Forget high risk speculative investments, time has shown that the best way to invest is to find small to medium sized companies that offer a healthy dividend whilst you wait for growth. From an investing perspective, what could be better than good management and balance sheets to keep a steady flow of income and drive growth? Here are five stocks that provide good growth prospects and healthy returns.
Technology is beginning to play a bigger and bigger part in our everyday lives. Ten years ago, mobile phones, calendars, diaries, cameras and printers were free-standing applications, controlled by cables and slow internet connections. However in modern society everything runs on wireless internet connections supplied through numerous Internet Service Providers or ISPs. On the ASX, two companies that have stood out and provided both growth and have a big future ahead of them are M2 Telecommunications (MTU) and iiNet (ASX: IIN).
In the first half to December 31 2012, they reported increased NPAT’s of 47% and 112% respectively. In the past two years, both companies have made acquisitions which are, only now, being realised in their balance sheets and with the NBN rolling out, these companies are likely to have an exciting future. In addition, you’ll be paid healthy dividends of 3.3% and 2.6% fully franked.
Retail stocks have been shunned by investors chasing the ‘next big thing’ but they have forgotten that despite a massive technological boom already changing the industry, the retailers have survived. They occupy a position that is akin to mining stocks two years from now. They have cut staff, lowered operational costs, optimised their supply chains and have dealt with cheap overseas imports thanks to a high Australian dollar, which has made internet purchasing even easier.
Myer (ASX: MYR) has begun a downwards push into the everyday retail clothing sector which threatens to push out other budget clothing giants like Kmart and Target. With an 8% fully franked yield and steadily rising NPAT, Myer’s newfound efficiency and market position will make it more appealing to income and core growth investors.
Another stock that has managed to increase profits despite an incredibly tight retail market is Metcash (ASX: MTS). Although the company’s major division is its IGA Supermarkets, it derives only 60% of revenues from it. Its other sectors include liquor, hardware and a cash and carry distribution division which contribute significant revenues to the diversified retailer. With a 7.5% fully franked yield and steady growth, investors could do worse.
When companies and individuals go to court, they need funding to pay legal bills and gather information, let along all the other bits and pieces that need to be done. IMF Australia (ASX: IMF) is a diversified financial that provides funding for legal claims over $5 million. It operates in both Australia and through a wholly owned subsidiary in New York.
Despite a lower first half result for the year ended in December, there are a few big cases in the pipeline and the company’s impeccable track record is reassuring. To date, its record includes 94 settlements, 30 withdrawals, 13 wins and 5 losses which has lead the company to a ROI of 304%. With P/E of 11 and good income prospects, what more could an investor ask for.
The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!
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Motley Fool contributor Owen Raszkiewicz owns shares in IMF Australia, M2 Telecommunications, Myer and Metcash.