There are really 2 ways to make returns from your ASX shares. Capital growth – which involves the classic aim of buying low and selling high – is often viewed as the best way to turn a profit in the stock market. But the second method of dividends should not be forgotten either. Not only do you not have to sell your assets for cash flow, the long-term effects of reinvesting your dividends can be monumental, especially if it’s a growing company as well.
So here are two ASX shares that I would buy for both growth and income this week.
CSL Limited (ASX: CSL)
CSL is one of the best performing blue-chip shares on the ASX over the last 25 years. It was privatised in 1994 at a float price of $2.30 a share, but since that time CSL shares have appreciated to an all-time high of $242.10 at the start of September and finished last week at $234.30.
Not normally considered an income stock, CSL only started paying out a dividend in 2013, but has grown its payout steadily since then and now offers a starting yield of 0.98% on current prices. Still, if you don’t mind holding stocks for the long-term, I see CSL becoming a dividend machine one day, on top of continuing to deliver substantial capital growth.
Macquarie Group Ltd (ASX: MQG)
Macquarie is the largest non-Big Four ASX banking stock, but its earnings are mostly made outside the banking arena. Although Macquarie offers traditional banking services like credit cards and mortgages, it is Macquarie’s asset management and investment banking divisions that are the real powerhouse of this company – underpinning the 15% annual growth in earnings the company has achieved over the past 5 years.
Macquarie’s current dividend is offering a starting yield of 4.35% on current prices, but only represents about 66% of Macquarie’s total earnings. This compares favourably to a Big Four bank like Commonwealth Bank of Australia (ASX: CBA), which pays out between 70–80% of earnings – meaning there is both more fuel in the tank for dividend rises in coming years, as well as a bigger cushion against any sudden economic changes. This makes Macquarie another great choice for both growth and income in my view.
Both of these companies are 2 of the highest-calibre stocks you can get on the ASX, in my opinion. Both have demonstrated stellar track record in growth and income, and I see no reason why this won’t continue into the future.
For some more income growth shares, check out our Top 3 Dividend Growth Shares for 2020!
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Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group 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.