One of the biggest challenges facing savers and investors over the years ahead is how to generate a decent income while preserving and preferably growing capital.
The key of course is quality businesses, which is why identifying such companies on reasonable valuations with outlooks for solid earnings growth is essential. Here are four to consider.
Amcor Limited (ASX: AMC) is a multinational packaging company that supplies packaging for foods and beverages, healthcare applications and industrial uses. The company's overseas leverage should appeal to Australian investors given the soft outlook for the local economy and the stock currently yields 3.5%. Dividends though are forecast to rise strongly in the years ahead and selling for $13.70 this business looks an excellent growth and income option.
Telstra Corporation Ltd (ASX: TLS) is in the middle of a digital sweet spot and remains the dominant mobile network provider in Australia. Mobile and internet users are demanding more data and servicing this requirement bodes well for the future of the group. Selling for $6.17 the group offers a 4.8% fully franked yield and looks another solid option for conservative investors.
Magellan Financial Group Ltd (ASX: CBA) is a global equities and infrastructure funds manager that has an attractive capital light business model, operating leverage and scalability. In my opinion it's light years ahead of other fund managers as an investment option on the ASX.
Selling for $17 it offers a yield around 4.35% if you annualise the most recent half-year dividend of 37.1 cents per share. The stock is leveraged to global equity markets and if they remain reasonable I expect it will post some healthy capital gains in the years ahead too.
Iress Ltd (ASX: IRE) offers software and data feeds to global fund managers such as Magellan and is one of Australia's most successful technology businesses on the global stage. Key strengths include the stickiness of its product and the recurring revenue streams they generate to produce high profit margins and healthy cash flows.
Once an investment management business is using Iress's software the chances of its chief operating officer telling the chief executive officer that he thinks it's a good idea to switch systems are extremely low and this is one of Iress's key advantages.
Selling for $10.16 the stock yields a partially franked 4.2% with dividends forecast to increase steadily in the years ahead. It looks hard to go past as an income option in my opinion.
Income-generating stocks are the perfect antidote to falling markets, but there's never any room for complacency when it comes to looking after your wealth.
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