While it has been the high-yielding dividend stocks that have received significant investor attention over the last 18 months or so thanks to the low interest rate environment, it's time to look at companies with solid growth potential for new investment ideas.
After all, economies around the world are continuing to recover from the global financial crisis and the U.S. Federal Reserve has indicated that interest rates in the world's largest economy could start to increase much earlier than expected. While this will lessen the appeal of dividends (to an extent), the companies that will benefit the most are those which can increase their earnings more quickly as the economy picks up speed.
As the attention moves away from the high-income sectors, here are a few companies which you could consider adding to your collection:
Westfield Group (ASX: WDC): Although the shopping mall behemoth is facing headwinds caused by the rapidly expanding online retail sector, it should continue to benefit as it strengthens its balance sheet by divesting from non-core assets and redeploying the proceeds into its stronger centres. What's more, as economic confidence continues to improve (particularly in the U.S. and Europe), customers will begin to spend more, which will help boost earnings. Shares are currently trading at $10.34.
Collection House Limited (ASX: CLH): Individuals and businesses have taken advantage of low interest rates to pay off their debts, pushing bad debts to record lows. As interest rates rise however, bad debts will follow and receivable management companies like Collection House will be called upon to collect them. Priced at $1.82 a share, Collection House is trading on a P/E ratio of 12.6. In addition, it also packs a 4.1% fully franked dividend yield.
Slater & Gordon Limited (ASX: SGH): Although the Australian law firm might be well established locally, it is still looking at further expansion, particularly in the personal injury market (which helped boost its revenue by 7% in its first-half operations). It is also accelerating its push into the much larger UK market which will boost revenue and help drive its share price higher than where it currently stands at $4.54 a share.
Foolish takeaway
Long-term investors need to constantly remain on the lookout for quality companies trading at reasonable (if not bargain) prices. Each of the companies mentioned above would be excellent buys at today's premiums.
