The best thing about the stock market is capital gains. That is, the appreciation of your initial investment. I mean, dividends are good, but they’re only icing on top of the investing cake.
Sure, dividends have a place in every portfolio. Just imagine if you bought $10,000 worth of Commonwealth Bank of Australia (ASX: CBA) shares for $6.80 back in September 1991. You’d be receiving over $5,000 in dividend payments this year alone. But, imagine for a second, you put $10,000 into Fortescue Metals Group Limited (ASX: FMG) 10 years ago, your money would today be worth over $1.25 million, not including dividends.
Which would you prefer?
I know what I’d choose.
Now, I’m not promising or guaranteeing the next three companies will be the next Commonwealth Bank or Fortescue, but they do hold exceptional long-term prospects for investors’ focused on capital gains and increasing dividend payments. They’ll hopefully prove once and for all, you can have your cake and it too!
The first of which is Cash Converters International Ltd (ASX: CCV) – my favourite ASX stock at current prices – who yesterday provided a market update which showed it had made terrific progress on its recovery from legislative changes on small loan fees here in Australia. In addition its Carboodle business is tracking along nicely and its total number of franchised stores is growing rapidly. I first bought into CCV late in 2013 at $0.88 and it became my biggest holding – in less than six months it’s changing hands at $1.11 – but I am strongly considering buying more shares because it won’t last long at these prices.
Yellow Brick Road Holdings Ltd (ASX: YBR) is another top small-cap ASX stock currently overlooked by the market. Last month it jumped about 17% in a day when management informed investors of its intention to grow both organically and acquisitively to achieve its goals of becoming one of Australia’s biggest non-bank lenders. YBR has strong management, a number of macroeconomic tailwinds at its back and a great business model, making the chances of its first profit in FY15 very likely.
Slater & Gordon Limited (ASX: SGH) is a law firm most Australians know and trust. Rightly so. Its track record is impeccable and management have done a terrific job in growing the company to become Australia’s biggest personal injury law firm. However in the near future growth will come from its venture into the United Kingdom and expansion into the personal legal services market. Despite being considerably larger than Cashies and Yellow Brick Road, Slater & Gordon is just as exciting at current prices.
Although Yellow Brick Road doesn’t yet pay a dividend, with each of these companies in your portfolio, you’re likely to experience strong earnings growth in the long term. With higher earnings, dividend increases will ensue.