The best way to grow your portfolio the quickest is through growth shares. Dividend shares may be attractive for some people but those companies usually pay out a lot of their profit each year as a dividend. This doesn’t leave much money left for the company to re-invest back into the business.
Instead, if businesses retain more of their profit and operate in a growing industry then that company can grow itself at a fast rate. That company could maintain a 50% dividend payout ratio, or perhaps less, which still provides income today. If the company maintains the payout ratio whilst it grows the profit then the dividend could grow at a fast rate and investors could receive big dividends in a few years.
Here are three ideas:
Altium Limited (ASX: ALU)
Altium is one of the world’s largest electronic PCB software companies. It is growing strongly because devices and machines are becoming increasingly complex and technological.
It’s growing at a fast rate, in its recent half-year result it revealed earnings per share (EPS) growth of 50% and the share price has also done very well. When Altium first started paying a dividend in 2012 it paid $0.05 per share every six months. In March this year it paid a $0.13 per share dividend. In the recent half-year result it revealed dividend growth of 18%.
MNF Group Ltd (ASX: MNF)
MNF Group is Australia’s largest Voice over Internet Protocol (VOIP) network provider. Businesses are also looking for better and cheaper ways of delivering their service, which is why MNF’s offering is resonating so well with customers.
In MNF’s recent half-year result it revealed EPS growth of 16% and dividend growth of 15%. When MNF started paying a dividend in 2010 it paid $0.0075 per share and in its latest report it paid $0.43 per share.
Costa Group Holdings Ltd (ASX: CGC)
Costa is one of Australia’s largest good growing companies. It produces berries, citrus fruit, mushrooms, avocadoes and tomatoes. Food will always be in demand, the growing global food population should be help for Costa’s future earnings.
In Costa’s half-year report it revealed ‘normalised’ net profit after tax (NPAT) growth of 14.5% and a dividend increase of 25%. Costa’s first dividend in 2016 was $0.03 per share and the latest dividend was for $0.05 per share.
I believe all three shares will make excellent long-term investments. I think the Altium share price is a bit too expensive for a value buy today but Costa and MNF could generate strong returns over the next five years.
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Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and MNF Group Limited. The Motley Fool Australia owns shares of Altium. 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 Scott Phillips.