You might not think it from all the bad press, but the Australian share market is looking great.
Volatility is back, which is good news because it creates opportunity.
Indeed, share prices are down and dividend yields are up.
Here are two of my favourite ASX shares for new money:
- M2 Group Ltd (ASX: MTU) – dividend yield: 4.1% fully franked
M2 Group is the owner of Primus, Dodo, Eftel and Commander brands. Despite an extremely successful track record for bedding down large acquisitions, and the recent purchase of New Zealand's CallPlus Group and 2Talk, M2 Group shares look to be trading cheap.
Not only does the company enjoy a growing subscriber base, it also has the ability to cross-sell an expanding range of utilities to existing customers. Following a 14% fall in share price over the past three months, M2 Group shares trade on a forecast price-earnings ratio of 24x.
- Flight Centre Travel Group Ltd (ASX: FLT) – dividend yield: 4.26% fully franked
Flight Centre shares have been hit even harder (down 16% in three months) than M2 Group, but arguably hold even more growth potential over the long term. The reason Flight Centre shares have been punished can be put down to slowing growth in the local leisure market.
However, given its rapidly-expanding United Kingdom and USA businesses, investors can comfortably overlook the near-term concerns and load up on shares while they're cheap. At today's prices, Flight Centre boasts a P/E of just 13x.
Buy, Hold, or Sell?
I'd happily buy both of these companies for the long term, given their current dividend yields and modest long-term growth outlook. If I had to pick one, it'd be Flight Centre because it looks very cheap at today's levels (both in relative and absolute terms).
