For many Fools, the holy grail of ASX 200 shares are those stocks that expose investors to the best of both worlds – a growing business, and sustainable dividends.
The good news is, they do exist. Here are 3 ASX shares that I believe have strong growth prospects alongside a reasonable dividend yield.
1. Collins Foods Ltd (ASX: CKF)
The Collins Foods share price has soared to all-time highs as the business reported solid FY19 full year result alongside the recent debut of its Taco Bell business in Australia.
Collins Foods has been a stock that has displayed both defensive and growth characteristics as it delivered a 16.9% increase in revenue and 20.3% increase in net profit after tax (NPAT) for FY19. A simple reason why I think Collins Foods is a defensive business is that people just love eating KFC, and that shouldn’t change any time soon. And as long as the business can continue its growth in store expansion, marketing initiatives and product development, its bottom line should continue to grow in a reliable and consistent manner.
The company has also successfully opened 4 Taco Bell restaurants in Queensland with 10 more restaurants planned for opening before the end of the year, including the planned entry into Victoria in early 2020. This could be a nice addition to the company’s bottom line if Taco Bell can deliver.
Collins also pays a gross dividend of 2.7%.
2. Data#3 Limited (ASX: DTL)
Data#3 is engaged in providing IT solutions for consulting, project services and support service-related industries. The sector is seeing ongoing growth in the Australian IT market and this should be reflected in Data#3’s ability to continue to deliver sustainable earnings growth.
In its FY19 full year results, Data#3 delivered a pleasing 19.8% increase in revenue while NPAT increased by 28.7%. This is a strong result given the company’s price-to-earnings (P/E) ratio of just 25. Alongside its growth, it also pays a gross dividend yield of 5%.
3. Dicker Data Ltd (ASX: DDR)
Dicker Data is another company engaged with the IT sector. It is a wholesale distributor of computer hardware, software and related products with well-known vendors such as Hewlett-Packard, Cisco, Toshiba, Microsoft and other major brands. The company fetches a higher valuation, trading at a P/E ratio of almost 40, while delivering a 18.7% increase in revenue and NPAT growth of 50.5% in HY19. The company also pays a gross dividend yield of 3.6%.
Moving forward for 2H19, the company wants to focus on the development of its new division, Dicker Data Financial Services, which will provide customers with financing options to optimise their cash flow and shift capital expenditure to operational expenditure. The end of Microsoft Windows 7 support also represents a significant opportunity across all corporate and commercial devices in early 2020. I believe Dicker Data is well positioned to capitalise on both short- and long-term growth opportunities in the IT sector.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia has recommended Collins Foods Limited and Data#3 Ltd. 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.
- Safe ASX 200 dividend shares to buy today – June 27, 2020 9:30am
- Are retailers like JB Hi-Fi the best option for ASX dividend shares right now? – June 26, 2020 11:58am
- Iron ore prices: Are the Rio Tinto, Fortescue and BHP share prices a buy? – June 22, 2020 12:44pm