From the early stages of our investing careers, we've always been taught to diversify our portfolio in terms of stock selection, but it's also crucial to have the best of both worlds when it comes to the balance between growth and dividends.
In our historically low interest rate environment, it can be easy to only focus on high yielding stocks that offer little growth prospects. As a result, investors eventually experience heavy capital losses, losing more than they've gained in dividends. It's important not to make this mistake and try to find companies that offer both growth and dividends at a reasonable price.
If you're a long-term investor like me then these two growth stocks are sure to make your portfolio sizzle for the decades to come.
1. G8 Education
Childcare centre owner and operator G8 Education Ltd (ASX: GEM) is the owner of brands such as Early Learning services and Community Kids, with operations centred primarily in Australia, where 233 out of its 296 childcare centres are located.
Despite its share price gaining about 92.8% in the last 12 months, scaring off many value investors, G8 Education's strategically planned acquisition endeavours and solid organic growth provides it much more room for share price growth.
Since the beginning of the year, G8 Education has acquired 63 childcare centres, allowing it to improve the dominance it has in the childcare market and has also announced plans to acquire a further 25 childcare centres. A 48% increase in its latest first-half net profit reflects G8 Education's acquisition success and proves that further endeavours are likely to be of high quality.
When weighing up its relatively high forward price-to-earnings ratio of 22.2 with its strong long-term earnings drivers, it is easy to see why I think G8 Education will continue to outperform the market for the many years to come.
2. Flight Centre
Travel agent giant Flight Centre Travel Group Ltd (ASX: FLT) is a household name for many Australians, providing its customers with holiday and travel reservations. However, Flight Centre has experienced some turbulence in its share price, given weaker consumer confidence levels.
Its incredible ability to overlay its personal services at its bricks-and-mortar stores, with its online services is an unbeatable combination in the travel agency industry and creates a strong competitive advantage. This provides Flight Centre with some impressive long-term tailwinds that have the potential to generate big gains.
Furthermore, profit downgrades issued by Flight Centre are nowhere near as bad as other retailers such as The Reject Shop Ltd (ASX: TRS), as it still expects to modestly grow profits by about 7%.
Flight Centre trades on a cheap price-to-earnings ratio of 16.8 and offers a juicy 3.8% fully franked dividend yield. I think its recent share price dip offers investors a rare opportunity to pick up a quality growth stock at bargain prices.
