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2 mid-cap shares to hold for the next decade

The largest companies on the ASX are also the most followed. In addition, the growth outlook for many of these big stocks is pretty modest. For those seeking growth, it makes sense to look outside the top 20.

Here are two profitable mid-caps I like the look of today.

Brickworks Limited (ASX: BKW)

Brickworks manufactures a variety of clay and concrete products, and is also involved in property development and investments.

The company has been around for 80 years and operates across Australia and New Zealand.

There’s no question, we may be reaching peak earnings for the building industry over the next year or two, as the cycle rolls over and construction work slows. But Brickworks is hardly trading at a premium valuation, around 12 times earnings. This means even if earnings slide a bit, the company is still reasonably priced.

Given our growing population, it wouldn’t be too long before we reach a shortfall of dwellings and building picks up once again.

For income investors, the company has maintained or increased its dividend every year for the past 20 years. The current payout ratio is a very conservative 40% and the dividend yield is 3.3% fully franked.

Orora Ltd (ASX: ORA)

Orora is a producer of tailored packaging and visual communications solutions, namely the design and manufacture of bottles, cans and boxes among other things.

The company was spun out of its larger packaging parent Amcor Limited (ASX: AMC) in late 2013. Far from being a small offshoot, Orora does business in 7 countries, and has 47 manufacturing plants in Australia and North America.

Since listing, the company has performed well with shares roughly tripling over that time. Orora has also paid a decent dividend which has increased every year so far.

Recent results show growth is continuing, with underlying earnings per share increasing by 11.5%, while the dividend was boosted by 13.6%.

Shares are trading at around 20 times earnings and sport a partly franked dividend yield of 3.6%.

Foolish takeaway

Out of these two, I think Orora looks very attractive at this price. It’s a stable and predictable business, with earnings that should hold up well in a recession due to the non-discretionary nature of its products.

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Motley Fool contributor Dave Gow has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Brickworks. 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.

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