By all accounts, it seems Aussie blue-chip stocks are overvalued. Falling interest rates have driven investors in search of the dividends paid by many of the top stocks on the ASX, particularly those renowned for their fully franked payouts.
But you won’t hear me complaining because there are still many ASX stocks, whose brands and subsidiaries you would likely be familiar with, trading at great prices. But the kicker is: they’re more geared towards growth. So, if you don’t like capital gains with your stock investments, I urge you to look away now because you might not like what you see.
The first company is Slater & Gordon Limited (ASX: SGH), one of Australia’s premier personal injury law firms. At $4.53 per share, it’s cheap. That’s because it recently begun its venture in the United Kingdom, acquiring law firms as it seeks to grow its reputation in a market which is five times bigger than ours. In addition, management have also begun to push into other legal service areas here in the domestic market, providing further room for growth. Since the company is busy using its cash to boost the top and bottom lines, it pays a 1.5% fully franked dividend.
Transurban Group (ASX: TCL) is a top stock with heaps of potential. It operates and manages toll roads in Australia and the United States. Companies under its banner include Citylink, Hill’s M2, Lane Cove Tunnel and Eastern Distributor – to name a few. Due to the stability of its earnings and the ever increasing price of toll roads, Transurban’s revenues will steadily climb and provide an opportunity for further investment and return to shareholders. Although it boasts a market cap over $10 billion, I feel it deserved a plug amongst these top long-term growth ideas. It pays a 4.6% dividend.
Acquisitive and organic growth strategies are demanding on balance sheets and management in different ways. However management at Greencross Limited (ASX: GXL) have been balancing both very well. They provide veterinary services throughout much of Australia’s east coast and are in the process of rapidly consolidating the Australian marketplace. Their goal is to control 20% of the market but they currently hold around 5.8% – affording the company a large runway for boosting revenues. It pays a 1.7% fully franked dividend.
Many investors may not have heard of Ardent Leisure Group (ASX: AAD) as an investment idea. But many would have used its services. Ardent Leisure owns some of Australia’s biggest and best attractions including Dreamworld, WhiteWater World and SkyPoint. It’s also the company behind names such as AMF, Kingpin Bowling, d’Albora Marinas, Goodlife Health Clubs and Main Event in the United States. In its most recent half-yearly results, it grew revenue 14% and core earnings 13.4%. It pays a 5.1% dividend.
Also in the entertainment business is Village Roadshow Limited (ASX: VRL). The company behind movies such as The Great Gatsby, Superman and several other movies. Since its inception in 1997, it has produced some of the world’s best movies with office takings of over $US12 billion. It also owns or has an interest in Warner Bros. Movie world, Sea World, Wet ‘n’ Wild (Sydney, USA and Gold Coast), Australian Outback Spectacular and jointly owns the Village Cinemas brand. In 2013, profit jumped 51% and dividends per share increased 18%. At current prices it pays out a 4.2% dividend with expectations of strong increases in 2014.
Although you may have never thought about investing in these companies, they are truly great businesses with household names and services. Although they may be slightly behind their blue-chip counterparts in terms of dividend yields, they make up for it with long-term growth potential and dividend increases.