MENU

3 mid-cap shares to buy for growth and income

It’s quite hard to find a good mix of income and growth from shares. Most of the shares at the big end of the ASX have big yields but offer little growth. A lot of the shares at the small end of the ASX have small (or no) yields but have growth potential.

The answer of income and growth might be in the mid-cap space. Shares in the ASX200, but outside the ASX20 or even the ASX50. Those businesses are generally mature enough to have good profit margins and have a decent dividend payout ratio, whilst also having plenty of room for growth.

Here are three ideas:

Bapcor Ltd (ASX: BAP)

Bapcor is Australia’s largest auto parts business with its Burson and Autobarn chains, as well as many specialist chains including electrical parts.

The business is steadily growing through pleasing organic same store growth and a robust planned increase in store count over the next five years. Management have been very good at expanding through acquisition and then extracting synergies from those buys.

There are also rumours that Bapcor is looking at Kmart Auto & Tyre, currently owned by Wesfarmers Ltd (ASX: WES). It would be hefty buy, but it would be a good fit.

Bapcor is currently trading at 29x FY17’s earnings and is predicting profit growth of 30% in FY18. It’s currently trading with a grossed-up yield of 3.04%, slightly better than what you can get at the bank.

Greencross Limited (ASX: GXL)

Greencross is Australia’s largest pet company, it owns the Petbarn and Greencross pet businesses. The business has hit a few problems over the last couple of years, but the underlying revenue has continued to grow despite these problems.

Although it’s a little early to say, it appears the new CEO is making the steps to turn the business around. National pet expenditure continues to rise and Greencross should be the main beneficiary of this. The co-location strategy of a Greencross vet inside a Petbarn continues to be attractive for cross-selling and cost savings.

It’s trading at 12x FY19’s estimated earnings. It has increased its dividend each year since 2009 and currently has a grossed-up yield of 6.3%.

APN Outdoor Group Ltd (ASX: APO)

APN Outdoor may not sound like the most exciting pick, but it could be a steady earner. The advertising company is changing its static advertising billboards into electronic ones, which are much bigger revenue generators for APN.

Advertising dollars may be moving away from traditional media like print, but outside advertising expenditure continues to grow.

APN Outdoor is trading at 19x FY19’s estimated earnings with a grossed-up dividend yield of 4.8%.

Foolish takeaway

I wouldn’t expect huge returns from the above three shares, but all three are attractively priced and come with a nice dividend yield. Over the next three years I’d guess Bapcor will create the best returns because it’s expanding into Asia, however it’s hard to say which is best in five years or beyond.

Want more growth and income ideas? These three shares could be what you're looking for.

Top 3 ASX Blue Chips To Buy

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison owns shares of Bapcor and Greencross Limited. The Motley Fool Australia owns shares of and has recommended Bapcor, Greencross Limited, and Wesfarmers 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.