MENU

2 blue chip companies priming themselves for growth

There’s not much point in chasing income if it doesn’t grow. Neither am I attracted to growth stocks with little promise of income.

The following blue chip businesses have been working through some issues and refocusing their efforts for a new period of growth.

Crown Resorts Ltd (ASX: CWN)

Australia’s largest casino operator has undergone a fair bit of change in recent years, and I think is now setup for a good decade ahead.

The company has now exited its overseas operations and is refocused back on its core Australian business, with Crown Melbourne and Crown Perth being its main assets. In just a few years time, Crown Sydney will be opened and should become a substantial cash flow generator for the company.

Crown is expected to pay 60 cents per share in dividends until the Sydney casino comes online. Once the new asset gains some momentum, it’s likely the company would ratchet up the dividend from then on.

At the current price, shares trade on a dividend yield of around 4.4% (60% franked), or 5.5% grossed up.

Wesfarmers Ltd (ASX: WES)

The share price of Wesfarmers has been on a bit of a run lately, popping higher over the last 6 months, after being stuck between $40-$45 for a few years. The market has clearly taken kindly to the news of the Coles demerger and the step back from the loss-making Bunnings UK expansion.

Obviously, hopes are pinned on Wesfarmers finding some higher growth opportunities with the cash released from the demerger. It may sit on the cash for a while, or divert some to its best-performing businesses, such as Kmart and Bunnings Australia & New Zealand. We’ll have to wait and see, but I do think the growth outlook for Wesfarmers is reasonable and now better than before.

The company currently trades on a dividend yield of 4.5%, or 6.4% grossed-up. After the demerger, Wesfarmers is still expected to maintain the same dividend policy of paying out around 80-90% of earnings as dividends.

Foolish takeaway

Neither of these businesses look particularly cheap or expensive. I think both are reasonably attractive for a patient income-focused investor, looking for a solid yield with improving growth prospects for the next decade.

For other blue-chip stock ideas, check out the free report below.

Top 3 ASX Blue Chips To Buy In 2018

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 Dave Gow owns shares of Crown Resorts Limited and Wesfarmers Limited. The Motley Fool Australia owns shares of and has recommended Crown Resorts 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.