I think that the mid cap side of the Australian share market is a great place to look for investment ideas.
In this section I feel there are a large number of companies that have the potential to grow strongly over the next decade and potentially become large cap shares.
Three mid cap shares that I think are worth a look right now are listed below:
Bravura Solutions Ltd (ASX: BVS)
One of my favourite mid cap shares would have to be Bravura Solutions. It is a provider of software solutions for the wealth management, life insurance, and funds administration industries. In FY 2018 Bravura Solutions saw its revenue increase 15% to $221.5 million and underlying net profit after tax jump 27% to $27 million. The key driver of growth was the company’s Wealth Management segment which delivered a 52% increase in EBITDA to $46.2 million thanks to its increasingly popular Sonata wealth. Given the long runway for growth that the Sonata product has, I believe Bravura Solutions is well-positioned to continue its strong form for a number of years.
Collins Foods Ltd (ASX: CKF)
Another mid cap share with strong long-term growth potential is Collins Foods. Although the company is best-known for its growing network of KFC restaurants in Australia and Europe, it has just added Taco Bell to its portfolio and plans to expand the brand across the country. While I still believe its KFC expansion in Europe will be the key driver of growth in the short to medium term, if Taco Bell is a success in Australia it could provide it with growth opportunities over the long term.
Rural Funds Group (ASX: RFF)
A great mid cap dividend option in my opinion would be Rural Funds. This agriculture-focused real estate investment trust owns a diverse portfolio of properties across different states and sectors including wine, cattle, and almond production. These properties have very long leases and rental indexation mechanisms built in, providing Rural Funds with a growing and predictable income stream. In FY 2019 the Rural Funds board intends to lift its distribution to 10.43 cents per unit, which equates to a forward yield of just under 5%.
As well as Rural Funds, this mid cap star has been tipped to grow both its earnings and dividend at a strong rate over the next few years.
You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!
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Motley Fool contributor James Mickleboro owns shares of Collins Foods Limited. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia owns shares of Bravura Solutions Ltd. The Motley Fool Australia has recommended Collins Foods 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.