ASX Small Cap Disruptive Stocks and Dividend Shares

Richard Hemming

How do disruptive stocks play a part in the ASX?



In recent history disruptive stocks arguably make the most difference to the global stock market. You look at the Googles and Amazons of this world and tell me that the economy isn’t different and by extension this is reflected in the share market’s composition.

In our own ASX small cap stocks world we were early on to see that Afterpay and Zip Co. had potential and were lucky enough to profit from some of these stocks gains.

We’ve been looking in the past three issues of our ASX small cap stock report at some interesting small caps that have this sort of potential. That is, the potential to change the structure of an industry. To undercut existing businesses through costs and innovative provision of services.

ASX Small Cap: Volpara Health Technology (VHT)
We’ve come up with a Small Cap that diagnoses breast cancer using AI,

ASX Small Cap: Hazer Group (HZR)
A hydrogen and graphite producer utilising biogas from waste materials

ASX Small Cap: Bailador Technology Investment (BTI)
We’ve spoken to the former All Black captain, David Kirk who runs a technology fund that specialises in investing in private technology companies focused on software as a service and b2b data applications.

What’s coming up in our ASX Stock Report? Does the RBA cutting interest rates matter?

To answer your question in one word: Dividends.

In Australia and the rest of the developed economies, interest rates are declining to close to zero at all points of the yield curve, indicating how low expectations are for economic growth.

But you’ve got to get income somehow. If not, you live off your capital, which is fine if it’s growing. If it’s not, then you need yield.

Find me a term deposit that has a rate above 2.5% and your money is locked up for a period.

You can’t get 2% from a govt bond. Even if you do, you’re taking price risk. If interest rates go up, the value of your bonds goes down.

The next couple of issues our focus is on ASX Small Cap Dividends, where we’ve generated attractive cash returns for subscribers in the past and we’ve identified strong dividend small caps.

What does the ASX Small Cap dividend report include?

in our Small Cap ASX Dividend Report we review and report on previous ASX Small Cap portfolios and we show you how the power of stock diversification and how individual returns get evened out.

We look at how small cap dividends are often accompanied by a strong balance sheet.

We will also be showing you what Under the Radar looks for in these ASX small cap dividend paying stocks.

5% Dividend Yield from ASX Small Caps
What we do and have done is find a bundle of small caps that can give you a sustainable 5% dividend yield.

One example is the shade cloth manufacturer Gale Pacific (GAP). This ASX small cap stock has a solid but cyclical business and sells to major markets in North America and Asia. It has a very strong balance sheet and pays consistent dividends.

You wouldn’t bet the house on it, but you could buy this small cap stock for a bit of income that you could live off.

If you’re looking for $200 a year in income you buy 10,000 shares for $3000 you’re getting 1 cent a share in dividends every six months.

What about the risks in small caps?

There are risks in any ASX share investment, but it’s based on a yield of 6%, rather than a yield of 2% from a government bond.

Plus, you get capital growth potential, unlike a bond.

How long would you hold an ASX Small Cap Stock for?

What I’m talking about is investing for the long-term. Because that’s what investing for income is about. We’re helping you forget about the daily movement of share prices.
Things do change. Circumstances change for all companies including ASX small caps. We monitor what’s going on at the operational level.

Let us worry about that because these are not set and forget investments.

About the Author

Richard Hemming

Richard Hemming (r.hemming@undertheradarreport.com.au) is an independent analyst who edits www.undertheradarreport.com.au, which provides investment opportunities in Small Caps that you won’t get anywhere else.

Under the Radar Report is licensed to give general financial advice only (AFSL: 409518). The author does not own shares in any of the stocks mentioned.

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