If you’re going to make investments in the tech space in Australia, it makes sense to look at the most dominant players first.
The following companies have an incredible track record of long-term shareholder returns and are the top dog in their niche.
It may sound strange, but these three high-growth businesses have also been some of the best dividend stocks on the ASX. The low yields often put people off, but this is often just a by product of the extraordinary growth rate of these companies.
REA Group Limited (ASX: REA)
REA Group operates residential and commercial property websites, such as realestate.com.au and realcommercial.com.au. It also operates European sites and has interests in US and Asian based property websites too.
The 10-year total shareholder return has been an astonishing 35.2% per annum. Since the company started paying dividends in 2009, the dividend has grown at a rate of 28.9% per annum.
The current grossed-up dividend yield is 1.6%.
REA certainly doesn’t look cheap at around 43x earnings, but those earnings are currently growing at a rate of 15%-20% per year.
The company is focusing on replicating its success in other markets across the globe, which means it could keep growing strongly for years to come.
SEEK Limited (ASX: SEK)
Seek operates an online jobs advertising platform which is strong in Australia and is often front of mind for people looking for work.
Just like REA Group, it’s expanded overseas which should help underpin solid growth for the future.
The 10-year total return for Seek shareholders has been 17.1% per annum. Over that time the company has grown its dividend at a rate of 12.4% per annum.
The current grossed-up dividend yield is 3.1%. Seek is trading on around 35x earnings. That’s a lower multiple than REA Group, which seems fair due to its lower growth rate.
Make no mistake, these are both exciting, highly-profitable tech companies. Both are dominant platforms with a history of strong earnings growth.
Each business appears to have a bright future, but you’re certainly paying up for quality.
It’s difficult to see these companies being less profitable in the future. Having said that, I think there’s other stocks which offer a better balance between value, growth and income.
One of the world’s richest people is sounding the alarm on what could be a trillion-dollar technology.
And when a tech billionaire – several times over – speaks, it pays to listen.
This could be your chance to get in on the ground floor!
Motley Fool contributor David Gow owns shares in REA Group Limited and SEEK. The Motley Fool Australia has recommended REA Group Limited and SEEK 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 Scott Phillips.