To be ultimately successful in the stockmarket there's two things every investor needs:
1. Capital Gains; and,
2. Dividends
However I find that too many investors are focused on the here and now when they choose stocks. They focus on the giants, like Telstra Corporation Ltd (ASX: TLS), who are expected to pay massive dividends in the next 12 months, or they look for the next Google or Facebook and completely underestimate the risks the company faces, let alone even consider its ability to pay dividends in the future!
By focusing on cheap but stable and growing ASX stocks, we can use the law of compounding returns to grow our money faster than ever.
For example, fellow Motley Fool writer Ryan Newman highlighted a way in which a "lazy" investor could retire a millionaire by focusing on a simple, long-term investment strategy.
By starting with $10,000 in your stock portfolio, adding $1,100 per month, reinvesting all profits and achieving the market's historical average annual return (12%), we could grow our money to over $1.047 million in just 20 years!
However, as a new investor, it can be hard to achieve that type of yearly return from the get-go, so I've put together a list of four ASX stocks – which offer both growth potential and dividends.
1. Coca-Cola Amatil Ltd (ASX: CCL) is the exclusive bottler and distributor of The Coca-Cola Company's range of products to Australia, Indonesia, New Zealand and three other neighbouring countries. It is forecast to pay a 4.9% dividend which analysts expect will increase in coming years.
2. Rio Tinto Limited (ASX: RIO) is Australia's largest iron ore miner and whilst you may think its best days are now behind it, think again. After a rough start to 2014 (thanks to a falling iron ore price) and continuous writedowns of assets in recent years, Rio's shares trade cheap and offer investors an opportunity to capitalise on the eventual rebound of aluminium, coal and uranium prices.
3. Computershare Limited (ASX: CPU) will be, along with Rio, the company I next add to my stock portfolio. It is already a global leader in share services but provides a host of "back office" functions to companies and shareholders throughout the world.
4. Slater & Gordon Limited (ASX: SGH) is our leading Personal Injury (PI) law firm with nationwide brand recognition. However it has recently begun an expansion in the United Kingdom which will likely see both earnings and dividends increase in the long term.
Our number 1 dividend stock – FREE!
All of these companies are worthy of a spot in savvy long-term investors' portfolios. I'd love to buy all four stocks right now but my two favourites are Computershare and Rio (I already own Slater & Gordon).