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.
