Telstra Corporation Ltd and Coca-Cola Amatil Ltd: 2 stocks to buy now

These could well be the two most trusted brands in Australia and, at current prices, they are worthy of your consideration.

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If you’re looking for some top dividend and growth ideas. Look no further than these two blue-chip stocks.

1. Telstra Corporation Ltd (ASX: TLS)

Although Australia’s biggest telco appears to have had an outstanding run-up in value over the past two years, it might have more left in the tank for investors willing to jump aboard. Yes, it pays a fantastic 5.7% fully franked dividend but that’s not the only reason to buy it today.

Its lead in the mobile market share race is increasing as it continues to steal users from rival service providers such as Vodafone – part-owned by Hutchison Telecommunications Australia (ASX: HTA) and Optus, owned by Singapore Telecommunications Ltd (ASX: SGT). In addition, although there have been some concerns surrounding the impact of the changes to the NBN rollout, it appears Telstra is likely to benefit from the changes, especially with CEO David Thodey unlikely to accept a deal which would retract from the previous government’s agreement.

With the recent divestment of a majority ownership in the company’s Sensis business, Telstra can now focus on its two most exciting growth areas. Network Application Services (NAS) and International. Both of which grew revenues by almost 30% in the 2013 financial year. With consumers use of cloud computing and mobile data increasing rapidly coupled with the increased desire of business for networked applications, the long-term potential upside to Telstra’s share price is increasing every year.

2. Coca-Cola Amatil Ltd (ASX: CCL)

As one of only a few bottlers of Coca-Cola products it was disappointing to witness the company’s drop in earnings over the past 18 months. There seems to be many headwinds facing CCL but a majority of them are short-term and external to the business. For example, the high Australian dollar is wreaking havoc on the company’s foods business with local manufacturer SPC Ardmona unable to compete with imported goods from South Africa and Europe.

Wage increases of 35% and a reduction in fuel subsidies of 30% in Indonesia also hurt the group’s number-one growth area. However in all geographical locations, CCL continues to become more efficient by implementing new technologies and streamlined distribution. The low calorie Coke varieties such as Diet and Zero continue to witness rapid growth in market share by increasingly health conscious societies.

One valid concern some investors may have is the company’s large amount of debt (currently at $3.1 billion) and an interest cover of 6.7 times. These results have twisted unfavourably in recent times, particularly after a number of write-downs in SPCA. However CCL maintains robust cash flows and has $1.424 billion in cash and cash equivalents. In addition the company maintains robust margins with a return on invested capital (ROIC) of 16.5%.

Although – based on a price of $11 per share and a dividend of 59 cents per share – CCL trades on a forecast yield of 5.3% with 75% franking, shareholders shouldn’t be surprised if management take a more conservative approach with capital over the next 12 to 24 months.

Despite these short-term headwinds, CCL’s fundamentals remain very good and unlikely to change anytime soon. The recent setback in price has afforded investors an opportunity to grab a great long-term stock at an even better price.

Foolish takeaway

Both Telstra and Coca-Cola Amatil command their respective markets with superior brands and a reputation for quality service. Something which is unlikely to change in the next five to 10 years. They both yield great dividends, comparative even to the big banks, yet have growth prospects to match their current valuations. Now could be a great time to add a new name to your portfolio.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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