When thinking about which stocks to add to your portfolio, it may be prudent to get a good mix of characteristics. In other words, if your portfolio is totally focused on dividends, or solely geared up for growth, then you may miss out on improving investor sentiment for income plays as a result of a falling interest rate, or could be hurt by the performance of an uncertain Aussie economy.
As such, a mix of income and growth (as well as low prices) can help to not only mitigate risk, but provide returns that are less correlated with one another and that are more resilient in the longer term. And, with that in mind, here are three of my favourite stocks that could help to bring added balance to your portfolio.
Suncorp Group Ltd
A major appeal of Suncorp Group Ltd (ASX: SUN) is its income potential. For example, it currently yields a whopping 6.1% (fully franked), which easily beats the 4.4% offered by the ASX. In addition, Suncorp is expected to increase dividends per share at an annualised rate of 9.9% during the next two years, which puts it on a forward yield of 6.4%.
Clearly, investor sentiment in Suncorp is not particularly strong – as evidenced by its 6% fall in value during the course of 2015. However, its income potential could be the catalyst to push its shares higher and, with dividends set to be covered 1.2 times by profit next year, they appear to be sustainable, too.
Crown Resorts Ltd
The falling interest rate should provide a real boost to Crown Resorts Ltd's (ASX: CWN) bottom line and, looking at its forecasts, it seems to need it. That's because the gaming and entertainment company is expected to post a fall in earnings of 5.4% in each of the next two years, with a slowdown in Asia being a contributing factor.
However, Crown Resorts has an excellent track record of strong growth, with its bottom line having increased by 17.6% per annum during the last five years. And, as a cyclical company, investors must accept a degree of volatility in its performance, which is why its current price to earnings (P/E) ratio of 18.5 makes now a good time to buy it – especially when the wider consumer services sector has a P/E ratio of 18.7.
FlexiGroup Limited
While many investors discuss whether the major banks are overvalued, there remains tremendous opportunity in the wider financial services sector. For example, over the last five years, specialist lender, FlexiGroup Limited (ASX: FXL), has seen its share price soar by 175% and, despite this, it still trades on a P/E ratio of just 11.2.
Furthermore, FlexiGroup currently yields a whopping 5.1% (fully franked) and, over the next two years, is expected to increase dividends per share by 7.8% per annum. And, with dividends being just 58% of profit, their current level appears to be sustainable over the medium term too.
