If you are want a strong portfolio of stocks that will deliver decent dividends, excellent growth prospects, the following six stocks may well be the best selection available across the ASX. In fact, they may well be the best six stocks to put in your portfolio now and forget about for ten years.
They are also diversified across sectors, have generated strong returns on equity (ROE) in the past and have low levels of debt, or net cash or their books, and a number of them will also benefit from a falling Aussie dollar, thanks to their offshore earnings.
In no particular order, here they are.
SEEK Limited (ASX: SEK) – the job ads company. But Seek is more than that, with strong offshore potential, and more than one string to its bow. Trading on a prospective P/E ratio of 27.7 may look expensive, but Seek has compounded earnings per share (EPS) growth at 30% over the past five years. ROE was over 30% last year, with net debt to equity coming in at just 16%.
Flight Centre Travel Group (ASX: FLT) is expanding rapidly offshore in around 10 different locations. Catering to both consumers as well as corporate travellers, Flight Centre has generated growth at 13% each year over the past decade. With a net cash position and ROE standing at an impressive 27%, the company is trading on a prospective P/E ratio of 17.1, and paying a dividend yield of around 2.8%.
JB Hi-Fi Limited (ASX: JBH) the consumer electronics retailer has been written off more times that I can remember but continues to power along. Currently paying a fully franked dividend yield of 4% and trading on a prospective P/E ratio of 14.1, JB Hi-Fi doesn’t appear expensive. Add in compound earnings growth of 25% over the past ten years and net debt to equity of just 2%, and JB Hi-Fi should be on your watchlist.
Nick Scali Limited (ASX: NCK) flies under the radar, thanks to its market cap of just $216 million, but has generated impressive growth in EPS of 31% over the past 5 years, while boasting a return on equity of just under 50% last year! With a fully franked dividend of 4.5%, and trading on a prospective P/E ratio of 14.1, Nick Scali also doesn’t look expensive.
Carsales.com Limited (ASX: CRZ) is yet another of the internet ‘list’ stocks, but is trading on a prospective P/E of 23.2 and pays a dividend yield of around 2.8%. Despite moves by some dealers to stop their new cars being listed on the website, Carsales is still driving full steam ahead. Its powerful ‘network effect’ and dominant market position makes participation almost mandatory for dealers.
CSL Limited (ASX: CSL) is one of the world’s largest blood plasma biotech companies, and I have rated this company the number one stock on the ASX for many years. Shareholder friendly and excellent management, great products, massive growth potential in new markets, and CSL will likely still be a world beater in 10 years’ time. Trading on a prospective P/E ratio of 22.7, consistently high ROE – currently at 36%, growing net profit by 38% each year over the past decade and regular share buybacks make CSL almost mandatory in any investor’s portfolio.
While these stocks may look expensive, sometimes you have to pay up for quality and potential growth. These companies sport both attributes amongst their many other charms.
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Motley Fool writer/analyst Mike King owns shares in Flight Centre, Seek, Carsales.com and CSL. You can follow Mike on Twitter @TMFKinga