Getting strong share price appreciation on top of a robust (or even growing) dividend yield is the holy grail of ASX investing. Most investors tend to focus on either growth or income (usually depending on investing needs), but there are some shares out there that can convincingly offer investors both. Here are two that I think make good candidates.
Medibank Private Ltd (ASX: MPL)
Medibank is one of the newer blue chips on the ASX, having only been floated through a government privatisation in 2014. At the time, Medibank shares started ASX life at $2.14, but today (and 57% growth later) you can pick some up for $3.37.
In conjunction with this healthy capital gain, Medibank has also been steadily increasing its payout every year since 2015, and this year is even offering a special 2.5 cent dividend on top of its final dividend of 7.4 cents. On current prices, this equates to an annualised yield of 4.67% (or 6.67% grossed-up). The private health insurance business is one where I see significant tailwinds for the foreseeable future due to our ageing population and increasing life spans, so I think Medibank would be a great company to buy and hold.
Ramsay Health Care Ltd (ASX: RHC)
Ramsay is another stock that has been delivering growth and income to investors for years, through its portfolio of private hospitals that are amongst the best in the country. This company is one of only a handful that can boast an increased dividend every year since the turn of the century. In addition to this stellar income performance, RHC shares have grown from $1 a share in January 2000 to today’s price of $65.16 – a return of 6,400% over nearly 20 years.
The same tailwinds that explained my bullishness on Medibank also apply to Ramsay – our ageing population should increase reliance on the private health system over the coming decades as Medicare comes under increasing pressure. These tailwinds, together with Ramsay’s superlative record on dividend payments, make this stock another fantastic company to hold for the future.
In my opinion, both of these companies are among the best stocks the ASX has to offer. A history of rising income matched by capital growth is an important indicator of the quality of the underlying company, so in my view, both Medibank and Ramsay have demonstrated their worth in spades.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care 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.