If you want to be a great investor there are a few simple rules to stick to when it comes to building your portfolio. The core of any portfolio should consist of solid dividend-paying stocks. This provides a reliable income, margin of safety, and gives you some extra cash to reinvest to compound your returns.
Ideally you should look for stocks with potential to deliver growth above the level of that returned by the market. Inside and outside the S&P ASX 200 Index (INDEXASX:XJO) there are a few companies to consider with good growth potential and yields above 4%.
Ardent Leisure Group (ASX: AAD) Price: $2.80 Yield 4.5%
The owner and operator of theme parks, gyms, bowling and family entertainment centres just posted a 37.6% full year profit rise and has some big growth plans. It just bought Fitness First WA to incorporate into its already successful Goodlife Health Club business. This is part of an acquisitive strategy developing in an attempt to consolidate Australia's fragmented gym market.
It also has ambitious growth plans for its Main Event family entertainment businesses in the United States and if able to deliver on its grand plans it will prove attractive on current valuations.
Infomedia Limited (ASX: IFM) Price: $0.86 Yield 4%
Infomedia is a software services business for automobile dealers around the world. It supplies sophisticated menu pricing systems, a range of publications and data analysis or information research to automotive manufacturers globally.
It says it has 75,000 subscriptions to its products from franchised auto dealers in over 185 countries, with its products used by more than 147,000 automotive dealership personnel around the world every day.
As a technology-driven growth company in a niche market it's developing some nice competitive advantages and with the attractive yield looks a solid addition to any portfolio.
Platinum Asset Management Limited (ASX: PTM) Price: $6.35 Yield 4.2%
Platinum is an asset manager that specialies in the management of global equities on behalf of Australian investors. Growing interest in the area has seen it grow funds under management rapidly and revenues are derived as a proportion of FUM. The capital light business model allows it to generate relatively high profit margins and excess cash is paid out to shareholders in the form of juicy fully franked dividends.
BT Investment Management Ltd (ASX: WBC) Price: $6.42 Yield 4.1%
Is another fund manager with more of a global focus than many of its peers and with the support of its owner Westpac Banking Corp (ASX: WBC) it looks one of the better players in the sector. The growing superannuation pool should support fund inflows and the high dividend payout ratio means investors can expect to receive a high level of income in the years ahead.
Nick Scali Limited (ASX: NCK) Price $3 Yield 4.3%
Furniture retailer Nick Scali just posted a net profit of $14.2 million for financial year 2014 up 16% on the prior year. It also lifted its dividend to 13 cents for the full year on a payout ratio of 74%.
Nick Scali sells expensive household goods like extravagantly sized sofas, chairs, and dining tables. As household wealth increases via rising property prices Nick Scali looks a likely beneficiary of spending growth on big ticket household items. Household construction is also on the rise and the business plans to take advantage by opening more stores across the nation.
