Want growth and dividends? Try these 2 shares

These 2 shares offer the powerful.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Most shares are grouped into either being dividend shares or growth shares. I think there's a select few which offer investors a decent dividend yield and good growth prospects.

These businesses are normally ones that aren't experiencing explosive growth, but will deliver pleasing growth year after year.

Here are two that I think fit the bill:

Challenger Ltd (ASX: CGF)

Challenger is the clear market leader of annuities in Australia. It mostly sells annuities to retirees who are looking for a secure source of income from their capital. The number of retirees is expected to increase by 75% over the next 20 years, which should be a big boost to future earnings.

Fund management is a profitable business and there are a fair number of risks associated with Challenger's model, which is why Challenger trades at an attractive price/earnings ratio. The benefit of that means it's trading with a fairly attractive dividend yield.

Challenger has already seen its share price grow from $3.33 five years ago to today's $13.71 and I think there will be a lot more growth to come as the superannuation pool gets bigger.

It's currently trading at 20x FY18's estimated earnings with a grossed-up dividend yield of 3.59%.

NIB Holdings Limited (ASX: NHF)

I have been really impressed by how NIB has managed to grow over the last few years. The private health industry as a whole has struggled because premiums have been growing faster than wage growth. This has led many Australians, particularly younger ones, to question if the insurance is worth having.

Yet somehow NIB managed to grow total policyholders by 5.6% over FY17. Combined with the growth of premium NIB was able to reveal 7% growth of the total underlying revenue and 28.3% growth of earnings per share.

NIB has been growing the dividend nicely alongside the profit. In FY17 it grew its ordinary dividend by 28.8%.

It's currently trading at 25x FY17's estimated earnings with a grossed-up dividend yield of 4%.

Foolish takeaway

I think both shares are really good choices for investors looking for growth and income. Both are trading quite expensively at the moment, so I'd be inclined to pick Challenger at today's level.

Motley Fool contributor Tristan Harrison owns shares of Challenger Limited. The Motley Fool Australia owns shares of Challenger Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »