Many times you'll hear about fast growing companies with earnings shooting up 20% or more annually. They're great to own, but they can have a hefty premium to pay because they're so popular.
You can still have long-term investing success with companies that grow earnings by 5% – 15% as well.
For example, if you had a stock that annually raised earnings 10%, it could double earnings in about seven years. At 15%, that becomes less than five years.
The good thing is that they can be better priced and more affordable from the start.
Here are three stocks with steady growth and low price-earnings ratios.
Lend Lease Group (ASX: LLC) is involved in commercial, residential and infrastructure development. It had a standout year in FY2014 with a great increase in net profit. Its residential business is growing with the rising housing market.
Company guidance for FY 2015 is for net profit of $600 – $620 million. If the high end is achieved, then it will have almost doubled its underlying net profit since 2010 – about 14% average annual growth. It has a 4.3% dividend yield and a low 10 PE.
Challenger Limited (ASX: CGF) offers annuities and other wealth creation products as an investment management firm. It was highlighted by Credit Suisse earlier this month as a potential target stock for superannuation and SMSF investors looking for good growth and dividend income over the long term. It offers a 3.8% yield partially franked and is at a PE of 12.
Over the past five years, it has given an average 9% annual earnings growth. Long-term growth like that could be good for your own retirement, too.
Automotive Holdings Group Ltd (ASX: AHE) is the largest auto dealership company in Australia and has expanded its logistics and warehouse business. It's now also the largest temperature controlled carrier in Australia. The consensus forecast suggests a possible 9% average annual earnings growth over the next two years.
With interest rates low, it makes it cheaper to buy vehicles, so the company's sales benefit. As a shareholder, you could benefit from its whopping 5.9% fully franked yield as well. Its PE is 12.
Sometimes investing is like a marathon. A good, stable pace is what you need to win the race. Of these three, I prefer Challenger because I believe superannuation investing will be with us for many years to come and super funds just keep on growing.
In addition, there is another stock that you will want to know about. Our top analyst, Scott Phillips, recently identified one cheap but growing ASX stock with a 6.7% grossed-up dividend yield which could be a standout buy.
The Motley Fool has written a free report "The Motley Fool's Top Dividend Stock for 2014-2015" which it's sharing with all interested investors.
If this is you, simply click on the link here and enter your email address – it takes less than 30 seconds – and we'll send it to you, completely FREE!
