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• Regis Resources posts solid March quarter with strong cash flow and dividend

Regan Pearson owns shares of Xero. You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended REA Group Limited and SEEK Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Earlier this month, payments platform company Pushpay Holdings Ltd (ASX: PPH) announced it will undertake a four-for-one share split. This means that each share held in the company before the share split will turn into four shares after the split takes place.

This process kicks off today, Tuesday 24 November, so here's what you need to know.

Why is Pushpay splitting its shares?

Traditionally, share splits have been a way to make share ownership more accessible for smaller investors like you and me. That's because companies with high share prices can be out of reach for investors if they can only purchase whole shares.

Imagine trying to buy a whole share (or more!) in Warren Buffett's Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B). The Berkshire Hathaway share price was a phenomenal US$341,000 per share in November 2020. The CSL Limited (ASX: CSL) share price of around $317 per share is certainly more accessible, but even that could be a challenge if you only had $300 to invest.

This is less of a problem with newer investing platforms that offer fractional share investing, where you can invest fixed dollar amounts and buy part-shares. Still, the additional quantity of shares means there are more shares available to change hands as Pushpay noted in its announcement: "The Pushpay Board considers that the share split will assist to enhance liquidity in the market for Pushpay's ordinary shares."

Has Pushpay split its shares before?

Yes, this isn't the first time Pushpay has split its shares. Pushpay previously completed a four-for-one share split in February 2016.

At that time, Pushpay was only listed on the New Zealand stock exchange, but the company says it saw a positive impact from the split. In its most recent November announcement, Pushpay noted that the previous split resulted in "a meaningful increase in both the shareholder base and liquidity that was partly attributable to the share split."

The other part, of course, is likely to do with the company's impressive growth profile. Pushpay revenue has rocketed from NZ$15 million in the 2016 financial year to NZ$187 million (US$129.8 million) in the 2020 financial year.

When is the Pushpay share split happening?

Today, Tuesday 24 November, is the last date for trading in Pushpay shares on a pre-share split basis.

What happens then? Well from the start of trading on 25 November until market close on Friday 27 November, Pushpay shares will trade as if the share split has occurred. This means that, all else being equal, the Pushpay share price will drop to around one quarter of the previous day's closing price.  

However, it's worth noting that over this period, Pushpay shares will trade on the ASX under the temporary ticker 'PPHDA' and trades will be made on a deferred settlement basis, so settlement will occur on Wednesday 2 December 2020.

From Monday 30 November 2020, things will return to normal and the Pushpay share price will be found under the 'PPH' ticker with regular settlement times.

Do share splits increase a company's value?

Share splits have no impact on a company's fundamental valuation, but when the share price is high, a split can make it easier for individual investors to buy shares in the company.

This was a factor behind big name share splits in the United States this year, with both Apple Inc (NASDAQ: AAPL) shares and Tesla Inc (NASDAQ: TSLA) shares splitting into smaller slices. However, with the Pushpay share price trading around $7.64 at the time of the announcement, it's likely that having more shares outstanding available to buy and sell was a larger driver for Pushpay's split. 

The post Everything you need to know about the Pushpay (ASX:PPH) share split appeared first on The Motley Fool Australia.

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Regan Pearson has no position in any of the stocks mentioned. You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple, Berkshire Hathaway (B shares), and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and PUSHPAY FPO NZX and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Apple, Berkshire Hathaway (B shares), and PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Regan Pearson has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple, Berkshire Hathaway (B shares), and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and PUSHPAY FPO NZX and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Apple, Berkshire Hathaway (B shares), and PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

In more than 10 years of investing, I've never experienced anything like 2020. The ups, the downs, the twists! Markets have been changing so quickly that thinking about anything beyond this year, and beyond COVID-19, feels like crystal ball gazing.

That goes for our investing too. However we can't let the short-term events of 2020 derail the most important vehicle we have for growing our money over long periods: compounding returns.

Compounding is where earnings (or dividends) get reinvested, and those earnings start to produce their own earnings. Over time, this can turn an ordinary portfolio into spectacular, life changing wealth. So here are some quick tips to get that compounding back on track in 2021.

Reinvest those dividends!

Plenty of companies are paying out great dividends to shareholders. For compounding to happen, we need to put those dividends back to work.

For example, global packaging company Amcor CDI (ASX: AMC) pays a quarterly dividend which currently yields around 4.2% per annum (unfranked). In the 2020 financial year, strong cash flows allowed Amcor to increase its dividend by almost 10%. The company also has a dividend reinvestment plan (DRP) which can allow dividends to be automatically invested back into the company, without brokerage, commission or other transaction costs.

But there's more. In November, the Amcor board of directors approved a $150 million buy-back of ordinary shares. When buy-backs reduce the number of outstanding shares, earnings and dividends are shared between fewer shares, increasing their value.

Rail freight operator, Aurizon Holdings Ltd (ASX: AZJ), also increased its final dividend by 10% after a strong full year result where underlying net profit after tax (NPAT) increased 12%. Like Amcor, Aurizon is planning to buy back $300 million of shares in the 2021 financial year. This is in addition to $400 million of shares repurchased during the 2020 financial year which sweetens the deal for investors. Both companies are currently rated as 'buy' by The Motley Fool's expert dividend analysts.

Consistency is the key…

Compounding is about consistency, repetition and investing regularly over time. If you're good at setting habits, this will be easy. If not, no problem! The trick is to automate your investing as much as possible. Set up automatic payments to regularly deposit money into an investment account and sign up for company dividend reinvestment plans to take the hassle out of the process.

…but don't get complacent with investment risk

We need to give companies time to grow, but that doesn't mean we can be complacent with risk.

If 2020 has taught us anything, it is that to sleep well at night we want to build a resilient, unshakeable portfolio. Owning shares in companies in different industries, that earn revenue across different regions, is a good start. For example, 47% of Amcor's revenue comes from North America and another 24% comes from Western Europe. Aurizon earns almost all of its revenue in Australia, so between the two companies there is an element of diversification. 

Finally, if you're managing your own portfolio, it's important to keep up with company news and results. The compounding process is far more effective if earnings and dividends are growing regularly. Combined with a long-term perspective and some good habits, you can focus on leaving 2020 behind and turn 2021 into a great year for compounding your wealth.

The post How to compound your way to wealth in 2021 appeared first on The Motley Fool Australia.

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Motley Fool contributor Regan Pearson has no position in any of the stocks mentioned. You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia owns shares of and has recommended Amcor Limited. The Motley Fool Australia has recommended Aurizon Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The big headline numbers showed continued growth in subscribers and revenue, as well as a huge lift in net profit, which jumped from NZ$1.3m to NZ$34.5m. Given the Xero share price jumped by as much as 6% on the day, the results were better than many had anticipated for a period throttled by COVID-19.

However, digging into the results, there are three big things that you may have missed.

1. Xero is piling up a lot of cash!

During the period, Xero's free cash flow jumped from NZ$5.3 million to NZ$54.3 million. That is a big increase and the additional cash means that Xero now has NZ$572 million of cash and short term equivalents.

What could Xero do with that cash? Well, pop your dreams of a juicy dividend aside for now. Over the last few years Xero has made several careful acquisitions to expand the company's platform and make it even more attractive to users. This includes the purchase of lending platform Waddle for $80 million, as well as the US$70 million acquisition of invoice and receipt capture software Hubdoc.

As Xero is still very much in growth mode, there is a good chance the company will continue to look for acquisitions that continue to add to the company's platform.

2. COVID-19 caused the cost of acquiring new customers to spike

Although Xero was able to trim sales and marketing costs by 10% compared to the same period last year, the drag of COVID-19 on international subscriber growth meant that Xero's Customer Acquisition Cost (CAC) jumped noticeably.

International CAC months, the number of months it takes for revenue from a new subscriber to cover the cost of acquiring them, jumped from 16 months at September 30 2019, to 22 months in 2020. Xero says the increase was largely due to the lower growth rate of new subscribers, so the average cost of acquiring each new user internationally increased 30%!

3. Xero still has a huge opportunity ahead

Although it was disappointing to see CAC rise, Xero reminded shareholders of just how big the opportunity ahead is. CEO Steve Vamos noted that Xero estimates that only half of small businesses in Australia and New Zealand have adopted cloud accounting, while for the rest of the world that number is only at 20%. This reiterates just how big the opportunity for cloud accounting, and Xero, remains.

The post 3 big things you might have missed from the Xero (ASX:XRO) results appeared first on The Motley Fool Australia.

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Regan Pearson owns shares of Xero. You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Xero Limited (ASX: XRO) share price this week burst through the $100 per share mark, closing Wednesday at $100.02 per share. It is a big milestone for the New Zealand tech company with a share price rise of 25% so far in 2020. At the time of writing, the Xero share price is trading at $102.

Let's put the Xero share price rise into perspective

To put Xero's share price rise into perspective, the S&P/ASX All Technology Index (ASX: XTX), which includes Xero, has risen 26.9% so far this year. So Xero's share price rise is similar to its peers.

The All Technology Index, which can be tracked through the exchange-traded fund (ETF) Betashares S&P/ASX Australian Technology ETF (ASX: ATEC), currently includes 50 companies. Xero shares make up approximately 10.4% of the index, while the Afterpay Ltd (ASX: APT) share price makes up a chunky 20.4% of the index. The top 5 companies that make up the index are:

• AfterPay Ltd (ASX: APT), 20.4%
• Xero Limited (ASX: XRO), 10.4%
• SEEK Limited (ASX: SEK), 7.0%
• Computershare Limited (ASX: CPU), 6.6%
• REA Group Limited (ASX: REA), 5.6%

How does Xero's $14.2 billion valuation compare?

Xero currently trades at a market capitalisation of around $14.2 billion dollars, which means it has a price-to-sales ratio of around 21x. This is certainly well above the company's own average over the last five years of closer to 12x sales,according to data from ycharts.com. It is also substantially higher than the All Technology Index average price-to-sales ratio of 6.7x.

The price-to-sales multiple alone is not necessarily a fair reflection of the company's valuation. But it does tell me that an investor buying Xero shares at $100 today is assuming a surge in revenue growth in years ahead to justify paying so much more than in previous years.

Should you buy Xero shares at $100?

I own Xero shares and I've written before that I think Xero has the potential to become one of the world's best companies. The platform that Xero provides is evolving from an accounting service to a full suite of products designed to help small businesses and is growing an incredible switching cost moat.

Still, I can't help feeling that at $100 per share, there is very little margin for error in the Xero share price. In my view, Xero's financial performance still has some way to go before justifying the $100 mark and it's likely that Xero has simply been caught up in the hot demand for consumer-tech stocks. 

As Motley Fool Australia Director of Research Scott Phillips wrote recently about Apple (NASDAQ: AAPL): "Where the 'safe stocks' used to be banks and oil companies, they're quickly being supplanted by big, well known, consumer-tech stocks."

In this kind of environment, it's best to proceed with caution.

The post Is the Xero Ltd share price a buy at $100? appeared first on The Motley Fool Australia.

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Regan Pearson owns shares of Xero. You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Apple, REA Group Limited, and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

1. CSL was able to avoid major COVID-19 disruption

Collecting plasma from donors is an essential part of producing many of CSL Behring's products. I was expecting the disruption from the COVID-19 pandemic might have a big impact on the company's performance. However CSL was able to avoid major disruption and says plasma collections only dropped by around 5% compared to the prior financial year.

This was helped somewhat by the opening of 40 new plasma collection centers and a US Food and Drug Administration mandate that reduced plasma quarantine periods from 60 to 45 days. The reduction opened up inventories and improved the availability of essential blood components.

Still, CSL says that COVID-19 restrictions are expected to continue to restrain plasma collections in the 2021 financial year and it expects increased collection costs for plasma in the year ahead.

2. Cash flow from operations rocketed 51%!

Given revenue lifted by a solid 7.2% in the 2020 financial year I was not expecting a huge 51% jump in cash flow from operations. The increase helped to power CSL's cash balance to US$1.2 billion, up almost 82% on the prior year.

Because CSL has changed to the 'indirect' method of reporting cash flows, it can be a little tricky to tell exactly what drove the increase. But essentially, the higher profit result, combined with less cash tied up in working capital and less cash paid out in taxes, helped to lift cash from operations higher.

3. CSL has one of the top CEOs in the world

Earlier this year, I wrote that I think CSL could be one of the best companies in the world. So I shouldn't have been surprised to discover that CEO Paul Perreault had been named as one of the top 100 CEOs in the world by Harvard Business Review. In fact, he came in a few places ahead of fellow healthcare titan Colin Goldschmidt, CEO of Sonic Healthcare Limited (ASX: SHL).

Paul Perreault has been with CSL since July 2013. CSL's reported revenues have almost doubled since then, climbing from US$5.1 billion to US$9.2 billion.

With the successful integration of flu vaccine business Seqirus, and continuing success in research and development, it's no wonder Perreault is considered one of the best.

The post 3 big surprises from the CSL full year results appeared first on The Motley Fool Australia.

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Regan Pearson has no position in any of the stocks mentioned. You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended Sonic Healthcare Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Last week, infant nutrition company a2 Milk Company Ltd (ASX: A2M) released a record result for the 2020 financial year.

I own a2 Milk shares so made some time to dig through the company's annual report. This is a great way to get a better understanding of the challenges and opportunities that face the company. But three things in particular caught me by surprise:

1. a2 Milk Company is accumulating a huge pile of cash

The first surprise was the huge pile of cash a2 Milk has built up. In fact, in the 2020 financial year, the company's cash position jumped by a massive 83% to NZ$854 million.

A2 Milk Company is a very capital light business. It doesn't directly own farms or factories and doesn't need to spend much cash to grow production. 

But what will the company do with all that cash? One option is for a2 Milk to pay a dividend to shareholders. However, a2 Milk says that a dividend is not on the cards. Instead the company is focused on using the cash to execute its long-term growth ambitions.

These include potential acquisitions and last week a2 Milk Company announced it is in discussions to acquire a controlling position in New Zealand dairy processing business Mataura Valley Milk. A2 Milk has proposed splurging up to NZ$270m to acquire a 75.1% stake in the business.

2. COVID-19 is creating problems in the US market

The COVID-19 pandemic created a bump in earnings of infant nutrition in the 2020 financial year, but it is making life a lot more difficult for sales in the United States. Higher unemployment rates and economic uncertainty have made US consumers more cautious and this has forced a2 Milk to change strategies. Price discounting and in-store promotion will now be used to drive increased volumes.

Disappointingly, a2 Milk says that it expects revenue in the US to remain flat in FY21 after jumping 91% in FY20.

3. Return on equity dropped

One surprising result of building up such a huge cash pile is that a2 Milk Company's monster return on equity (ROE) dropped from 44% in 2019 to 40%.

Return on equity (ROE) is a company's net profit after tax (NPAT) divided by the average shareholder equity over the year. Having a large cash pile increases the equity in the business, so we end up dividing profit by a larger number. Although this is a surprise, the cash pile gives a2 Milk options to reinvest back into the business and compound returns in the years ahead.

The post 3 big surprises from the a2 Milk Company full year results appeared first on The Motley Fool Australia.

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Motley Fool contributor Regan Pearson owns shares of A2 Milk.

You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Santos Ltd (ASX: STO) share price goes ex-dividend tomorrow. This when shares start selling without the value of its dividend payment. But before you rush out to buy at today's Santos share price, let's look a little closer at what the the natural gas producer's dividend offers.

What's the dividend yield on today's Santos share price?

Santos announced a disappointing half year result last week on the back of tumbling oil prices. The interim dividend was similarly disappointing, slashed by 65% on the same period last year to just US 2.1 cents per share (cps).

This means that Santos shares currently yield around 1.8% at the current exchange rate, fully franked. Although I wouldn't be lining up for a 1.8% dividend yield, there are some positive signs for the Santos dividend going forward.

Are good things coming for the Santos dividend?

As the major global economies start to spool up again following their COVID-19 forced holding patterns, it is fair to assume that demand for energy, and energy prices, will continue to recover. The price of brent crude oil has been steadily ticking upwards over the last few months and currently sits around US$44 per barrel.

In addition, guidance provided by Santos has the company targeting record production for the full 2020 year of up to 88 million barrels of oil equivalent (mmboe). Year on year, this would be production growth of up to 16.5%.

Because Santos offers a 'sustainable' dividend policy which aims to pay out between 10% and 30% of free cash flow, if these factors can drive higher sales revenue going forward, investors may be in for a jump in the dividend pay-out.

A history of poor dividend returns

Still, 10% to 30% of free cash flow seems to me like poor recompense for investors who have helped to fund billions of dollars in risky capital expenditure. In fact, since 2016, Santos has paid out just US$459 million in dividends and has written down its assets by a staggering US$3.4 billion. In this light, Santos looks like little more than a fiery furnace of capital destruction.

Commodity producers are often prone to cyclical earnings fluctuations which can make dividends unpredictable and Santos is no exception. There may be good things coming for the company, but I won't be rushing to add Santos to my dividend portfolio today.

Fortunately, there are several other big companies going ex-dividend on 25 August to consider, including:

• Domino's Pizza Enterprises Ltd. (ASX: DMP)
• InvoCare Limited (ASX: IVC)
• Netwealth Group Ltd (ASX: NWL)

The post Is today's Santos share price a buy for its dividend? appeared first on The Motley Fool Australia.

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Regan Pearson has no position in any of the stocks mentioned.

You can follow him on Twitter @Regan_Invests. 

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Netwealth. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited and InvoCare Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

After opening the week at a near record high of $19.52, the A2 Milk share price dropped almost 7% in the following days. This was after the company announced a record profit of NZ$385.8 million, a 34% increase.

So, what happened?

There is no doubt that A2 Milk has had an absolute stellar 2020 financial year. The company received a positive bump in earnings from the COVID-19 pandemic as people rushed to buy groceries and milk powder. At the same time, A2 Milk seized the opportunity to boost its shareholding in supplier Synlait Milk Ltd (ASX: SM1) to 19.8%.

And to cap it all off A2 Milk Company was included as a member of the S&P/ASX50 Index (ASX: XFL).

However the outlook provided by A2 Milk for FY21, and expectations of slower revenue growth going forward, has caused at least one broker to turn sour on the company and suggest shares are a 'sell'. I disagree.

There's still a lot to like about A2 Milk

Firstly, although growth may slow in the coming year, it certainly won't stop. The company's guidance for the 2021 financial year said it expected "continued strong revenue growth support by our regions". This will be driven by investing more into marketing and continuing to increase market share.

Secondly, I think the A2 Milk brand is building a valuable intangible asset moat that adds significant long-term value for investors.  Having a trusted, health focused brand differentiates A2 Milk and lets the product command a premium price for what would otherwise be a commodity product.

Finally, if the company can continue to grow revenue and maintain strong margins, it stands to become a cash-generating monster in the coming years.

For the 2020 financial year, A2 Milk reported a huge return on equity (ROE) of 34%. To put this into context, data compiled by valuation guru and New York University professor Aswath Damodaran suggested the average ROE for the food processing industry was 7.9% in 2019. With no debt and minimal capital expenditure requirements, this cash can be ploughed back into growth or returned to investors.

Should you buy A2 Milk shares?

I think it's one of the best quality companies to own today, and the A2 Milk share price is reasonable relative to its prospects for growth over the next 5 to 10 years.

I've made the mistake before of thinking shares in quality, growing companies looked expensive, only to watch them flourish – hello Fisher & Paykel Healthcare Corp Ltd! (ASX: FPH).

I see the A2 Milk share price in that light today. A high margin, growing business with significant potential to continue compounding returns over the coming years.

The post Is the A2 Milk share price still a good buy after strong full year results? appeared first on The Motley Fool Australia.

More reading

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• Should you buy the dip on A2 Milk shares today?
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• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Regan Pearson owns shares of A2 Milk. You can follow him on Twitter @Regan_Invests. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Oil and gas producers have battled through an especially rough 6 months as the COVID-19 pandemic exploded. Lower demand for land and air transport sent West Texas Intermediate (WTI) crude plunging from US$61 per barrel at the start of January, to an unprecedented -US$40 per barrel in April as investors panicked and dumped oil options. Since then WTI has crawled its way back to US$42 per barrel in August, but the damage to Santos has been clear.

How did Santos perform in the first half of 2020?

Santos announced it generated sales revenue of US$1.7 billion in the first half of 2020, 16% lower than the same period last year.

It was an especially disappointing outcome for investors given record production of oil and gas to 38.5 million barrels of oil equivalent (mmboe), a 4% increase on the same time last year.

Significantly lower oil and LNG prices meant that the average realised oil price Santos received was down -34% to US$48 per barrel, while the average realised LNG price dropped 14% to US$8.57 per million British Thermal Units (mmBtu).

Disappointingly, after massively writing down the value of some of its oil and gas assets to the tune of over US$750 million, Santos reported a loss of US$289 million for the 6 months.

Will Santos still pay a dividend?

Yes, Santos will still pay a dividend, but it will be a big drop on the same time last year. Santos announced it will pay a fully franked interim dividend of US 2.1 cents per share, down 65% on the far more enticing US 6.0 cents per share dividend paid last year.

This is in keeping with the company's 'sustainable' dividend policy, which targets a range of 10% to 30% payout of free cash flow.

If you've been watching Santos shares for its dividend, you'll need to move quick! Shares go ex-dividend on 25 August 2020. This is the date when shares start selling without the value of its dividend payment.

What's the outlook for Santos for the rest of 2020?

For the second half of the financial year Santos is turning up the heat on production. The company is estimating production of between 44.5 million and 49.5 million barrels of oil equivalent in the second half, which suggests a total of up to 88 mmboe. Year-on-year this would be production growth of up to 16.5%.

This is good news for investors as it sneaks in above the guidance Santos provided in their 2019 annual report of producing 79–87 mmboe in 2019.

Still, it will take a strong, sustained recovery in energy prices for Santos investors to have a result to really cheer about in the second half of the year.

At the time of writing, the Santos share price is down 3.57% to $5.67 per share.

The post Santos share price slumps as interim dividend slashed appeared first on The Motley Fool Australia.

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Motley Fool contributor Regan Pearson has no position in any of the stocks mentioned.

You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

It's hard to believe that the CSL Limited (ASX: CSL) share price is almost exactly where it started the year, at $275 per share. Well, at least it was until this morning's open which has seen the CSL share price climb 0.78% to trade at $277.89 at the time of writing. 

A global health crisis should be CSL's time to shine! The problem is that CSL's products rely heavily on donated plasma as a key ingredient. This plasma comes from donors in the United States and Europe where coronavirus related shutdowns have created supply issues.

Plasma is used for CSL's immunoglobulin and albumin business lines which in the 2019 financial year made up 56% of the company's revenue. It's no surprise then that analysts are forecasting a decline in revenue in the year ahead.

But looking at the company's long-term prospects, I think there are a lot of attractive reasons to own shares in the company today.

CSL could be one of the world's best companies

I think CSL could be one of the world's best companies because of its strong flywheel effect. A flywheel is a combination of processes that feed off each other and can rapidly grow a business over time.

CSL's focus on new, innovative treatments and reinvesting profits has helped the company to compound returns rapidly over the last nine years.

CSL has a wide intangible asset moat

You can give your wealth a serious boost by buying and holding shares in companies that have strong economic moats, or competitive advantages. Economic moats work to protect the company from the attack of competitors. In my view CSL has built a wide intangible asset moat through its patented rights to produce and sell lifesaving medicines and immunotherapies. Although these rights can be challenged and have a finite life, CSL's diverse portfolio of products makes the moat more robust, which bodes well for the CSL share price.  

CSL has a monster 42% return on equity

One of the benefits of being a top dog with a large competitive moat is that you can produce huge returns on investor equity. In fact, CSL's monster 42% return on equity (ROE) is far above the 21% sector average for pharmaceuticals according to data from valuation guru Aswath Damodaran.

Is the CSL share price a buy today?

The slowdown in plasma collections will certainly have a negative impact on the short-term growth of the CSL share price. However, I still think that CSL will be a great performer in the years to come. Perhaps it is finally time for me to add the company to my own long-term portfolio.

The post Is it finally time to buy at today's CSL share price? appeared first on The Motley Fool Australia.

More reading

• CSL's collapse deepens. Why this ASX giant can't find a floor
• Prediction: CSL shares could surpass $265 in 2026
• Are ASX healthcare shares the next to rally?
• 5 oversold ASX shares to buy before the end of April
• 2 ASX healthcare shares I think can beat the market

Regan Pearson has no position in any of the stocks mentioned.

You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.