An unfortunate consequence of shares rising in value is that dividend yields fall for anyone looking to buy in. This is because a dividend is mostly fixed for a six-month period, so if the stock price rises, the percentage yield that the fixed dividend provides will drop in proportion, at least until the company raises the dividend.
Hence, there is a common misconception that 'growth' shares do not provide investors with any worthwhile income flow and vice-versa. Whilst this is arguably true for established dividend payers like the big banks, there are some stocks out there that manage to provide a growing payout alongside growing earnings.
Here are 2 such shares that I would consider buying for both capital growth and dividend income.
CSL Limited (ASX: CSL)
CSl is the largest healthcare company on the ASX and has been hugely successful in growing its range and quality of blood plasma medicines and research over the past decade. Indeed, CSL has been one of (if not the) best blue-chip ASX performers in this time, rising from around $30 ten years ago to today's share price of $269.04 (which is coincidentally just off the stocks all-time high).
What's also truly remarkable about this company is its rate of dividend growth over the last 6 years. CSL only started paying a dividend in 2013, but has already doubled its payout during this time, with a compound annual growth rate of around 15%. Such a potent mix of both income and earnings growth make this a stock I personally would love to own.
REA Group Limited (ASX: REA)
REA shares have been under pressure today, falling 1.43% at the time of writing to $101.38 per share. Despite this drop, REA shares have more than doubled over the past 5 years – you could pick some up back in 2014 for just $45.
REA is the dominant player in the online property classifieds space – its flagship website realestate.com.au has significantly more traffic than its nearest rival, and the company is looking to leverage this dominance today with an expanded range of products, including real estate data and home loans.
As with CSL, this impressive capital growth has been accompanied by an increasing payout to shareholders. In 2010, REA paid out 26 cents per share to its owners, but by last financial year (FY19), this payout had grown to $1.17 per share. Such an impressive growth rate makes this another stock I would love to buy-and-hold for the long-term.
Foolish takeaway
Both of these shares have demonstrated that is it entirely possible to concurrently reward patient shareholders with both growth and dividends. CSL and REA are both companies I would love to own, but unsurprisingly, the market places a premium on these shares – so waiting for a dip might prove to be a winning strategy here!
