The only reason we risk our hard-earned money on the stock market is because we know it's one of the best ways to drive our wealth higher, over time.
Dividends and capital gains, in the form of share price appreciation, offers us a unique investing experience. In the long haul, dividends can provide a powerful income stream and capital gains tax will be reduced after a year of holding onto your investment.
Below, I've identified five companies which have proven business models and long-term runways for growth. Although not all of them pay dividends right now and may appear pricey, in five or 10 years' time I expect they will be making bigger profits and paying out far larger distributions than they do today.
- ResMed Inc. (CHESS) (ASX: RMD) is a developer and distributor of medical equipment for individuals suffering from sleep-disordered breathing and other respiratory disorders. Shares may appear quite pricey now but with ample organic growth opportunities still ahead, today's price will likely appear cheap in the long run.
- Senex Energy Ltd (ASX: SXY) recently took a hit to its share price following the release of its annual results which showed falling earnings per share. However with growing reserves, ongoing exploration drilling, higher gas prices and strong cash flows, Senex is setting itself up for long-term success in Australia's Cooper Basin.
- Cover-More Group Ltd's (ASX: CVO) shares went in the opposite direction to Senex's upon the release of its full-year results. The market pushed shares 8% higher as the result of a 14% net profit increase (based on prospectus forecasts) throughout FY14. Cover-More is the dominant player (46% market share) in the travel insurance market because it offers the best service for customers. It appears well placed to deliver long-term shareholder returns in the form of dividends and capital gains.
- Nearmap Ltd (ASX: NEA) doesn't offer a dividend but long-term shareholders aren't complaining because the stock is up around 1,470% in the past two years alone. However Nearmap's fantastic offering of geospatial map imagery may only just be getting started, with test flights in the U.S. currently underway.
- G8 Education Ltd (ASX: GEM) is the last company on the list but is, by no means, the least. G8, a childcare centre owner and operator, is currently pursuing a rollup strategy of the highly fragmented childcare market. Shares may appear expensive on the trailing earnings per share basis but analysts are expecting rapid earnings per share growth in coming years as the $1.8 billion company capitalises on its aggressive acquisitive growth strategy conducted over the past two years.
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Each of these companies are pursuing growth in a variety of different ways and offer potential investors a way to diversify their growth portfolio. Not only is there significant capital gains potential in each of these companies, each of them will likely be paying out handsome dividends in coming years.
